Wire Services Are Buying Your Customer

[RC in Dayton and Cincinnati]

Conversely, if one was a successful florist, you'd tell FTD NO! If they want to compete with you they can invest a couple million dollars building their own facility.

If one was a weak and desperate florist you may take them up on their offer for any additional revenue you could get to go towards your bottom line.

So why do you fill any incoming at all, Randy?

Preston,

I do it out of courtesy. I belong to FTD to be able to send out wire order.

Sending orders is the reason florists should use for wire service membership, not receiving orders. The problem is membership costs have gotten so high that a large volume of outgoing orders (much more than most florists have) is needed to justify membership.


RC

 

[RC in Dayton and Cincinnati]

Joe -

Right now, FTD lacks cool chain distribution. They have to rely on FedEx or other overnight services. Needless to say, the cost is high and the quality is uneven due to temp fluctuations in cold or hot environments. (Think Michigan in winter or Phoenix in summer.)

They need temperature-maintained transport and can only get it through florist trucking firms.

Those firms will not deliver to 99.9% of retailers so FTD needs wholesalers as receiving points and distribution points - for now.

Once they can establish a beach head and then grow demand through lower prices and more consistant delivery of quality product, the wholesalers won't be needed at all - except for delivery and last-minute fillins. They'll have amassed enough buyers to pay for a new local facility - with the 'help' of the local wholesaler.

I agree with RC. Let them build & maintain their own facilities if they want to 'service' 'your' market.

I feel the same way about WSs.

Did anyone notice that 1-800 is now completely out of the retail and LFC business? They make more money through BloomNet than they ever could running their own retail stores.

and where does that leave Veldkamps?



RC

 

[Joe Mioux]

Joe -

Right now, FTD lacks cool chain distribution. They have to rely on FedEx or other overnight services. Needless to say, the cost is high and the quality is uneven due to temp fluctuations in cold or hot environments. (Think Michigan in winter or Phoenix in summer.)

They need temperature-maintained transport and can only get it through florist trucking firms.

Those firms will not deliver to 99.9% of retailers so FTD needs wholesalers as receiving points and distribution points - for now.

Once they can establish a beach head and then grow demand through lower prices and more consistant delivery of quality product, the wholesalers won't be needed at all - except for delivery and last-minute fillins. They'll have amassed enough buyers to pay for a new local facility - with the 'help' of the local wholesaler.

I agree with RC. Let them build & maintain their own facilities if they want to 'service' 'your' market.

I feel the same way about WSs.

Did anyone notice that 1-800 is now completely out of the retail and LFC business? They make more money through BloomNet than they ever could running their own retail stores.

What does FTD pay these wholesalers?

How many wholesalers participate in this type of distribution?

Does FTD retain ownership of the product and if so, is the wholesaler relieved of the burden of replacing bad flowers?

In other words, is the wholesaler just a broker?

Is this actually happening. I haven't seen it around here.

and one last thing, didn't Hill's try something similar to this about 7 or 8 years ago? Expanding their market by using local distribution. Where is Hill's today?

 

[Joe Mioux]

What happens to FTD's product at holiday time when the local wholesaler is distrbuting 100 pct of their own product? Will their product get deliveed last?

 

[BOSS]

You assume that all designers are busy nonstop from 8 am until 5 pm filling orders. you are wrong.

Mine are!!! Not 8-5....BUT 8-til the orders are done and the coolers stocked!

I took a page from the 800LFC manual, designers come in, work til it's done and then go home...like in the Boston LFC, typically designers only work 1/2-2/3 day...it's the only cost effective way to do it these days!

 

[BOSS]

Is it a good idea for the wholesaler to take FTD’s proposition?
RC

As you have already stated, not if they are in a good position, as they would simply be helping their competition to take a share of their market.

But we will see wholesalers join the FTD train thinking (like many florists) that it will save them from the inevitable. But then, will the domino's begin to fall? Will local florists continue working with a wholesaler thats helping FTD...probably as the florist in this case is the end consumer, and they will be getting their flowers through FTD cheaper than they are now as freight costs should be lower than air.

However, what happens when the wholesaler helps FTD gain market share on stems, and then when FTD has a bigger volume than the local guy? FTD takes the local wholesaler out of the mix and once again goes direct...

There is talk of this over on F&C, and it seems FTD is trying to build a cold-chain distribution model...

 

[BOSS]

What happens to FTD's product at holiday time when the local wholesaler is distrbuting 100 pct of their own product? Will their product get delivered last?

No, it will get handled at the same time. Fuel costs will not allow for multiple trips to the same area the same day and the LW (local Wholesaler) will want/need/have to limit their exposure to high fuel costs.

For most LW's, those with wet trucks anyway, they are only recouping 50-60% of their actual fuel/truck costs with their delivery charges. Since they are already going door to door, the addition of FTD's product, and the added shipping money will help to offset the imbalance they already have in their delivery operation, and it will cost them nothing more than time to unload the extra boxes at the local florist.

 

[Mikey the Flower Guy]

No, it will get handled at the same time. Fuel costs will not allow for multiple trips to the same area the same day and the LW (local Wholesaler) will want/need/have to limit their exposure to high fuel costs.

For most LW's, those with wet trucks anyway, they are only recouping 50-60% of their actual fuel/truck costs with their delivery charges. Since they are already going door to door, the addition of FTD's product, and the added shipping money will help to offset the imbalance they already have in their delivery operation, and it will cost them nothing more than time to unload the extra boxes at the local florist.

FlowerBuyer has been doing this already, for a number of years, through a highly skilled and well organized wholesaler in the Toronto area, and the wholesaler has grown exponentially.

 

[Joe Mioux]

Mine are!!! Not 8-5....BUT 8-til the orders are done and the coolers stocked!

I took a page from the 800LFC manual, designers come in, work til it's done and then go home...like in the Boston LFC, typically designers only work 1/2-2/3 day...it's the only cost effective way to do it these days!

Is that because they are busy filling all those incoming FTD orders? :>

just kidding around....

 

[Joe Mioux]

No, it will get handled at the same time. Fuel costs will not allow for multiple trips to the same area the same day and the LW (local Wholesaler) will want/need/have to limit their exposure to high fuel costs.

That is not what happened when Hill's entered the STL market. Their stuff got bumped off the delivery trucks in favor of the local wholesaler. Delivery vans only hold a finite amount of flower stuff.

Hells Bells, at Easter I had my local wholesale purchased palm plants and other blooming plants removed from the delivery truck. The local wholesaler needed room for the Easter lilies they sold directly to churches!!!!

 

[BOSS]

Is that because they are busy filling all those incoming FTD orders? :>

just kidding around....

Well....you know better than that you silly man...the truth IS, I have not seen more than a handful of incomings in weeks...very weird...

 

[Oldtimer]

Whenever you sell your product or services to fill excess capacity or cut your losses, you should try to do it in a way that may have future benefits. For example, it’s wiser to sell excess flowers by creating a special offer for your good customers to take advantage of than selling them to your competitor for him to take advantage of.

Likewise it is better to fill excess labor capacity by creating incentives encouraging customers to buy more than by filling wire orders. When you create incentives you are building future business. By filling wire orders you are not adding any future benefit and possible aiding your competition.

RC

Randy, I don't think it matters what some of us say. They will disagree. It does not matter whether it is about Marketing or the WS, or whatever, they will disagree.

Much of this discussion has been about what is referred to as basic accounting principles. However, many accountants will admit that some accounting techniques work better for some companies and products as versus others. For example, you have two ways to depreciate your vehicle and you have to determine which is right for your company. I've had too many years in business to just want to give special consideration to incoming wire orders and not be willing to do the same thing to my regular customers.

We have also made some analogies that I don't feel comfortable with, such as looking at a florist as a manufacturer. It matters that florists don't operate like a manufacturer, but rather a job shop. For example, Harley Davidson is a manufacturer and Orange County Chopper is a job shop. There is a very important difference. A manufacturer prices their product with a percentage included in the final price to cover sales cost. In the case of Harley Davidson, it is the difference between the wholesale price and the list price for the bike. That way Harley Davidson doesn't discount any portion of the margin of profit unless THEY feel there is a need to and it has to be to their advantage to ever do so. A job shop or custom shop, on the other hand computes the total cost of building a special bike purely based on cost of components and total labor time involved plus profit margins and doing this one bike at a time. There is NO added margins for salesmen. There is never going to be a situation where a stranger walks into their shop and tells them that he just sold a special custom model bike for $10,000 for them to build and is asking for his commission. Florists operate like job shops and not manufacturers when it comes to their product pricing. There has never been an added profit margin within the price of floral product to handle SALES COMMISSION and the WS has always know this. It is expressly why they have always tried to convince florists about the benefits of filling orders with non specific ideas such as getting your product infront of more potential customers or doing for me so I can do for you.

Why is this important to note? Because it is the fatal flaw in wire orders today. When the idea first began of sending orders from florist to florist, there was a very small monthly charge to belong and a straight 20-80 split. The simple concept was that because everyone within the system sent and received, the distribution of orders would pretty much balance out. Then the creators decided that an additional 5% (later 7%) would be needed for national advertising and for some silly reason they decided to take the additonal advertising percentage out of the receiving florist rather then the sender. In retrospect, one of the poorer decisions. Even as late as the middle 1980's, the monthly fee for all the WS was less than $20 a month. Now look at it. The system has become so far out of whack because OGing has completely and blatantly distorted distribution and the industry pricing formulas have never included margin for sales commission, like Humpty Dumpty, it can never be put back together again. What used to be a completely separate portion of the florists business has now become one of the major monthly expense drains and is badly sucking the life blood out of many of the florists today and most don't know how to stop the bleeding. And yet, no matter how many times this subject is bridged. many just shrug their shoulders and say "oh well". Their problem is most don't have a plan B.

This Summer, gas will most likely be $4 a gallon and when your delivery vehicle is lucky to get 18 miles to the gallon in town with the air on and you get one of those special rush incoming orders at 2:00 in the afternoon, we'll see how many florists are really interested in using excess capacity of designer time as an excuse for filling incoming wire orders.

Randy's right again.

Of course, there will be people that still disagree.

 

[bloomz]

So what's yer point OT?

 

[RC in Dayton and Cincinnati]

Randy, I don't think it matters what some of us say. They will disagree. It does not matter whether it is about Marketing or the WS, or whatever, they will disagree.

Much of this discussion has been about what is referred to as basic accounting principles. However, many accountants will admit that some accounting techniques work better for some companies and products as versus others. For example, you have two ways to depreciate your vehicle and you have to determine which is right for your company. I've had too many years in business to just want to give special consideration to incoming wire orders and not be willing to do the same thing to my regular customers.

We have also made some analogies that I don't feel comfortable with, such as looking at a florist as a manufacturer. It matters that florists don't operate like a manufacturer, but rather a job shop. For example, Harley Davidson is a manufacturer and Orange County Chopper is a job shop. There is a very important difference. A manufacturer prices their product with a percentage included in the final price to cover sales cost. In the case of Harley Davidson, it is the difference between the wholesale price and the list price for the bike. That way Harley Davidson doesn't discount any portion of the margin of profit unless THEY feel there is a need to and it has to be to their advantage to ever do so. A job shop or custom shop, on the other hand computes the total cost of building a special bike purely based on cost of components and total labor time involved plus profit margins and doing this one bike at a time. There is NO added margins for salesmen. There is never going to be a situation where a stranger walks into their shop and tells them that he just sold a special custom model bike for $10,000 for them to build and is asking for his commission. Florists operate like job shops and not manufacturers when it comes to their product pricing. There has never been an added profit margin within the price of floral product to handle SALES COMMISSION and the WS has always know this. It is expressly why they have always tried to convince florists about the benefits of filling orders with non specific ideas such as getting your product infront of more potential customers or doing for me so I can do for you.

Why is this important to note? Because it is the fatal flaw in wire orders today. When the idea first began of sending orders from florist to florist, there was a very small monthly charge to belong and a straight 20-80 split. The simple concept was that because everyone within the system sent and received, the distribution of orders would pretty much balance out. Then the creators decided that an additional 5% (later 7%) would be needed for national advertising and for some silly reason they decided to take the additonal advertising percentage out of the receiving florist rather then the sender. In retrospect, one of the poorer decisions. Even as late as the middle 1980's, the monthly fee for all the WS was less than $20 a month. Now look at it. The system has become so far out of whack because OGing has completely and blatantly distorted distribution and the industry pricing formulas have never included margin for sales commission, like Humpty Dumpty, it can never be put back together again. What used to be a completely separate portion of the florists business has now become one of the major monthly expense drains and is badly sucking the life blood out of many of the florists today and most don't know how to stop the bleeding. And yet, no matter how many times this subject is bridged. many just shrug their shoulders and say "oh well". Their problem is most don't have a plan B.

This Summer, gas will most likely be $4 a gallon and when your delivery vehicle is lucky to get 18 miles to the gallon in town with the air on and you get one of those special rush incoming orders at 2:00 in the afternoon, we'll see how many florists are really interested in using excess capacity of designer time as an excuse for filling incoming wire orders.

Randy's right again.

Of course, there will be people that still disagree.

Oldnews,

Thanks for the well thought-out post.

We all need to stop grasping onto what we’ve been told for so long and start believing in what we experience.
This takes letting go of some of the notions we’ve accepted as fact...

... because the fact is those facts were only facts because we thought they were.



RC

 

[LJVF]

Typical low to mid level order sent to us by FTD.COM

Delivery Address: 4365 Executive Dr. SD, CA 92122
Description: TY FTD THANK YOU BOUQUET
Price Including Delivery: 49.99 edit: this is the deluxe version, $10 upgrade

Product Recipie:

9 stems stock @ .30 (my cost) = 2.70 edit: add 4 stems for upgrade = 3.90
1 container @ $6.00 = $6.00

total = 8.70 edit: new total = 9.90

73% of 49.99 = 36.49 - 2.00 (FTO) = 34.49 - 8.70 = 25.79
edit: new total = 34.49 - 9.90 = 24.59

Est. time to design: 5 minutes

Distance in miles according to Google Maps: .3 miles
Est. driving time according to Google Maps: 1 min


Does anyone care to offer an explanation as to why my shop will lose or make money on this low to mid level order? I understand the "sending is better than receiving" theory, but am having trouble understanding the concept of why most incoming orders are a losing proposition. It appears that this particular order is at the very least break even for my shop.

Our volume of incoming orders is roughly $100,000.00 per year. We are an FTD top 1000 sending shop, but have less outgoing volume than incoming. Should I consider tweaking the amount of incoming with the risk of losing my FTD high level rating?

I'm on the fence, not bias and open to persuasion.

 

[Rhonda]

I'm glad you pay that little for stock. I paid $10.50 (add $2.00 on for delivery) so $12.50 per bunch last week. I'd need three colors, three bunches of which I'm going to use just 3 of each color, leaving 21 stems to find a place to use in just a couple of days....Remember....small town America!...... I have $37.50 invested (cost) in just the flowers.
I'm not going to make money on that arrangement if I'm having a slow week and can't use those other stems.

 

[inferno63]

I'm glad you pay that little for stock. I paid $10.50 (add $2.00 on for delivery) so $12.50 per bunch last week. I'd need three colors, three bunches of which I'm going to use just 3 of each color, leaving 21 stems to find a place to use in just a couple of days....Remember....small town America!...... I have $37.50 invested (cost) in just the flowers.
I'm not going to make money on that arrangement if I'm having a slow week and can't use those other stems.

You are singing my tune. I pay $ .85/ stem for stock. I ran into the same problems with incoming WS orders. Although I often would call them and tell them that I would have to substitute or reject. More often than not they would allow the substitution. I am still in the directory of Bloomlink but no matter what they do, I am done at the end of this month. I sent a cancellation letter without response from them.

One thing that isn't in the computation is the amount of the other charges and fees that need to be applied to each incoming such as association fees, software, etc. But at over $8000/month of incoming those fees might be offset considerably?

 

[inferno63]

Here's an example of a day in the life of WS for me....

Just got an incoming for $49.99 for Sunday delivery. This would be my 10th incoming for Bloomlink for April. If I accept this order, the "technology" fee slides from $19.99 to $69.99.

Without additional fees and charges I net $ 15.66 but take out the extra $50 that this order creates on "technology" fees and I am paying them $ 34.34 to take this order to their customer! Arrrrrrggggggggghhhhhhhhhh!

Just my life, not everyone's, but it certainly justifies my decision to drop the WS.

 

[LJVF]

I'm glad you pay that little for stock. I paid $10.50 (add $2.00 on for delivery) so $12.50 per bunch last week. I'd need three colors, three bunches of which I'm going to use just 3 of each color, leaving 21 stems to find a place to use in just a couple of days....Remember....small town America!...... I have $37.50 invested (cost) in just the flowers.
I'm not going to make money on that arrangement if I'm having a slow week and can't use those other stems.

I guess being in San Diego makes a difference. We have an abundance of flower growers here in Carlsbad, Vista and Encinitas. I bet some of your flowers you get come from the farms out here. I pay about $2.50 - $3.50 per bunch depending on the season, and that's delivered. It would be less if I went to the farm or the SD Floral Trade Center directly.

As far as what to do with the leftovers after buying 3 bunches? I think this is where volume comes into play. It would be a slow day for us if we had any left over. I guess as you stated, "small town America" is whole different ballgame.

 

[LJVF]

One thing that isn't in the computation is the amount of the other charges and fees that need to be applied to each incoming such as association fees, software, etc. But at over $8000/month of incoming those fees might be offset considerably?

I realize that there are a lot of "hidden" fees, but I think by the sheer volume I receive and the amount of our outgoing orders, these costs are more then covered. However, I stand corrected.

I'm sure most of you are aware that FTD uses a point system, similar to a lottery in distributing it's orders. You are rated on a variety of things: outgoing volume, codification, amount of rejects, etc... It's almost like the more ping pong balls you have in the hopper, the better chance you have at randomly being selected for the order. My concern is that if I begin to pick and choose my incoming orders, my rating level will drop.

Our turnover for the FTD Branded bouquets is very high. We receive numerous orders like my previous example on a weekly basis. Unless I'm missing something (which is quite possible), I truly believe I'm at least breaking even, if not turning a small profit on these orders. This coupled with my profits on my sending volume, I think the wire service is working for me.

By the way, most of the FTD branded and Florist.com incoming are very simple to fill. The labor is very low and a skilled designer is not necessary for these.