2007 was a tough year for
online flowers and gifts retailers as their combined sales
bloomed by less than any other segment in Internet Retailer’s
Top 500 Guide.
For the year, the cumulative web sales of the 21 flowers
and gifts merchants ranked in the 2008 edition of The Top
500 Guide rose by just 11% to $1.35 billion from $1.21 billion
in 2006. In comparison, all retailers ranked in the Top
500 Guide grew their combined sales year-over-year by 21.6%
to $101.7 billion while total online retail sales rose by
21.8% to $165.9 million.
In 2007, segment leader 1-800-Flowers.com Inc., No. 36 in
the Internet Retailer Top 500 Guide, generated e-commerce
revenue of $501.9 million, up 16.6% from Internet revenue
of $430.3 million in 2006. Following 1-800-Flowers.com in
the Top 500 flowers and gifts rankings are FTD Group Inc.
(No. 55) at $260 million; Hallmark Cards Inc. (No. 127)
at $92.9 million; RedEnvelope.com (No. 132) at $88.5 million;
American Greetings Corp. (No. 136) at $85.2 million; Potpourri
Group Inc. (No. 151) at $77.4 million; Celebrate Express
(No. 163) at $64.7 million; The Vermont Teddy Bear Co. (No.
179) at $57 million; PersonalCreations.com (No. 189) at
$51 million and JustFlowers.com (No. 323) at $20 million.
1-800-Flowers.com now controls 37% of the online gifts and
flowers market as measured by the Top 500 Guide, compared
with 19% for FTD, 6.9% for Hallmark and 6.6% for RedEnvelope.com.
When retailers began to notice the web, flowers and gifts
merchants were among the first to take advantage of the
Internet as a marketing and merchandising channel. 1-800-Flowers.com
started selling online through CompuServe in 1992 and became
the first web merchant on AOL two years later.
But in recent years gifts have become a commodity item on
the web with even more online retailers offering gift registries,
wish lists and targeted seasonal campaigns. To survive and
maintain their market position, some flower and gifts retailers
are making acquisitions while others have been acquired
or now operate within a different organization as the result
of filing for bankruptcy.
Since 2002 1-800-Flowers.com has made several acquisitions
to diversify its line of business. In May 2002, 1-800-Flowers.com
acquired The Popcorn Factory, followed by The WineTasting
Network in November 2004, Cheryl & Co. in March 2005,
Fannie May Confections Brands Inc. in May 2006 and DesignPac
Gifts LLC in April 2008. By acquiring companies, 1-800-Flowers.com
is building up a $250 million gifts business and targeting
niches in gourmet food and gifts baskets, and a merchandising
line of gifts for children and the home. “We are now
at a revenue run rate of more than $250 million, making
us a leading provider of gourmet food gifts,” 1-800-Flowers.com
CEO James McCann told Wall Street analysts on the company’s
year-end earnings call in June. “We continue to see
excellent growth opportunities in this business for both
our organic initiatives as well as acquisitions. In our
home and children’s business, despite the economic
headwinds in this category we have improved our bottom-line
results significantly.”
In the online flowers and gifts market, 1-800-Flowers.com
Inc. is using a mix of organic business development, mergers
and acquisitions to drive sales. But many other retailers
in the segment, including FTD, RedEnvelope.com and Celebrate
Express are now under new ownership. In August, United Online,
which also owns Internet service providers Juno and NetZero,
the Classmates social network and web-based loyalty program
MyPoints, purchased FTD in a deal valued at $754 million.
Two other prominent flowers and gifts retailers –
RedEnvelope.com and Celebrate Express – also are now
owned and operated by Liberty Media. In June Liberty Media
acquired Celebrate Express for $31 million and merged the
company with BuyCostumes.com, another company in Liberty’s
interactive media group. In May Provide Commerce, another
Liberty Interactive company, acquired the assets of RedEnvelope.com
after a bankruptcy filing.
One way American Greetings, which saw revenue at its e-commerce
subsidiary AG Interactive decline by 5% in the 2007 fiscal
year, is trying to differentiate is by offering more digital
and social network services. In December American Greetings
spent $26.5 million and purchased PhotoWorks, an online
photo sharing and personal publishing company that allows
consumers to use their digital images to create quality
photo-personalized products such as greeting cards, calendars,
online photo albums and photo books. PhotoWorks offers production
capabilities that position us for a comprehensive photo
strategy bringing together both digital and physical products,”
says American Greetings CEO Zev Weiss.
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