In the wake of a devastating Thanksgiving Day fire that destroyed a distribution center outside Cleveland housing its Fannie May and Harry London chocolates products, 1-800-Flowers.com needs to do all it can to make all affected customers happy and keep them loyal, one expert said.
While another expert said a better contingency plan would have softened the blow for the two brands at a critical time of year, a company spokesperson said the plan was sufficient and meeting customer needs.
Tony Cox, founder and president of specialty food consultancy 5th Food Group, said the key for 1-800-Flowers.com is immediately contacting all affected customers and offer them alternatives.
“If they can’t replace what was ordered, can they offer substitutes from other 1-800-Flowers. com brands?” Cox asked. “If they quickly communicate what happened to customers, let them know they will either get their money back or get a gift of equal or higher value, they may be able to turn this into a positive from a customer service standpoint.”
The disaster would have been worse had it occurred closers to Christmas, Cox said, as data shows that online specialty food companies process 2.5 to 3 times more orders during Christmas week than Thanksgiving week.
“That means they have time to make it right by the customer,” he said. “With a Christmas week fire there would be very little they could do to replace those gifts in time for Christmas, which would result in a lot of disappointed and angry customers.”
Cox said 1-800-Flowers.com has to send notification emails to all affected customers with options and choices. They should also have substitute products teed up and ready to go, offering customer the ability to click and initiate a replacement.
“The easier they make it for customers to get the gift replaced, the better for the company,” he said. “I suspect most customers would be willing to take a substitute product of equal or higher value, especially if they just need to check a box or click a link to make it happen. They should also set up a special toll-free number for gift replacement, communicating it via email and by outbound calls for customers without email addresses on file.”
“The good news is no one was injured, and we’re very focused on our associates to make sure there’s minimal impact (from the disaster),” said Yanique Woodall, a spokesperson for 1-800-Flowers.com. “And we’re very focused on our customers, as there are favorites they’ll be looking for this holiday season, so we’re working around the clock to make sure that happens.”
Cox gave Fannie May high marks for putting the disaster “front and center” on its home page, where it also highlighted sister brands like The Popcorn Factor and Harry and David.
David Flora, a principal with Firestorm, a business continuity, risk mitigation and crisis management company, said the fact that 1-800-Flowers.com was dropping Fannie May and Harry London chocolates from its product offerings indicated the company’s contingency plan was inadequate.
“If you’re in a DTC business like this, and you tell the consumer you can’t fill an order, they’ll go to Amazon.com or to a competitor or tick down the gift list to another item,” Flora said. “You’ve trained customers to go elsewhere, and you may never bring them back. Their business interruption insurance will pay for the lost revenue, but it won’t help going forward with lost market share.”
He said 1-800-Flowers.com “boxed themselves in” by relying on a “single point of failure,” meaning there was no alternative supply source for the two brands in the event of a catastrophic loss.
“If the supplier was an internal asset, it appears they didn’t have any way to augment that by going to a supplier outside the family,” Flora said. “But whether they sourced internally or externally, they needed an alternate plan in place to be able to deal with the loss of a key facility.”
However Woodall said that 1-800-Flowers.com did have a contingency plan in place, including having employees fulfilling Fannie May and Harry London orders out of the company’s Canton, OH production facility, offering alternative products from those brands, offering products from sister brands and offering full refunds and gift cards to affected customers. “And our stores are fully stocked for the holiday season,” she added.
According to the Fannie May website, the company expects to have all its popular items for sale online within the next couple of days.
Flora said Firestorm conducted a survey in 2011 of 1,000 large companies across B2B and B2C, both manufacturers and service providers, on their disaster recovery plans. A third of respondents said they couldn’t identify who their critical suppliers were. Of the remaining two-thirds, half said they hadn’t viewed their suppliers’ business contingency plans.
“Our takeaway was that this is a significant market risk that is understated by public and private companies, and is generally not disclosed in their filings under risk factors,” he said. “We’ve seen no data since then that’s indicated any shift away from that conclusion.”