January 29, 2009

1-800 Flowers & Catalog Prospecting In Kids/Home

A few comments worth sharing from their most recent investor conference call.
  • Management says the business is "solidly profitable", $50 million in profit, 10% pre-tax. Nice results in a gloomy environment. Not everybody is failing.
  • About 10% of the salaried workforce were downsized.
  • "We are significantly downsizing our Home and Childrens gift business segments including reductions in catalog marketing (see page 2 of the document) ..."
  • Kudos to the 1-800-Flowers Database Marketing Team!!! It isn't often you hear figures quoted in these calls. 1,000,000 new customers during the holiday period, 57% of orders from repeat customers (not how I prefer to calculate this metric, but so what!) , and 30,000,000 customers in the database. This tells me that this business is probably in Acquisition Mode --- that may sound strange, but with 30,000,000 customers in the database, they should be pulling in 80% of orders from repeat buyers if they had better customer loyalty.
  • Comment From Joseph Pititto: "I think on the marketing channels the least productive channel we have is catalog marketing especially on the prospecting side."
Our job, as industry leaders, is to synthesize all of the feedback we're getting from business leaders. The vendor community continues to advocate multichannel marketing via catalogs. Business leaders continue to shut down catalog marketing efforts, clearly telling the world that catalog prospecting is dying.

Every one of us should have a five year customer acquisition plan that migrates us out of the co-ops (if performance warrants) and catalog prospecting (if other avenues can be developed) during the five year period. This plan requires considerable testing of alternate ideas over the next eighteen months, in order to keep us moving ahead of this trend.

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