Editor’s Note: United Online, FTD’s Woodland Hills parent company, said it is not considering setting up additional supermarket floral displays, as described in this article. The article was based on a stock analyst’s report, and a company spokesman offered no comment for the article. But after publication, the company said FTD sells flower arrangements from a limited number of grocery stores and has no plans to expand.
The Mercury man logo of florist FTD could start sprouting up at local grocery stores.
United Online, FTD’s Woodland Hills parent company, is considering setting up supermarket floral displays offering cheaper bouquets than from its network of florists, according to analyst reports.
The goal would be to boost market share by letting FTD cultivate customers who buy flowers at lower grocery store prices or pick up the occasional bouquet in addition to their milk and eggs.
But the company could get some blowback from its own network of FTD-approved florists, said Mike Crawford, an analyst with West L.A.’s B. Riley & Co.
“The company has to be careful pursuing such a strategy,” Crawford said. “The benefits … must outweigh the costs of channel conflict given that its independent florist partners view grocery store chains as cut-rate competitors.”
FTD, based in Downers Grove, Ill., currently sells flowers and other gift items through its website. The company either ships the products direct to the customer or works with independent florists in its network to deliver orders.
United Online, which is led by Chief Executive Mark Goldston, declined to comment on its grocery store strategy for FTD. But Daniel Kurnos, an Internet analyst for Benchmark Co. LLC in Boca Raton, Fla., said the company has already designed in-store displays, and is now weighing the pros and cons of going through with the plan.
Customers at grocery stores, however, typically spend less on flowers than those who go to florists. That means FTD would have to sell products at a lower price and risk its reputation for premium arrangements, Kurnos said.
“They’d clearly be sacrificing price to reach an untapped segment,” he said. “The type of customer who goes to the grocery store to buy flowers is not the type of customer who would order on FTD.”
‘Cash-and-carry’
Since acquiring FTD in 2008, United Online has focused on the flower company’s premium products. It implemented a tiered pricing system that shows a similar arrangement on sale for three different prices based on size. Modest bouquets retail for less than $35 and premium bouquets price well above $100.
The FTD business has become United Online’s highest performing segment. United Online also operates a dwindling dial-up Internet business and runs social network Classmates.com.
In the second quarter of this year, United Online reported net income of $14.8 million on revenue of $256 million. FTD brought in $176 million in segment revenue.
To move into the grocery store market, FTD would likely have to pay rent for the floral sections in the stores or give the stores a cut of revenue from sales, Kurnos said. FTD also would develop a new brand name for the service that incorporates the Mercury man logo.
“They wouldn’t want to label it FTD,” he said. “That would clearly impair their brand.”
Groceries and other outlets have been taking business away from storefront florists in recent years, some flower shop owners say.
“Farmers markets, Trader Joe’s, grocery stores have taken the whole cash-and-carry market,” said Rita Azar, owner of Rita Flora on La Brea Avenue, a premium flower shop that is not part of the FTD network.
The company already stirred some resentment in its flower shop network by launching a direct shipping business that bypasses its own florists. Instead, FTD now works directly with suppliers to fill some of its orders.
Kurnos said the backlash from florists for that decision could be one reason United Online hasn’t moved forward with its grocery store plans. But he noted that market share gains for the company could outweigh the risk of angering the floral network or lowering prices.
“FTD would get access to a huge piece of the pie that was unreachable before,” he said. “And if they decide that it’s working, it will be easy to scale.”
