It's a Jungle out There

Amid fierce competition, American Floral Services (AFS) is striving hard to keep pace with an ever-changing wire service market to produce more blooms for its IT investment buck.

AFS offers software that helps the individual mum-and-dad floral retailers with all aspects of the business, from accounting to order taking to Internet access. AFS brags that technology is its strongest suit, but the company needs to realise that its true differentiator is educational services. Local retailers have access to online classes including how-to's on design and technology. It's these types of services that will make florists loyal transacting members.

But AFS has a tough row to hoe. Thanks to the Internet, less expensive, fresher flowers are quickly becoming a hot commodity - a direct-from-grower approach that threatens wire services like AFS and FTD. Of AFS's competitors, FTD (with its 96 per cent brand recognition among consumers) and Gerald Stevens (which hopes to build a Blockbuster-like chain of neighbourhood flower stores) directly threaten the offline wire services. The first to enter the online market, 1-800-Flowers.com, represents the strongest online competitor with its wire service and direct-from-grower offerings.

This new business plan cuts out retailers while increasing margins and offering consumers lower prices. Direct-from-grower flowers typically carry lower handling costs but can often last longer because of the truncated supply chain.

What does this mean to AFS and its retailing members? The introduction of a new marketspace and a decreased ­consumer demand for wire service flowers threatens the existence of both retailers and wire services as growers take more of the market. A new marketplace brings new challenges.

In the past, wire services were the only way for local retailers to get access to a national marketplace. As more and more retailers consider using the Internet to gain direct access to a larger market without paying membership fees, wire services will begin to find it difficult to justify their existence.

AFS is attempting to combat this by offering its members access to a set of Web-initiated applications (via Eflorist.com) that gives them the ability to promote their products on a co-branded Web page. However, AFS's secret weapon may be its Web-enabled educational emphasis. By offering its educational content, AFS provides added value and incentives for local florists to choose its wire service over others. AFS and similar wire services will need to promote products that direct-from-grower companies can't provide, like professionally designed arrangements and bouquets.

AFS should also consider supporting wireless Internet orders. FTD recently announced a two-year partnership with AT&T Wireless that will enable consumers to purchase products through WAP-enabled devices. If AFS is serious about maintaining its membership ranks, it will need to quickly show its hand for untethered consumer-oriented transaction ­services.

Stephanie Pawlowicz is a research analyst covering the online gift market at Gomez Advisors in Lincoln, Massachusetts

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