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How 1-800-Flowers Sprouted Success

How did a florist from Queens, N.Y., with a few flower shops come up with the now patently obvious idea to use a toll-free vanity phone number and the web to sell flowers? And then how did he manage to make a $7 million error in judgment, only to still land at the top of the heap with the most successful floral distribution company in the United States?

Jim McCann is the founder and CEO of 1-800-Flowers.com—the florist and gift retailer, franchisor and distribution company based out of Carle Place, N.Y.—and among the first businessmen to use a mnemonic toll-free telephone number for direct sales to  consumers.

In the company’s fiscal 2014 first quarter, McCann’s enterprise (which is publicly traded on NASDAQ under the ticker symbol FLWS) had revenues of $123 million. That’s a 2.9 percent increase from sales for the same period the year before, and it was fueled by approximately 375,000 new e-commerce customers.

McCann’s success since establishing 1-800-Flowers in the mid-1980s has a lot to do with something that wasn’t even a blip on the computer screen back then: the Internet. But traditional advertising was crucial as well. Unless you live in a cave without a television hookup, you’ve probably seen dozens of ads for 1-800-Flowers.com.

SUCCESS wondered what this seemingly self-effacing entrepreneur learned from early mistakes and what he means when he says he hasn’t even reached the halfway mark in what he thinks he can create with the company.

Q: What event prompted you to go from a multistore flower shop owner to a large franchisor?

A: I was living in Queens with my wife and three kids in the early 1980s, and I heard a radio commercial for 800-Flowers while I was shaving. And I thought, Holy mackerel. It was something I’d been thinking of doing for a while with my company, Flora Plenty.

I decided to buy the company that had the telephone number, even though it was essentially out of business. It turned out to be the worst business decision you could imagine because of my naiveté: Here I am, a wise-guy kid from New York City, and I think I’m going to save all this money by not hiring bankers and lawyers. I’ll just go ahead and buy the company myself. A year later, I’m able to purchase the company and its assets, which at that time was only a telephone number; it had absolutely no business to speak of. The good news is they spent $20 million promoting that phone number. The bad news is they only generated $10 million, so they’re in debt.

What I didn’t know was I signed for everything personally. I put everything I’d accumulated in building the Flora Plenty chain for 10 years into the new company and now all of a sudden I found that I’m $7 million in debt.

So we changed the name of our stores from Flora Plenty to 1-800-Flowers, and everybody thought that was nuts. “You’d name your store a telephone number?” But the good news is we were too foolish [to realize we might fail]. And it became a brand.

Q: Is there a management philosophy to which you adhere?

A: I was in a Sam’s Club once and I asked somebody, “What’s the best-selling item in the store?” And they told me it was the boneless, skinless chicken breast, and they were back in the left-hand corner of the club. I figured if the fellow mopping the floor knew that, it’s pretty powerful stuff. And when I asked why they shared such data, what I was told was, “Sure, it’s risky from a competitive point of view—because the competition is going to know everything about us—but that’s outweighed by the power of an enlightened, informed, involved team.”

We’re not going to try and keep secrets from our competition, because the empowering effect that has on the team far outweighs any advantage your competition has by free sharing of information.

Q: You have a reputation for doing things “first and early.” Where did the early-adopter approach come from?

A: When we learned about the vanity telephone number, we sold some of the shops we owned in order to pay off the debt. We realized we weren’t going to become a successful national brand by occasionally opening a shop here and another shop there. We are a company that changed our trajectory by thinking we needed a different way of doing things and by utilizing technology first. Being early [and changing with the times] is a part of our DNA.

Q: Is there a downside to this pioneering philosophy?

A: It’s been expensive. Being a pioneer, you spend money early and sometimes other people learn from your mistakes. And, of course, technology costs tend to come down with time. But we think it’s more important that we are out there first and early because our customers tend to be early adopters and that’s how we acquire a lot of new customers. In terms of recent successes over the last several years, we have very much embraced mobile and social technologies.

In terms of failures, there are probably three or four dozen things that we did wrong in the early years, including [the creation of] CD-ROMs and catalogs. It turned out that the convenience of the online world made irrelevant the idea that there would be aggregated centers for shopping, like a physical mall would allow. Those are things that we tried and things we pulled the plug on at some point.

Q: Is there anything you do on a regular basis that recharges you, gets you prepared for the day ahead?

A: A good part of my time is out of the office—at our other facilities, different events that I participate in. Getting away from the office and everything here charges me up. But there are certain people who I go to just to get charged up.

There are interactions that refuel me, mostly with individuals I get attitude from. And there are a dozen of those people in my life who I like to spend time with—people like Wayne Huizenga, who founded Blockbuster, Waste Management Inc. and AutoNation, who’s a hero and a mentor. It’s people like Jamie Dimon, who runs J.P. Morgan Chase, who have the ability to rise above the fray and can clarify and summarize things quite easily and don’t suffer from the distractions that keep you from being focused on the big picture.

Q: How do you specifically step back and take a look at the bigger picture?

A: We’re all very good at seeing exactly why something happened in the past. So I hit a reset button in my own head to say: OK, let’s look at the circumstances today. In other words, challenging myself to see if I’m reading the tea leaves correctly and therefore making decisions or taking actions because of good interpretation of the signals.

From an entrepreneur’s perspective, being able to look over the landscape and make an informed judgment about what’s happening is important. We can see from a technological point of view what’s coming through the pipe. Social media has been one wave crashing and breaking on our beach for the last five or six years, and mobile clearly is the other. We can see those things coming. But you’re always challenging yourself, saying: OK, I can see what’s coming, but am I stepping back far enough to see how it’s going to impact my world, and are we making the right moves to capitalize on that?

Q: Aside from categorizing the purchase of the 1-800-Flowers number as a “mistake,” what’s the biggest mistake you’ve made in business, and how have you been able to move past it?

A: I thought that with a name like 1-800-Flowers, we could do anything related to flowers. So we launched a catalog called Flora Seasons and everything on every page had a floral theme. Long story short, I have some beautiful ladies’ satin Oriental-style jackets with an embroidered rose on the back that have been sitting in inventory since 1999 that you might be interested in.

I tell you that story because I want you to know that you’re going to make mistakes. You’re going to go about some things the wrong way. That said, be wise enough to hit the reset button and get over it quickly and make a joke out of it.

Q: What is it you’d like to accomplish that you haven’t gotten to yet?

A: People ask me, “Did you ever imagine what you would create?” And the answer is yes. But we’re not halfway to what we wanted to create and so the fact that we now have the physical wherewithal, the brand and the talent to go finish painting the painting, turns me on.

The world is playing into our hands by inventing tools that help us get there. Six years ago we had telecenters around the country. Today we don’t have telecenters, but we still have the same number of people or more. They’re working from home, and it’s changed our landscape. That’s pretty neat that we’re becoming a global player even though we’re still a small company.


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