Companies like 1-800-FLOWERS, FTD, and Teleflora have been delivering flowers with the wrong message for over a hundred years. The first floral wire service was established in the early 1900s as a cooperative where florist-members could exchange orders via telegraph messages. Originally, these companies created value by transferring orders and payments between florists in different geographies and captured value through a small facilitation charge in addition to a monthly membership fee. In this pre-internet world, floral wire services benefited from direct network effects – the more florist-members that were part of the platform the more valuable the wire service became to each of them as they could send and receive more orders.
In the latter part of the century, wire service companies began selling flowers directly to customers, effectively transforming their direct network model into an indirect network model. The value to florist-members was no longer tied to having other florists on the platform but rather in having consumers place orders directly through the floral wire service. The more consumers placing orders via the platform, the more florists wanted to become members. The more florists on the platform, the better the platform could fulfill the needs of its far-reaching consumers.
Fast-forward two decades and these wire services have been taking an increasing share of the profit pool without making any major advances to their value proposition or operating model. Collectively, 1-800-FLOWERS, FTD, and Teleflora capture nearly two-thirds of the $2.3B online flower market. However, consumers and florists alike have begun to question whether the value these wire services provide is sufficient to make up for the cost. Florists often end up losing money when they fulfill orders via a wire service given the large commission and annual membership fees they are required to pay. Disgruntled florists and breakdowns in the system are leading to less than stellar customer service. Consumers are paying significantly more in service fees but are left frustrated as flowers are often delivered late or don’t look anything like they did in the picture.
Some companies have tried to address these network inefficiencies by either going around the platform (e.g., local florists creating their own e-commerce sites) or integrating along the chain (e.g., national order gathers like ProFlowers or Bouqs cutting out the florist by shipping flowers direct from floral farms to consumers via UPS). However both of these solutions leave one side of the platform underserved. In the former case, if a consumer wants to send a floral arrangement to a loved one in a distant city he/she needs to search online and research multiple local flower shops. In the latter, florists are losing out on potential orders and consumers miss out on the thrill of receiving a beautiful, hand-delivered arrangement. Surely there must be a better solution to this problem that leverages today’s technology.
Enter BloomNation, the modern community marketplace startup that connects local florists with consumers all across the country. Founded by three friends and bootstrapped together on poker winnings, BloomNation is rapidly changing the online flower landscape. Since launching in 2011, BloomNation has raised over $7M in funding and was closing out 2014 at a $10M run rate according to their CEO. Toted as “the Etsy of flowers”, BloomNation creates value for florists by allowing them to manage and display their own offerings, including uploading their own pictures and setting their own prices. Moreover, BloomNation also provides a host of easy to use tools like a website builder, point of sale system, CRM solution, etc. that help local florists quickly and cheaply overcome the challenges of establishing an online presence and integrating technology into their operating models. For consumers, BloomNation provides a single place to browse a hyperlocal and constantly changing catalogue of flowers. Consumers can also verify order quality as florists can send pictures of the flower arrangements in progress and notify them upon delivery via the BloomNation app. Finally, by only capturing a 10% commission (less than half of what the big wire services charge), BloomNation enables florists to profitably meet the needs of non-local customers and ensures that consumers are getting the most peonies for their pennies.