1-800-Flowers.com announced today that it has signed a multi-year deal with Internet portal Snap.com to become the anchor tenant in Snap.com’s Flower Shop.
Although the specific length or terms of the agreement were not disclosed, 1-800-Flowers will be featured in an integrated online and TV media campaign. 1-800-Flowers will also be spotlighted in select Snap on-air promotions that are slated to appear on NBC during the Valentine’s Day and Mother’s Day seasons.
Building Anchor Positions
This development comes only one month after 1-800-Flowers announced it had extended and expanded its partnership with America Online until 2003.
Under the terms of that 4-year, $37 million (US$) deal, 1-800-Flowers will continue as the exclusive third-party marketer of fresh-cut flowers on AOL and AOL.com. Starting in 2000, the online florist will also hold the same exclusive with Netscape Netcenter, CompuServe, Digital City and ICQ.
For one year during this contract, 1-800-Flowers will be the exclusive third-party marketer of gardening products across AOL’s properties. The online florist will also have anchor positions in both the gifting and gourmet gift categories and be available internationally through ICQ.
Industry observers feel that this agreement, along with today’s announced deal with Snap.com, is part of 1-800-Flowers.com’s ongoing strategy to keep one step ahead of competing online florists.
Dependency Upon Portals
Nonetheless, 1-800-Flowers seems to have a heavy dependency upon portals to drive its business. Even before going public in August, the Westbury, New York-based 1-800-Flowers cited its need to be marketed on Internet portals and American Online as a potential risk factor in its filing with the Securities and Exchanges Commission.
“If these third-parties do not attract a significant number of visitors, we will not receive a significant number of online customers from these relationships and our revenues will decrease or not grow,” the filing says.
The company also listed the increasing costs of maintaining these relationships in the filing, revealing that it shelled out $4.3 million to companies such as Excite, Microsoft Network and AOL for the nine months ended March 28, 1999.
Should Pay For Themselves
Nonetheless, industry observers feel that the $37 million paid by1-800-Flowers to the number one online service is money wellspent — considering AOL’s 20 million plus subscribers’ potential buying power. Additionally, the new Snap.com deal could also be a bargain — if it helps 1-800-Flowers to maintain its edge on competitor FTD.com.
The FTD Association established its own 800 number in 1993, went online in 1994 and formed FTD.com as a subsidiary in May of this year. About 6,500 florists in the FTD Association fill the site’s orders. It has since gone public as well.
In 1986, James McCann decided to take advantage of the popularity of toll-free numbers by founding 1-800 Flowers — allowing customers to bypass their local florists. In 1995,1-800-Flowers launched its own Internet site and just recently added the dot-com to its name. About 1,500 independent florists affiliate themselves with 1-800-Flowers.com.
Big backers such as Benchmark Capital and Japan’s SOFTBANK have helped to fund 1-800-Flowers.com, which earned $5.1 million on revenue of $221 million in 1998.
The announcement of the new deal did little for 1-800-Flowers stock in early trading today, with shares falling 1/8 to 14-5/8 after being up fractionally. Volume was light with only about 25,000 shares changing hands in the first 45 minutes of trading.
This stock is still significantly off its offering price of $21 when the company went public on August 2nd. Investors are hoping that the frenzy surrounding online shopping during the holiday season will boost the stock.