Wire Service Profitability

[BOSS]

From another thread:

Our staffer Nid, a cost analyst in her previous life, advised that we stop filling orders because they're too much work with not enough profit for the efforts. She suggested we just send them out. urpletea

It is true you know!
__________________
I decided to take a quick look this morning at my actual wire service numbers, and while I did not take the time to run the wire service calculator here at FC, I thought I'd post my actual numbers, leaving off a few things to give a simple look at what has taken place in my store the last 12 months 07/15/07 thru 07/15/08... this is not a exact science... and for those smaller shops, my numbers rank me in about the Top 250...

Wire Out's Total $56441.56 with "my" 20% = $11288.31
Rebates Earned = $5026.50

Wire In's Total $34647.16 with "my" 70% = 25.292.42 giving up $9354.74

Membership Fees Total $5332.32 (inc, membership, Sel Guide, Mercury, Q/A etc)

++$11288.31 (20% Earned)
++$5026.50 (Rebates Earned)
--$9354.74 (Comm Given)
--$5332.32 (Membership)
Net: $1627.76

Ok, so this does not take into account COG's, or Labor or Delivery, but assuming they are all in line, I'm scratching my head trying to figure out WHY I am even bothering with this side of the industry at all. Remember, in my case the wire side of the biz, both in's and out's accounts for less than 5% =/- on my total sales.

I'm almost affraid to run the calculator, and add in COG's, Labor etc, cuz it looks like I may be losing money on the wire side, but I will just to be sure.

I'm pretty much convinced I simply need to "Just Say No", give customers your numbers and walk away...

I've said in another thread, that 99% of my complaints come from wire orders...why am I bothering?

Someone will likely find fault with the way I looked at these numbers...tis OK...it's a simple calculation, and like I said, I left off all the assorted expenses associated with filling and delivering the incoming side, I'm pretty sure that $1627.16 NET would be a fairly large negative number...

 

[CHR]

Do you charge a relay fee? If so, you'll want to add that to the numbers.

Mark, I'm not at all surprised with your results. But let me give you some food for thought....

Each of those outgoing customers sees you as their source for all flowers. If you drop relay entirely, they will most likely turn to another company, rather than calling a florist direct. In our case, most of the outgoings are from companies and long-time customers so those relationships are important.

In your case, I would not recommend completely dropping all order transfer services.

 

[Lizi]

From another thread:

It is true you know!
__________________
I decided to take a quick look this morning at my actual wire service numbers, and while I did not take the time to run the wire service calculator here at FC, I thought I'd post my actual numbers, leaving off a few things to give a simple look at what has taken place in my store the last 12 months 07/15/07 thru 07/15/08... this is not a exact science... and for those smaller shops, my numbers rank me in about the Top 250...

Wire Out's Total $56441.56 with "my" 20% = $11288.31
Rebates Earned = $5026.50

Wire In's Total $34647.16 with "my" 70% = 25.292.42 giving up $9354.74

Membership Fees Total $5332.32 (inc, membership, Sel Guide, Mercury, Q/A etc)

++$11288.31 (20% Earned)
++$5026.50 (Rebates Earned)
--$9354.74 (Comm Given)
--$5332.32 (Membership)
Net: $1627.76

Ok, so this does not take into account COG's, or Labor or Delivery, but assuming they are all in line, I'm scratching my head trying to figure out WHY I am even bothering with this side of the industry at all. Remember, in my case the wire side of the biz, both in's and out's accounts for less than 5% =/- on my total sales.

I'm almost affraid to run the calculator, and add in COG's, Labor etc, cuz it looks like I may be losing money on the wire side, but I will just to be sure.

I'm pretty much convinced I simply need to "Just Say No", give customers your numbers and walk away...

I've said in another thread, that 99% of my complaints come from wire orders...why am I bothering?

Someone will likely find fault with the way I looked at these numbers...tis OK...it's a simple calculation, and like I said, I left off all the assorted expenses associated with filling and delivering the incoming side, I'm pretty sure that $1627.16 NET would be a fairly large negative number...

Numbers don't lie, after seeing that for my self I am now wire service free.

 

[BOSS]

Hence the tough decision Cathy...it IS all bout customer service...

No I was not charging a relay fee... I am now...so had I been for that whole year it would have added about $10K, but I'm pretty sure much of that would be eaten up by losses in real delivery dollars and labor.

I'll add, that while I have seen a decline in total sales for the date range used, the decline in wire out business accounts for more than 50% of the total decline. Not sure how to work that number into actual dollars, since we're really only working with 20% of that number...

And yes, like you too, most of my outgoings are from long time customers and companies too, but even there, they are declining, and I firmly believe that in 4-5 years they will be but a blip on my balance sheet as more consumers go direct everyday...this biz is dying off with our older customer base...

I don't plan to totally drop my "transfer service"... I just plan to drop the wires...

 

[goldfish]

Wire Out's Total $56441.56 with "my" 20% = $11288.31
Rebates Earned = $5026.50

Wire In's Total $34647.16 with "my" 70% = 25.292.42 giving up $9354.74

Membership Fees Total $5332.32 (inc, membership, Sel Guide, Mercury, Q/A etc)

++$11288.31 (20% Earned)
++$5026.50 (Rebates Earned)
--$9354.74 (Comm Given)
--$5332.32 (Membership)
Net: $1627.76

BOSS, you are deducting wire-in commission without adding wire-in earning. A better approach would be to calculate the contribution margin of wire-ins: 100%-35% COGS-27% commission-5-10% delivery-a few % transmission fees = about 25-30%.

++$11300 (20% Earned from WO)
++ $5000 (Rebates Earned from WO)
++ $9500 (WI earning before labor=27.5% of WI gross)
-- $9300 (Comm Given)
-- $5300 (Membership)
Net before labor = $11200

Assuming labor for WI = 25% of WI revenue = $8700

Net after labor = 11200-8700 = $2500

That's a whopping $900 increase over your #!

 

[LJVF]

I looked at this quick so exuse me if I interpreted this wrong, but didn't you forget to add in the 25,292.42 for wire in's?

 

[SpringCity]

Thank you for this thread! With all the discussion on WS and opinions (including mine) this is the kind of info I need to make an intelligent choice.

 

[BOSS]

I looked at this quick so exuse me if I interpreted this wrong, but didn't you forget to add in the 25,292.42 for wire in's?

No, not really, since that number is the actual money received, it's lost to COGs/labor and delivery...no profit in that number actually.

 

[RC in Dayton and Cincinnati]

Do you charge a relay fee? If so, you'll want to add that to the numbers.

Mark, I'm not at all surprised with your results. But let me give you some food for thought....

Each of those outgoing customers sees you as their source for all flowers. If you drop relay entirely, they will most likely turn to another company, rather than calling a florist direct. In our case, most of the outgoings are from companies and long-time customers so those relationships are important.

In your case, I would not recommend completely dropping all order transfer services.

Cathy,

Mark would not have to give up the ability of wiring flowers out for his customers. There are lots of options to get that done without being burdened with a membership.

 

[LJVF]

No, not really, since that number is the actual money received, it's lost to COGs/labor and delivery...no profit in that number actually.

Ok, so you're basically saying, roughly, the 25k and cog's are a wash, which leaves you with minimal profit? I thought you were saying the 1627.76 was before cog's.

 

[CHR]

Cathy,

Mark would not have to give up the ability of wiring flowers out for his customers. There are lots of options to get that done without being burdened with a membership.

I agree... but he said

I'm pretty much convinced I simply need to "Just Say No", give customers your numbers and walk away...

 

[NavyBrat]

Mark,

I finally ran the numbers too and I feel your pain! I am at home today, so I don't have the figures with me, but will post by the weekend. Quite a wake up call, heh? I could hardly believe what I was seeing!

Here's my resolution. Just became a Bbrooks member. That takes care of the sending aspect and it is a feather in our cap to be able to advertise my shop as a member of the prestigious Bbrooks. Would suggest you look into membership. Will be out of Teleflora by the end of the year, and will be switching from Daisy to Floristware. Thought about switching to MAS, but honestly, think Floristware will be a better fit for my shop. The wind is blowing in a new direction for Richardson's Flowers, and I am excited about the breath of fresh air!

Cathy, thanks for the calculator and your help in assisting me with plugging in the numbers. Don't know why I put in on the back burner for so long! You are da diggity bomb!

 

[CHR]

Golfish pointed out there is a calculation error in the cost of delivery field which will reduce the cost of delivering incomings slightly. Nid, who created the calculator, will be in later today and I'll ask her to update it.

Even with the cost adjustment, the numbers still don't add up for us - especially considering the aggravation. I'm going to enjoy knowing I'm not helping pay rebates to the dregs of the industry.

We've been with bbooks for a little more than a month and the experience has been quite positive. The minimum order is $40 for product and $10 for delivery, but we don't have any orders falling below that level anyway, and if we did, we could just use a CC.

Note: Bbrooks does use TF in areas where they don't have a member so it's not entirely WS 'free'.

What I really like is that members are paid 100% of their delivery charge and the commission is only paid on the flowers.

 

[BOSS]

BOSS's Quote of the day!!

I'm going to enjoy knowing I'm not helping pay rebates to the dregs of the industry.

Bingo!!!...we have a winner!!

 

[yellowroses]

I, too, wonder if wire services are profitable. I have TF and Bloomnet. I one I'm having real trouble is Bloomnet. The send orders for 1dz white roses vased with all the bells and whistles delivered for $49.99. My white roses without a vase, greens & fill to say nothing of a design fee, are $4.00 ea. X 12 = $48.00. I don't know where they are coming up with these prices. My delivery area includes some rural areas and some deliveries are 16 to 18 miles one way. I just refused the order. Most other orders are the same. If I do accept them, the greeting on the card should read "Happy Birthday, Mom Love, Suzie and Exclusively Yours Floral.

 

[SpringCity]

the greeting on the card should read "Happy Birthday, Mom Love, Suzie and Exclusively Yours Floral.

Ain't that the truth! lol

 

[Louis Taylor]

I remember attending a meeting years back and an accountant with the old AFS discussed the profitability of wire orders. He said it's a break even business; that is it's a service you provide for your customer.
Now, if you are sending only, that's where the money is made.

 

[bloomz]

I'm going to enjoy knowing I'm not helping pay rebates to the dregs of the industry.


Note: Bbrooks does use TF in areas where they don't have a member so it's not entirely WS 'free'.

are those loaded statements? :headbang:

 

[Joe Mioux]

From another thread:

It is true you know!
__________________
for those smaller shops, my numbers rank me in about the Top 250...

Wire Out's Total $56441.56 with "my" 20% = $11288.31
Rebates Earned = $5026.50

Wire In's Total $34647.16 with "my" 70% = 25.292.42 giving up $9354.74

Membership Fees Total $5332.32 (inc, membership, Sel Guide, Mercury, Q/A etc)

++$11288.31 (20% Earned)
++$5026.50 (Rebates Earned)
--$9354.74 (Comm Given)
--$5332.32 (Membership)
Net: $1627.76

OK, what am I missing?

you are earning $25K for filling and $11K for sending on roughly $35K worth of ADDITIONAL (albeit WS incoming) business that you won't receive if you dump the WS.

The rebates and your membership fees sort of negate each other.

All things remaining equal if you lose the incoming side you can also figure losing the outgoing side. Once you dump the wireservices you won't be earning the $11K out going commission. Will this happen? probably not completely, you will, if you choose to send and expect an outgoing commission, earn some revenue.

Also, once a shop dumps WS, but then sends orders F2F directly, does that not make that florist a SFO, an order gather, or something similar?

 

[BOSS]

OK, what am I missing?

you are earning $25K for filling

Joe...what am I missing??

I'm getting paid $25K and sending out $34.5K worth of product and delivery (but actually it's not even that close, when I deduct the del chg)...I don't see it as earning anything...

(not being confrontational, maybe I just have too many years into this gig and can't see the petals for the stems?)