How I Bought A Flower Store
One of my crazier business ventures was buying a florist even though I had never owned a store before, never worked in a store before, and knew nothing about flowers. On top of that, I bought the store through a business broker over the Internet without ever seeing it (the store was in California and I lived in New Hampshire). Here’s how it all happened:
For several years in the early 2000s I was using my GetFlowers.com domain name to sell flowers through various affiliate programs, where I made money for every sale I generated for various online florists. This made a small amount of money, but there was no way I was ever going to be able to make it into a big website that way, so I decided to open my own online florist on it instead.
I did some research and found out that almost all online florists were basically just order takers, and sent out all their orders through electronic networks like FTD and Teleflora. These floral networks then route the order to a local florist who delivers the flowers. Almost all retail flower shops have a computer that runs FTD or Teleflora software, and they use this to print out the electronic orders they are sent, and also to enter orders for deliveries to far away locations. For example, if you walk into a florist in Boston and ask them to send flowers to your grandmother in Florida, they will sit down at their computer and type your order into their FTD or Teleflora system. Florists that don’t use computers can instead use the FTD and Teleflora directories (these are like big yellow page type books) to find a florist and then phone or fax the order to them.
FTD and Teleflora have pre-set prices for the flowers, so your cost is always pretty much the same no matter which florist you go to. The florist gets a 20% profit on the sale, plus they are allowed to add their own extra fee (usually called a “service charge” or “handling fee” or “relay charge”) which they get to keep. Many times this fee is as high as $14.99, and most florists (both online and off-line) don’t tell you about this extra fee until just before you are about to pay for the order. This fee is not given to the local florist that will deliver your flowers, so you don’t get more flowers or better flowers by paying it. It just compensates the florist that takes your order for the time they spend with you on it.
My idea for GetFlowers.com was to make my site 100% automated, and then not charge any extra fee, since there was no work involved for me in taking each order. The customer just filled out the online form on my site and it was emailed to the floral network which then relayed it to the local florist. Most other online florists at the time were not that automated, so even though they took the orders online, they still had to print them out and then manually re-enter them into the FTD or Teleflora system or call them out to the local florists. Whether I got one order a day or one thousand order a day, the only work for me was doing the customer service. Plus, unlike other florists, flowers was only a small part of my overall business, so I did not need to make as much profit from it.
Another problem that I wanted to solve was that most florists have horrible customer service. Many local florists are disorganized and often make mistakes, but are very unwilling to give you refunds or compensate you for these mistakes. They will usually offer to redeliver the flowers for free if they mess up, but for example when it is a week after your grandmother’s birthday that they missed, that does not help much. Or, they will deliver the flowers, but forget the balloon you ordered. Or, they would deliver the order on time, but the gift card won’t say who it was from. And, under no circumstances will any florist ever refund your order and give you something extra as compensation to make up for the problem. In my opinion, if a florist loses your order and makes you look like an idiot for forgetting someone’s birthday or anniversary or whatever, it is not enough just for them to give you a refund and say they are sorry it happened.
From the start, I decided to handle these situations totally different than the other florists. If for example a birthday order was never delivered due to a screw up by the local florist, I would give the customer a refund on the entire order and have the local florist deliver an apology bouquet to the recipient at no cost to the customer. I did this regardless of how much of a discount/refund the local florist would give me on the order. Most of the time I ended up giving my customer at least double the discount the local florist gave me. Many times the florist would not give me any discount, yet I still gave the customer a full refund. Aside from making customers happy, having better customer service also made things easier for me, because with online orders customers are very quick to dispute a charge with their credit card company, so if they are unhappy they can basically get a full refund anytime they want one no matter how much I argue with them about it.
Anyhow, to do all of this, I needed membership into the FTD and Teleflora networks, and the only way I could do that was to own an actual flower store that was already a member. At the time, FTD and Teleflora did not like websites that just took orders but were not real florists, so to start my GetFlowers.com website I needed to buy a florist. I knew nothing about flowers or running a store, but my hope was maybe I could use my extensive business and computer knowledge to make a struggling flower store more profitable. If that worked, I could then buy more florists and make it into a big business. If eventually I had 20 flower shops each making $5000/month profit, that would be way more money than I was making from all my websites.
I looked online at various business brokerage websites and found that there were many flower shops for sale, usually ranging in price from $50,000 – $200,000. I found one for sale for $40,000 in Huntington Beach near my office in California (this is the office I had never been to, and ran remotely from 3000 miles away), and had one of my employees (a web designer with no floral or retail experience) drive by and take a look. He thought the location was good, so I bought the store. I made a deal with the owner where I would pay her to run the it for me. She was selling because she needed the cash, but she still needed a job afterwards, so this worked out well for her.
Then, while I was working on closing that deal, I found another florist for sale for only $20,000 in Sacramento California, and the current store manager was willing to keep running it after the sale. There was no need at all for me to buy 2 florists, but it seemed like a good deal, so I bought this one also. My reasoning was that there would be some economies of scale in running 2 florists instead of 1, where a bunch of the costs (web sites, marketing, payroll processing, etc.) could be shared. I also thought maybe some of the store employees might at some point help me with customer service for the Getflowers.com website. And, it was not that much extra work for me to run 2 florists instead of 1. Another big reason was that if I had only 1 florist and it failed, I might not know if the problems were related to that store in particular (like the location) and I still would have dreams of running a giant floral empire, so if I had 2 florists that failed at least I would get it out of my system once and for all and be done with it.
Once I bought the 2 florists, I was able to launch my GetFlowers.com website, although running the site really had nothing to do with the stores. The only related part was that I had the manager of one of the stores handle the GetFlowers.com customer service for me in her spare time at the store. I advertised GetFlowers.com in various search engines and it started getting several dozens orders a day. A few years later I bought the domain CheapFlowers.com for around $35,000 and set it up as an alternate version of my GetFlowers.com website, with both domains using the same order entry system and same FTD/Teleflora accounts. I made the CheapFlowers.com site more wholesale looking, with a long description about how I was able to offer such low prices. Although CheapFlowers.com was a catchier more memorable domain, I worried customers would be turned off by it because they might think it was a scam, or would worry about what to say if the flower recipient asked where they bought the flowers (“Honey, I bought your flowers at CheapFlowers.com” does not sound so great), so I made sure the credit card billing still showed the name GetFlowers.com. I did not find much difference in the effectiveness of the search engine ads for the two sites, but interestingly over time CheapFlowers.com has attracted more repeat business, so that is the domain I have focused my efforts on. It now gets 50-100 orders a day, with up to 500 orders a day during holidays.
Running the 2 retail stores turned out to be an adventure. Most florists run their own store and make their living from the profits, so as an absentee owner pretty much all the profit went to paying people to run the stores for me. Keep in mind that a typical owner works much more than 40 hours a week, so I basically had to pay 2 people at each store to run things. All that was fine with me, since my main goal was to make money from my website and not the stores, but the problem was that managing the stores was a lot of work for me and there was little hope of making any significant money from them. I computerized both the stores, setup websites for them, did lots of online and offline marketing, tried to get more wedding business, tried to get more corporate business, joined additonal floral networks, gave out coupons, and even setup a flower kiosk in a mall, but none of that had much of an effect. The Sacramento store was in a mall that after a few years pretty much died, so that caused a significant drop in sales which caused the store to lose money. The Huntington Beach store had a good amount of sales, but still never made a profit for me.
In some ways, owning the stores was actually easier than I expected. Rarely did something come up that I could not handle, and the existing employees in each store were dedicated and did a good job running things. But, just like with any business, there were constantly things that I, as the owner, had to handle, like filling out paperwork, hiring/firing, payroll, advertising, bill paying, dealing with suppliers, computer issues, insurance, sales tax, delivery van problems, etc. Some of that work was because I was making changes to improve the stores, but no matter what running a business is always a big headache and involves lots of work. On top of that there were constantly personnel issues I had to deal with. Employees were always fighting with each other, always had problems that needed to be handled, and sometimes would accuse each other of things like stealing, lying, and drug use.
If the stores were making money I could have hired somebody to handle all the “owner” stuff, but for me it was all just a hassle. I had hundreds of websites to run, in addition to doing all the mundane tasks of running my company (paying bills, email and phone calls, payroll, taxes, domain name renewals, etc.), and all of that had much much more income potential than running the florists. So, after a few years I shut the retail stores down. I was losing $5,000-$10,000/month combined on them and could not afford to keep them open any longer. Luckily, I was doing a large volume of orders by then with FTD and Teleflora, and they were more accepting of Internet florists, so they did not care anymore if I had stores or not. And, I hired the manager of one of my stores to work full-time for me doing customer service for CheapFlowers.com/GetFlowers.com.
Once I got rid of the stores, I had more time to focus on expanding CheapFlowers.com. I did some online yellow page advertising, some price comparison search engine advertising, some paid link exchanges, and other such marketing strategies, but none of that ever made more money then I spent. I also bought 300+ city and state floral domain names (such as newportflowers.com and newyorkflowershop.com) and setup flower pages on each of them promoting how CheapFlowers.com delivers there, but that did not help much either. I then tried setting up customized versions of the CheapFlowers.com website on more specialized domains:
CheapRoses.com (for roses)
FloristHotline.com (to get phone orders)
CanadianFloral.com (with prices in Canadian dollars)
FlowersOverseas.com (to get foreign orders)
SamedayFloral.com (to get same day delivery orders)
but that did not get much extra business. I can easily handle thousands of flower orders a day, but so far no matter what I do, the number of orders always seems to stay the same (50-100 per day).
There are still problems I have to deal with on the flower websites, like fraud, server downtime, website errors, customer emergencies, supplier issues, and more, but it is much easier to run the flower sites then to run the stores. I had a bunch of more serious problems over the first few years of opening GetFlowers.com, like getting my ecommerce system working correctly (orders for flowers are very very different than a typical product like books or DVDs, so a standard shopping cart system won’t work for it), automating the blocking of potentially fraudulent orders, getting my customer service system working well, and many problems with my suppliers (the floral networks). I also handled all the night and weekend customer service myself for the first few years, which was a lot of work.
Overall, I am glad I bought the flower stores, because it allowed me to start my CheapFlowers.com/GetFlowers.com websites, which now make me a profit of around $5,000/month. And, although I did not become a retail flower tycoon, at least I tried. Remember, a ship in harbor is safe – but that is not what ships are built for.