New DTC toolkit   //   March 29, 2019

How 1-800-Flowers competes in the direct-to-consumer era

While 1-800-Flowers isn’t considered in the conversation of trendy DTC brands, the company’s direct-selling strategy is what’s protecting its turf as large floral brands and startups try to gain market share.

Since the 42-year-old company first acquired the 1-800-Flowers phone number 33 years ago, its goal has been to create a direct line of sight to the consumer through delivery. It’s had an e-commerce site since 1995, and it’s used its network of corporate and franchise-owned stores, a network of Bloomnet affiliate stores (a total of more than 5,000 locations) and its own fulfillment centers to reach consumers as quickly as possible. It’s also expanded its product offerings to gourmet foods and gift baskets, the result of its 2014 Harry & David acquisition.

You should not be constrained by the opening and closing hours of a physical shop — we wanted to empower our customers,” said chief marketing officer Amit Shah, speaking of the company’s early plans to offer round-the-clock delivery to customers via phone orders, even prior to the internet.

Last year, the company brought in $1.2 billion in total net revenues, 52 percent of which was generated through its gourmet food and gift baskets business, while 40 percent was through its 1-800-Flowers consumer floral business. Its growth is built off of its physical footprint combined with tech investments that yielded advances in online and mobile ordering, conversational tools like message-based commerce, and voice. Last year, it spent $39.2 million on technology and development expenses, which included costs associated with its website, content development, maintenance, fulfillment and other costs.

Being early to a market doesn’t guarantee success today, as eager brand founders look to disrupt sleepy industries. But 1-800-Flowers has stayed on the defense, and has combined digital communication methods with the strength of a physical store and fulfillment network that’s helped it hold its own against chief competitor FTD, startups like UrbanStems and Amazon. According to investment firm DA Davidson, the e-commerce floral market is valued at $6 billion, and 1-800-Flowers maintains a leading position.

But 1-800-Flowers faces the challenge of trying to meet customers’ needs across channels and innovate on product development across a wide geographic footprint, Shah said, as customers don’t tend to use one channel to complete their purchase trajectory. Therefore, being present on a range of different platforms is essential to reach customers of varying ages (it said its target is 18 to 80), comfort with technology, and locations, Shah said. Social media-based marketing, particularly via Instagram, is an important driver for the brand’s growth.

To close the circle on online-to-offline communication, the company has been evolving its ordering and payments through messaging, a process which started by its rollout of Facebook bot ordering and payments three years ago and since expanded to Google Assistant and Apple Business Chat. With respect to messaging platforms, the challenge is to be able to build a tool that can learn based on customer interactions, something which tech company Conversocial is helping 1-800-Flowers achieve.

“[The] biggest piece about automation is the ability to learn based on what people are asking that we don’t know; if somebody is asking for something specific [that they don’ t have] — you’re able to take that intelligence and learn from it,” said Conversocial chief automation officer Shane Mac. And difficult inquiries can be easily escalated to humans, he added.

What’s keeping 1-800-Flowers a strong player is its consistent investment in technology and digital marketing, according to DA Davidson research analyst Linda Bolton Weiser. It’s added a series of digital and conversational commerce tools out over the past decade, including an Alexa skill, ordering and payments through Facebook messenger, Google Assistant, Apple Business Chat and Samsung Bixby.

“They’re dominating because FTD is almost bankrupt — their issues are that they didn’t invest enough in capital expenditures and marketing,” she said. “[1-800-Flowers’] secret sauce is they’re very sophisticated in digital marketing and investing in platform and digital capabilities.” 

In addition, while Amazon has dabbled in flower delivery, it’s not high on the retailer’s priority list, she added. Meanwhile, 1-800-Flowers has borrowed from some of one of Amazon’s most successful ways to lock in customers: a Prime-style membership program called Passport which offers free two-day shipping and other member benefits.

As a next step, building on its success in digital customer outreach and fulfillment, a brand refresh that pulls together all the tech improvements under the wrapper of a fresh look and feel could help it stay relevant with a younger audience, said Matt Rednor, founder of Decoded Advertising.

“They have deep expertise built up over time — they could probably benefit from a fresh modern marketing campaign that reframes them in consumers’ minds. They don’t want to be seen as the grandmother’s flower brand anymore.” 

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