Live from NEMOA: The Blooming of 1-800-Flowers

Mar 25, 2005 4:21 AM  By

Cambridge, MA–Westbury, NY-based 1-800-Flowers didn’t grow from one 700-sq.-ft. flower shop in Manhattan to a company with annual sales of approximately $700 million by shying away from chances. Jim McCann, chairman/CEO of the multititle merchant, shared his company’s growth path during a session at the New England Mail Order Association spring conference here.

“‘Due diligence’ was not a term I was familiar with,” McCann said of the early years following his purchase of 1-800-Flowers in 1986. McCann found himself in debt before the company took off in the early 1990s. He described a meeting with Ted Turner in which the mogul took him under his wing, encouraging him to advertise on his new cable-TV network, CNN. When the Gulf War erupted in 1991, Turner asked McCann to do him a favor by not pulling his advertising as many of the network’s other sponsors had done. As millions tuned into watch the war coverage, the favor was returned to McCann.

In 1992, 1-800-Flowers became a Web pioneer, becoming the first merchant listed on America Online. In 1995 it launched its own Website, from which, said McCann, 70% of its orders are currently derived. “We used the technology to build personal relationships with our customers,” he noted.

The company has 1,200 call center reps and an additional 300 who work from home. Forty percent of orders are for same-day delivery. The 10 million floral orders it processes each year account for half of all sales across its multiple titles, which include Plow & Hearth, The Popcorn Factory, and HearthSong.

During the past six years, the company has acquired five companies. While the acquisitions contributed to the parent company’s growth, of curse, the individual titles themselves have enjoyed organic growth. “Country lifestyle” brand Plow & Hearth, for instance, went from sales of $38 million annually when it was acquired in 1998 to projected sales of more than $110 million this year.

Not all of its acquisitions have been runaway successes, though. McCann pointed to the 1999 purchase of online/offline cataloger GreatFood, which crashed along with the bursting of the Internet bubble. The company hasn’t given up on this catalog, however: McCann plans for it to be “rebirthed this calendar year, third quarter.”

The company’s fastest-growing segment is its food, wine, and gift basket category, McCann said, referencing the company’s recent purchase of The Wine Tasting Network, which includes the Ambrosia Catalogue of Fine Wine. McCann had first noted the possibilities of adding wine merchandise to gift baskets and floral items years ago when he was a floral shop owner.

Baked goods are the next food category that 1-800-Flowers is excited about, McCann said, citing its recent purchase of cookies purveyor Cheryl & Co. He said that prior to the acquisition, the company had tested its own line of baked goods under the name Mama Moore’s Bakeshop (a reference to McCann’s mother-in-law). The test resulted in sales of $8 million in baked goods. Mama Moore’s has been consolidated with Cheryl & Co., which has annual sales of $33 million.

The acquisitions have opened up holidays that the company had never thought of in the past, McCann said. For instance, its acquisition of toy catalogs HearthSong and Magic Cabin Dolls have boosted Halloween sales of plush toys, balloons, and trick-or-treat bags. Consumer interest in this holiday surprised the company: In its first year of marketing to it, it ordered 3,000 pumpkin bears only to find that 5,000 had been ordered.

For holidays that the company already has a strong foothold in, such as Valentine’s Day, it tries to find new ways of reaching customers. Two years ago, for instance, it began capitalizing on the difficulty some men have of expressing themselves by launching a contest in search of good lines to use with wives or girlfriends. This Valentine’s Day it had 40,000 entrants to the contest, for which the prize was a Caribbean vacation. It also decided around that time to combat the stereotype of florists as price gougers by lowering the price tag on its roses for the holiday. “We decided you’re not going to undersell us, because our buying power is 10 million roses,” McCann said of the company’s Valentine’s Day pricing strategy.

For Mother’s Day, the company has tied together its marketing and philanthropy efforts by publicizing a Bring Your Mother to Work Day. All proceeds from sales of special packages tied in to the event go to the Ovarian Cancer Fund. McCann said that the development of Bring Your Mother to Work Day is typical of the company’s family-oriented approach. He said that its purchase of smaller companies keeps that approach alive. “We’re an amalgam of family businesses,” he said. “We try to maintain the special things that come from that.”