1-800 Flowers.com’s response to a downturn; flower delivery company worked with florists to focus on innovation

February 13, 2014 4:45 pm

1-800 Flowers.com’s response to a downturn

By Jayashankar Swaminathan

James McCann, CEO of 1-800 Flowers.com, has focused on promoting top-quality floral design

The story

From a single shop in New York founded by James McCann in the 1970s, 1-800 Flowers.com has become one of the world’s leading retailers of floral arrangements and gifts, with a broad range of cut flowers and plants, gourmet foods and gift baskets.

From the start, it had a culture of implementing innovations such as round the clock ordering by phone (toll-free 800 numbers gave it the 1-800 name) and setting up a network of independent florists, BloomNet, that facilitated same-day delivery and good quality items to a wider geographical area. Latterly, it was an early adopter of the internet as a sales channel (adding the .com to the name); and most recently using social and mobile technology to enhance the flower delivery experience.

The challenge

The economic downturn that set in after 2008 hit 1-800 Flowers.com’s revenues hard as consumers cut spending on gifts. They increasingly focused on value – in terms of price and differentiated products. Initially, the company concentrated on the cheaper end of its ranges and on cutting costs. However, while new efficiency measures were important, Mr McCann and his team felt the company needed something more radical: a pure cost-based strategy alone was not going to work.

The strategy

1-800 Flowers.com products came in three categories – “good”, “better” and “best” – based on factors such as design, delivery methods and price. At first, the cost-based approach led the management team to focus on the basic “good” category, but this did not differentiate 1-800 Flowers from other low-cost rivals.

The team took the bold decision to switch their attention to the higher value product categories (“better” and “best”) and to focus on developing truly original flower arrangements that would capture the imagination of consumers. An easy approach would have been to boost the in-house product design; but the team decided instead to make use of the immense wealth of knowledge and ideas they knew already existed in the network of its florist supplier, BloomNet.

What happened

The company devised a variety of strategies to facilitate the exchange of ideas and to deepen their design collaboration with the florists.

It set up Floriology magazine as a way for florists to exchange both inspiring design ideas and marketing strategies. The magazine regularly featured designs by member florists as well as a short narrative about the design. Some of these designs would eventually be added to 1-800 Flower.com’s product offerings. This kind of recognition and visibility encouraged the florists to participate actively in the design process.

The company also established the 1-800 Flowers.com Floral Design Council to foster design artistry and collaboration on new product development. The design council regularly conducted design competitions for florists. Winners were rewarded with prizes and, in some cases, a share of the revenue for designs that were directly attributed to them. On occasion they named a trademarked arrangement after the designer, such as “Dee’s Tropical Paradise” after a Boston-based florist.

The collaboration with the BloomNet florists resulted in many innovative arrangements including the popular “a-DOG-able Collection” line of flowers arranged in the shape of a dog, which became a top-seller immediately.

The lessons

Economic downturns present challenges in terms of maintaining prices while continuing to attract and engage customers. Although considering costs is important, innovation that increases value in processes from design to production to delivery can be a true differentiator.

1-800 Flowers.com focused on innovation in the design process and demonstrated how to collaborate creatively with its supply chain partners on floral designs, thereby creating arrangements that represented compelling value for their customers.

The author is the GlaxoSmithKline distinguished professor of operations at the University of North Carolina’s Kenan-Flagler Business School