co-branding agreement

Status
Not open for further replies.
Yes I know Ben, and have had a few chats with him....

Hence my pondering the results of this type of deal. Everyone does things for various reasons...

Should prove interesting down the road, as the advertising wars heat up...
 
HERO said:
p.s. Time will tell, but this is a BIG deal.

you are right this is a big deal!!

To quote Jim McCann from the article

"We've learned to partner with great gift products companies," McCann said. "We sold 75,000 gifts for Halloween this year, and very few were floral. It was more cookies, candies and gift bags" - Jim McCann

This is a sign of things that are here and picking up speed.

To lure consumers into florist websites, and convert them from buying flowers from florists to other gift items.

So you are right. This is a big deal!!
 
The first one in usually is a winner

What I have seen in the past is that it is usually the first guy into most new arrangements who gains the most. 800FLOWERS probably wants to grow it's brick and mortar position in front of the consumers eyes. The easiest and cheapest way is to become involved with existing businesses.

I am willing to wager that the deal Velkamps got was a sweet one and they will profit from it. But if this is a start of a trend, those who get involved later into the cycle, usually get a lot less.

Remember, many of the smart people who sold out to Gerald Stevens at their start got paid cash, all cash. And by adding brick and mortar stores in major markets, 800FLOWERS gives the consumers some sense of security that when they order off the internet, they are dealing with a real company, not just something in cyberspace.
 
Rob got it right!

ROBSWF said:
Xyz shop has been filling for corporate public giant's orders for years in a large metro market. Along comes ABC that expresses interest in becoming a multi unit franchisee & LFC. So public giant goes to xyz and asks if you want to maintain your order volume, here’s what it’s gonna take. ARE YOU FOLLOWING ME?

This is the way big business operates!! So now the public giant can force the mid size guy into following the leader, cause no matter how smart you think they were, they were never smart enough not to get hooked on the drug!!
Just heard about a friend's large operation that is getting caught in this squeeze. The new Bloomlink scheme is set to extract more dollars from their largest fillers and this company is looking to have to pony up another $150K in commissions if they want to keep filling 1800's orders in their market.

Sounds like they're going to say 'no thanks' but here's the irony - This is an excellent company that provides a high quality of product and service. I can almost certainly guarantee that any other operation filling those orders will not be able to match them. So 1800 shuffles off to a different filler and puts their future recipients in jeopardy.

The quality from this florist and others like them has been essential in building the 1800 brand. So what.

Having gained 800,000 new customers but losing $2M in what should have been one of their best quarters, 1800 is looking to wring profits out of the folks on whom they most depend - the florists.

Our friends are weighing the best methods to extract themselves from the drug but at least they've decided the short-term withdrawl pain is better than the long-term addiction.
 
Nice post Cathy, it gives me food for thought.
 
CHR said:
So WS shuffles off to a different filler and puts their future recipients in jeopardy.

looking to wring profits out of the folks on whom they most depend - the florists.

Dang that sounds like I have heard it before....Hmmm...let me see...

(emphisis mine)
 
Veldkamp's, floral website team up

"Lakewood-based Veldkamp's Flowers stores will convert to 1-800-FLOWERS.com/Veldkamp's Flowers as part of a co-branding agreement with the Westbury, N.Y.-based floral retailer."

http://www.denverpost.com/Stories/0,1413,36~33~2786796,00.html
.
800Flowers Closing in Denver area??? This just in! Has anyone heard? I just searched the net and found nothing. Just this week we had 2 different customers come into our store and tell us that 1800 was closing shop in the Denver area. 1st a customer came in and told us that they tried to wire out some flowers at a Veldkamps/800 flowers location. They were told that they could not be helped as they were packing up and closing shop. Then another customer stopped at another 800flowers location, to follow up on her wedding flowers. She informed us that they had completely closed up shop and did not even bother to call her and tell her that they could not do her wedding. (not surprised). Since I couldn't find anything on the net or the local news I picked up the phone and called them myself. I was told by the rep that answered the phone, that they closed all of their shops in the Denver metro area except one remaining shop on Denver and another one in Arvada (a suburb of Denver). I'm surprised I couldn't find anything on the news about this!
 
Interesting indeed

All of you have my respect for your perception and insight into the big picture of this industry.

I agree, we have not received the whole story yet, but when it clearly comes through, I don't think it will be in the best interest of the flower consumer.

The users of flowers are the ultimate judge. When coporate America loses sight of the best interest of the consumer, they are going to cause great harm to floriculture. The smallest of us are going to feel the pain. We have already suffered through some pain and there is more to come, I am sure.

We have to keep the consumer in focus or we cannot survive. I am putting the consumer first in my shop.

Tom Carlson
 
veldkamps

Veldkamps closed all but 2 of their stores, they are searching for further growth but are pulling back to realign and then reopen in other higher traffic locations.
 
Hal - if they are planning to continue in business, why would they not at least consolidate all the future orders (like weddings) and refer all current customers to the two remaining stores?

If the Denver franchise fee structure is anything like the Conroy's agreement, 1800flowers takes 10.75% off the top of each sale (for franchise fees and advertising). In an industry that averages a net 10% profit, how much could be left for owner profits? (I know what the old numbers were but don't have any inside info regarding today's operations.)

With so much flower gift sales taking place online and via phone, I can certainly see where maintaining multiple B&M full-service stores staffed with designers would be costly - and probably unprofitable.

IIRC, the 1800 LFC's are supposed to open 8 or so walk-in locations in their markets. Isn't this going the opposite direction?
 
Chr

CHR, only fill the profitable orders when you deal with a ordergatherer, or so the story goes.

But in this case, it seems that there were no profitable orders. How did that happen, other florists know how to make money filling for the OG'S.
 
Hal - if they are planning to continue in business, why would they not at least consolidate all the future orders (like weddings) and refer all current customers to the two remaining stores?

If the Denver franchise fee structure is anything like the Conroy's agreement, 1800flowers takes 10.75% off the top of each sale (for franchise fees and advertising). In an industry that averages a net 10% profit, how much could be left for owner profits? (I know what the old numbers were but don't have any inside info regarding today's operations.)

With so much flower gift sales taking place online and via phone, I can certainly see where maintaining multiple B&M full-service stores staffed with designers would be costly - and probably unprofitable.

IIRC, the 1800 LFC's are supposed to open 8 or so walk-in locations in their markets. Isn't this going the opposite direction?
Cathy I was just answering the question of what happened, I don't know why, well some of it i do. I talk to Ben occasionally, he's a pretty savy guy. The old idea of having locations as billboards has since faded. He has central phones, design and delivery already so it made since. Now he needs to find locations with higher volumes of foot traffic, which he will. I am sure if there were any problems with weddings he would make right, a business that size, mistakes are made and he didnt do anything intentional.
Your information is incorrect also about how many stores the LFC's have to open. As I stated before he will be reopening other stores in more strategic locations.
 
I was thinking the exact same thing CHR? I'm not complaining because this will likely mean a little more business for me. But I wonder what they are not telling the public and their shareowners. If they are truly going to open up other locations in higher traffic areas, then I really question what they have been doing as far as demographic research the last couple of years. 1800 just put up a brand new store (from the ground up) about 3 blocks from my house. It wasn't even open 2 months and it's closed now. It just happens to be in a very high traffic area. There are other new stores popping up all around and right next door to this particular shop. Has anyone seen anything offical in the news yet?
 
The spin according to RC, or file this under "R" for rumor

The spin according to RC, or file this under "R" for rumor.


Since reality and truth are always so hidden away in the many layers of spin, we will never know the full story of what has happened to Veldkamp's.

But since this is playing out so close to what I expected, I feel compelled to share my version of the truth. Keep in mind I don't know Ben or any of the Veldkamps and my limited knowledge of them comes from what I've read and heard (no facts, just my insight), and one of my ex-employees who worked for Veldkamp's for a good number of years as a buying manager.

Here goes.

Veldkamp's was aggressive and showed great growth during the 70s and 80s when the flower industry was going strong. Growth was easily achieved by opening up stores and profits automatically followed, but as we moved through the 90s business started to change. Growth wasn't automatic, new types of competition started popping up, and margins started shrinking. Veldkamp's growth had stalled and in fact business was starting to erode.

The erosion of business crept unnoticed for a few years because Veldkamp's solicited incoming wire orders to fill their growing excess capacity. As their local business declined, sales were propped up by ever increasing numbers of incoming wire orders. Incoming wire orders were beginning to no longer be a peripheral part of their business, but were now looked at as an integral part, a profit center as well. FTD, Teleflora, and especially 1-800 had become their blood line for growth. Soon Veldkamp's was the primary filler for 1-800flowers. The much sought after growth finally was back. Any loss of local business was easily replaced by the explosion of incoming 1-800 orders.

The monetary costs of receiving these orders inched higher, but the immeasurable costs went completely ignored. These costs included the slow loss of local identity, the slow loss of customer loyalty and finally the loss of control over one's own business. At the same time Veldkamp's local business was eroding tremendously, incoming 1-800flower orders were now well into the millions of dollars annually and continuing to increase. It would be no surprise that a co-branding effort might be forced upon them with the threat of pulling away a couple hundred orders a day that Veldkamp's had become so accustom to filling. What was Veldkamp's to do? They either had to drastically downsize their business fast or come to the realization they have lost control of their own business to their new partner.

Veldkamp's decided to partner, maybe because of ego or maybe because they liked the growth 1-800 provided that they were unable to achieve on their own, but unfortunately when they gave up controlf their business they also lost control of their own destiny. As the world changes so does business models, and as much as 1-800 liked the idea of having brick and mortar shops with vans driving around town with their name on it, they liked the idea of expanding their wire business even more. The only known way to sign up shops to a wire service is to promise them orders. This presented a problem in Denver, not for 1-800flowers but for Veldkamp's as not only had they become forced into partnership, they were not even going to be exclusive. As 1-800 signed up florists promising volume, the volume of orders to Veldkamp's declined, losses mounted and today, stores are being forced to close.

Of course their spin is they are simply reevaluating and reorganizing, but they fail to tell you the whole story as to why.

But this is just my spin not based on fact, just my insight. You see, I had already written this script in my head long before it all unfolded. Whether my spin is at all accurate or not, I tell you this for the lessons to be learned.



The spin according to RC, or file this under "R" for rumor.



-
 
Thanks for your insight RC That was VERY well written and a good lesson for each of us to take under our own umbrellas.
Marilee
 
Has anyone heard anymore about Veldkamps??? I was amazed at their decision to "co-brand" and have been waiting to see the end result. These people are long time big flower shop owners and must be aware of a larger pciture than most of the rest of us.. It was never a secret that 800fl could and did change preferred receiving members at a moments notice so I wondered why they believed they would be exempt from this option.??

Altho' I think RC might be dead right.. I wonder if they did this instead to guarantee an order base (albet mostly incoming) so that they could shut the losing stores and still stay alive with work. Closing physical locations generally stops the gushing out of money (overhead, facility & mostly labor).. if they could be guaranteed orders , even for a short time, there would be the opportunity to make these changes while still having a cash flow and then in the future they could re position themselves back to local business.. either getting out of the 800fl contract or changing their name.
With a lot of incoming business there is the opportuniy to market to recipients.. although you need to be creative and have a definite plan of action to choose who would apt to be a flower buyer and who just receives flowers.

And there must have been some upfront money from 800fl to justify the changing of all the logos on vehicles etc. to include their logo.. so maybe the up front payment was substantial???
 
.
With a lot of incoming business there is the opportuniy to market to recipients.
When your name has 1800Flowers in it, as Veldkamp's did after becoming a franchise, each marketing piece will likely send shoppers back to 1-800.

Another FC member and I were discussing the situation with Conroy's stores here in So Cal. (1800Flowers owns the Conroy's corporation.) On Google Local/Maps, each store is identified with a little flower icon as part of a pay-per-click campaign. Though most franchises run their own web sites, the PPC's go straight to 1800Flowers.com

Take a look at this Westminster CA page. The PPCs appear on the right and the top listing I see is for the 1800 corporate-owned store in Huntington Beach. The second listing is for a franchise in Westminster but both listings link to 1800's home page.

Those franchisees pay a marketing fee as a percentage of sales. Were I a franchise owner, I'd be furious that my store was being used to direct orders to 1800. Perhaps 1800 gives the franchises a better cut of the order, but I wouldn't count on it.

Based on the way these links are presented, I'm not even sure how 1800 can make sure the chosen franchisee actually fills the order, but perhaps they have an internal way of handling it.

Regardless, it should be a serious concern for any business co-branded with 1800.

And there must have been some upfront money from 800fl to justify the changing of all the logos on vehicles etc. to include their logo.. so maybe the up front payment was substantial???
Someone correct me if I'm wrong, but I believe the franchise bears all expenses of changing the signs, logos, etc.
 
Operating an LFC takes a different kind of mindset, generally not one based in the flower business, but in the cut-throat business world.

I wonder if the "traditional florist" mindset was not able to be overcome, and transformed. Retail floral is one thing, basing your business on a majority of filling for someone else is another.

We work on small margins already, but imagine, someone taking even 8% off the top of all sales, then 29.2% on all incoming business as is the 800Flowers model.

I think RC is probably pretty much right on track. It reminds me of something Bad Bobby told me years ago, when I inquired about becoming the first ever FTD "branded/logo'd" store...

He said "Mark, you would not want to pay the price"...and he was not talking about dollars.
 
Status
Not open for further replies.