MBA 703 Management Information SystemsDr. Joseph O’Donnell

Prepared by:Rima AkelRami AridahSameer Tadros

1-800-FLOWERS.com Company Analysis

Maher Abu Arja 6/21/2012

Table of Contents

About 1-800-FLOWERS.com, Inc................................................................2

Business Environment..............................................................................2

Competitors Overview..............................................................................3

SWOT Analysis..........................................................................................4

Business Strategy......................................................................................5

Financial Analysis..................................................................................... 6

Operations and Customer Service.............................................................9

1-800-FLOWERS.com Website Evaluation................................................11

Conclusions............................................................................................ 14

Appendix: Financial Statements..............................................................16

1

About 1-800-FLOWERS.com, Inc.

1-800-FLOWERS.com, founded in 1976, is a gift retailer located throughout the

United States and is headquartered in Carle Place, New York. It is a family-run

business that offers a variety of products such as fresh flowers, gifts, popcorn,

gourmet foods, cookies, wines, and chocolates. Products can be bought from several

channels such as the internet, franchise stores, and retail floral stores. 1-800-

FLOWERS.com operates 1 fulfillment center, 2 floral retail stores, and 104 franchise

stores. It is one of the first retailers that used the internet to sell directly to their

customers. In the year 1999, the company went public on the NASDAQ stock

exchange (ticker symbol FLWS).

Business Environment

1-800-FLOWERS.com is the world’s #1 florist with over 2.5 times higher market

share than their next biggest competitor in the US. It is one of the top 50 on-line

retailers and one of the first companies who took their business model on-line back

in the 90’s. In addition, 1-800-FLOWERS.com was the first company to sell products

through Facebook. 1-800-FLOWERS.com has over 32 million customers; their

website attracts more than 57 million visitors each year.

Consumer floral, gourmet foods and gift baskets, and BloomNet Wire Service

business are the three business segments of 1-800-FLOWERS.com.

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The consumer floral segment is part of the namesake 1-800-FLOWERS.com, and

accounts for more than half of company’s total revenues. They offer all types of

flowers and floral arrangements to provide to customers for any type of occasion.

Gourmet foods and gift baskets are operated by 1-800-BASKETS.com, Fannie May

Confections, The Popcorn Factory, and The Winetasting Network. It accounts for

more than a third of company's total revenues. They offer wines, gourmet gift

baskets, chocolate, candy, and popcorn that are packaged in all sorts of customizable

tins and baskets.

BloomNet Wire Service is the company’s electric communication system that allows

over 3,000 of the florists in its network to contact each other to send and receive

orders. It accounts for nearly 10% of the company's total revenues and has the

highest gross margin among the three business divisions.

Competitors Overview

1-800-FLOWERS.com’s main competitors are FTD, Inc., Harry & David Holdings, Inc.,

and Teleflora LLC. FTD, Inc. is owned by United Online (UNTD), which also partners

with Interflora. FTD, Inc. offers floral arrangements, gourmet foods, greeting cards,

balloons, candles, and etc. Harry & David Holdings, Inc., a private company, offers

gift baskets, chocolate, fruit, wine, and etc. Lastly, Teleflora LLC focuses on just floral

arrangements and is a privately held company.

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1-800-FLOWERS.com is not only competing with them but is also competing with

local floral stores in people’s neighborhoods and grocery stores. Many people buy

their flowers from local flower shops in their city because of the convenience and

price. The customer is able to pick out exactly it is what they want and they know

the condition of the flowers that they are sending. In addition, people pick up floral

arrangements at grocery stores either for the cheap price or they are shopping last

minute and it is on their way. However, they are not getting the best quality and

freshness that 1-800-FLOWERS.com is able to offer.

SWOT Analysis

Strengths

Unique fulfillment system - includes its BloomNet network of approximately 3,000 florists around the country & own distribution facilities

Wide range of products Strong marketing and promotion Gift services division - company

partners with many Fortune 1000 companies

Database of more than 32 million unique customers

Weaknesses

Geographic concentration in the US only

Late payment for the florist chain Absence of contingency plans for

uncertain conditions that may occur that would affect the business.

Opportunities

Online growth Increase in home improvement

expenditures Growing specialty stores Promotional opportunities

Threats

Increasing competition Slowdown in US economy &

discretionary spending Transportation expenses

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Business Strategy

The business strategy for 1-800-FLOWERS.com describes how they run their

business, how they intend to succeed in the market and how they are able to stand

up against their competitors; it represents the management attempt in securing the

current and future goals.

To explain the business strategy used at 1-800-FLOWERS.com we will start with the

competitive advantage that they have; they are providing the right and original

products and services with excellent quality and value which gives them power in

the market (specific product features aimed at satisfying specific market needs).

What differentiate 1-800-FLOWERS.com from their competitors are the marketing

strategies they adapt and the investment in technology to improve their brand and

in expanding their market share. One of their strategies is to leverage the significant

web traffic, multi-million customer base and having a dual-branded website for

baskets and other brands. Also, they have a social responsibility in investing and

developing a training center that is educational for community building programs in

the floral industry which affects their reputation and perception among customers.

Their sales strategy plays a very important role in maximizing their profits; their

position in the market is reflected by the strong returns on their investments on the

brands they have acquired and those they have launched internally. They focus on

multi-channel retailing with an emphasis on ecommerce as well as their decision to

be vertically integrated where appropriate which enabled them to become leaders

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in the market. 1-800-FLOWERS.com will continue to focus on the specific areas of

their business where they believe they can exert control and achieve enhanced

results, bearing in mind some improvements and opportunities they need to

develop.

Recommendations

Few of the improvements needed to refresh their business strategy are:

To invest more in the promotional and marketing strategies to expand their

market and respond to customer demands with no restrictions.

To stay up-to-date with what is new in the market and adapt to the economy

circumstances in their pricing and cost structure.

To create and design line extensions by engaging directly with their

customers to deepen their relationship with them.

To invest more in the Social and Mobile marketing and commerce initiatives,

1-800-Baskets.com business, Celebrations.com content and media business.

Financial Analysis

Trend Analysis

2011 2010Increase/ Decrease

Percent Change

Net Revenues 689,787 667,710 22077 3.31%

Cost of Goods Sold 409,703 401,908 7795 1.93%

Expenses 684,065 671,931 12134 1.81%

Net Income (Loss) 5,722 (4,221) 9943 Not meaningful

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2011 2010Increase/ Decrease

Percent Change

Assets 256,951 256,086 865 0.34%

Liabilities 115,290 123,460 (8170) (6.62%)

Stockholders’ Equity 141,661 132,626 9035 6.81%

Cash from Operating Activities

30,725 40,028 (9303) (23.24%)

Cash from Investing Activities

(21,495) (6,518) (14977) Not meaningful

Cash from Financing Activities

(15,631) (35,229) 19598 Not meaningful

Net revenues have increased by 3.31% from 2010 to 2011; while cost of

goods sold has only increased by 1.93% and expenses increased by 1.81%,

the company is increasing revenues at a higher rate than expenses which

resulted in an increase of their net income.

Total assets did not change much from 2010 to 2011, but they have managed

to reduce their liabilities by 6.62% by paying long-term debts. Stockholder’s

equity has increased by 6.81% from 2010 to 2011 due to not paying any

dividends in 2011 and the additional paid-in capital by the investors.

Cash from operating activities has decreased by 23.24% from 2010 to 2011;

the main reason of the decrease is the rise of inventory which predicts a

slump in in profits and the need for external financing. Management should

manage assets and liabilities more efficiently.

Cash used in investing activities was higher in 2011 due to the acquisitions

and capital expenditures of the companies for the year 2011.

Cash used in financing activities was lower in 2011 mainly due to the

repayment of bank borrowings.

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Key Ratios

July 3, 2011 June 27, 2010

Profit Margin 0.8% (0.6%)Return on Assets 2.2% (1.6%)Debt to Equity 0.81 0.93

Profit Margin: the company’s profit margin was negative in 2010 which

indicates a decline in sales and increase in expenses. In 2011, the company

was able to increase its profit margin to 0.8% (each dollar of their sales

generated 0.8 cents of profit). They were able to increase their revenue in

2011 at a higher rate than expenses, which resulted in a positive net income.

It seems that the company has looked into its pricing strategy and made the

necessary amendments.

Return on Assets: this ratio shows how effective the company is in utilizing

its assets to generate profit. 2010 shows a negative ratio because of its net

loss, but 2011’s ratio of 2.2% indicates that the company is not utilizing its

assets effectively to generate profit, for every 1 dollar of assets the company

is only generating 2.2 cents.

Debt to Equity: this ratio measures the financial flexibility and the long-term

capital structure of the company. Debt to equity ratio decreased from 0.93 in

2010 to 0.81 in 2011. The decrease of this ratio is due to the disposal of

unproductive assets and using proceeds to liquidate debts.

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Operations and Customer Service

The 1-800-Flowers.com Consumer Floral category includes the operations of the 1-

800-Flowers brand which derives revenue from the sale of consumer floral products

through its E-Commerce sales channels (telephonic and online sales) and company-

owned and operated retail floral stores, royalties from its franchise operations, as

well as the operations of Fine Stationery, an e-commerce retailer of personalized

stationery, invitations and announcements.

The Gourmet Food & Gift Baskets category includes the operations of 1-800-Baskets,

Cheryl's (which includes Mrs. Beasley's), Fannie May Confections, The Popcorn

Factory, Winetasting.com, Stockyards.com and DesignPac businesses. Revenue is

derived from the sale of gift baskets, cookies, baked gifts, premium chocolates and

confections, gourmet popcorn, wine gifts and prime steaks and chops through its E-

commerce sales channels (telephonic and online sales) and company-owned and

operated retail stores under the Cheryl's and Fannie May brand names, as well as

wholesale operations

As the company’s primary objective has always been to provide the best possible

customer experience in every channel, they decided to implement LivePerson’s live

chat program to better serve their customers’ immediate needs in real time. Their

main goal in implementing the program was to engage and connect with customers

at the most helpful moment in their shopping experience—when they would benefit

the most from an interaction.

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One of the reasons they chose this program is because they need to connect with

customers at the right time, and LP Chat has the intelligence to proactively deliver

chat invitations at the best possible moment, based on a visitor’s onsite behavior. 

Some of the company’s most successful use cases include leveraging LP Chat’s geo-

location intelligence to help customers pick the best delivery options based on their

area and to successfully complete their orders.

The 1-800-Flowers.com has different delivery options; same day delivery and a

florist guarantee on same day delivery, they also deliver to countries outside the US.

Their delivery method could be Direct (from growers), or Network (local florists). 1-

800-FLOWERS.COM can deliver floral items almost anywhere in the world through a

number of international affiliations.

Their accepted methods of payments: American express, Visa, Master Card, Bill Me

Later and PayPal. There also sell their products through their Facebook page.

Recommendations

To improve operations and customer service, the company should build its business

on the philosophy that success is defined as helping customers express themselves

perfectly by leveraging a wide variety of original arrangements with the ultimate

goal of delivering smiles to the important people in their lives. To accomplish this

goal across all channels, they must realize that they need an integrated customer

service program to assist their online shoppers.

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1-800-FLOWERS.com Website Evaluation

1-800-FLOWERS.com’s website is very important to the business; it is their main

interaction point with the customers and very crucial to their success. Below we

discuss the most important factors that make their website successful.

Informational:

1-800-FLOWERS.com are making an effort to showcase items that are likely to be of

interest to visitors, obviously with the intention of helping visitors to find something

they will buy. 1-800-FLOWERS.com is using a large area on the homepage to

promote current sales, new product lines. Moreover, they update the homepage

more often in order to promote different occasions such as Mother’s Day.

Ease of purchase:

In 1-800-FLOWERS.com’s website, once the visitor adds an item to the cart, he/she

will immediately see the contents of the shopping cart. They will be presented with

the options to continue shopping or to checkout. If they chose to checkout, the

visitor can login as an existing customer or create a new account. The checkout

involves a minimal amount of steps thus it is as easy as possible for shoppers.

Simple graphics:

1-800-FLOWERS.com includes many different pictures of products. The pictures

even show how the products are packed up. Potential buyers will be able to get a

very good feel for the product based on these photos as selling online is different

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than selling in a physical store because the buyer cannot touch the product or see it

in person before making a buying decision.

Ease of navigation:

1-800-FLOWERS.com uses a drop down navigation menu to help visitors find what

they are looking for. The navigation menu contains links to the major product types

that are available on their site, and roaming over a link will bring up the drop down

menu that helps to narrow it down to find more specific products. Effective

navigation is important for their website and critical for their success (Figure 1).

Figure 1

Redundant navigation:

Although navigation is critical for making it easy on visitors to find what they want,

there is still the need to allow them to search. Some visitors will still have trouble

finding a specific product even with good navigation, and with larger e-commerce

sites it may often be more feasible to simply do a search than to move through

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several layers of links. 1-800-FLOWERS.com offers a search bar that helps the users

to find redundant ways to reach their desired products.

Legible text:

The design and color scheme of their website does a good job of matching up with

their products. The website also looks professional and appealing to the users who

are interested in their products.

Multi-browser functionality:

1-800-FLOWERS.com’s website supports most of the browsers such as Internet

Explorer, Firefox, Chrome 6 and Safari 5.

Functionality:

The website is very user friendly and its design and features is appealing to visitors,

thus visitors normally do not have any problems within the site. The website also

provides clear image and additional information on products. Moreover, the website

loads its pages quickly and does not take time when it navigates between pages.

Recommendations

Let the customer compare between products: 1-800-FLOWERS.com website

will benefit from letting their users compare two or more products.

Make the website available in other languages such as Spanish to allow non-

English speakers to navigate through the website easily and use its services.

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Include videos about production: an easy way to gain the customers trust is

by introducing videos that explains how the main products are being created.

Improve Internet marketing and search engine optimization.

Conclusions

Assuming a stable to better US economy, we believe 1-800-FLOWERS.com will show

more positive results and success in the upcoming years. Their diversified product

portfolio will allow them to grow and reach more customers. 1-800-FLOWERS.com

continuously adds florists to its fulfillment system network to be able to respond to

customer orders and guarantee their satisfaction. Their success depends on

satisfying customers in an efficient and effective manner.

Another factor that will help 1-800-FLOWERS.com succeed even further is to

expand to other US states and even other countries. Their current geographic

concentration is limiting them from reaching customers and giving their

competitors the opportunity to increase their market share.

1-800-FLOWERS.com is known for its strong marketing and promotional activities

which have helped them attract millions of customers. They were the first to use

Facebook to sell products which gave them a competitive advantage over their

competitors. If they continue with their innovation especially in utilizing mobile e-

commerce to target customers they will definitely increase their profits and

succeed.

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1-800-FLOWERS.com had previously adopted several technologies in order to

improve the way they conduct business; for example, they are using cloud

computing to cut IT costs costs, increase efficiency and productivity. They plan to

invest in other technologies and make enhancements to the current technologies

they use; this should enable them to cut costs, increase productivity and efficiency

and therefore increase revenues.

1-800-FLOWERS.com is very customer-focused and their business model is built

around guarantying the customer’s satisfaction and a “100% smile”; all their future

initiatives should be carefully studied and planned to continuously ensure customer

satisfaction and fulfillment.

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Appendix: Financial Statements

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