Is a lawsuit the ultimate compliment? That's what we're about to find out, now that floral delivery behemoth FTD
Provide Commerce's popular ProFlowers.com site makes the pitch that its flowers are "Direct From the Fields," and its jabs at conventional floriculture don't end there. The ProFlowers.com website goes into great detail explaining the cumbersome five-step process through which traditional florists deliver flowers eight to 12 days after they have been cut. From the grower to the importer to the warehouse to the local florist to the eventual customer, ProFlowers proposes a simpler solution. By cutting out the layers in the middle, the online florist promises that its direct approach shortens the cycle by roughly a week and lengthens the life of the flowers in the recipient's hands.
FTD claims that ProFlowers is misleading its customers. It points to the company's refrigerated warehouse in Miami, third-party warehousing arrangements, and the practice of warehousing inventory in anticipation of peak holiday periods.
Provide Commerce isn't about to deny the existence of warehouses. Its SEC filings have always mentioned that a fifth of the company's orders -- no doubt, mostly the exotic flowers shipped in from Latin America -- are fulfilled through the company's Miami warehouse. The company uses as many as 10 regional third-party warehouses to expedite the shipping process in a cost-effective manner.
However, here is where things get interesting. FTD's own site claims that "flowers from an FTD Florist are among the freshest in the industry." If the claim of freshness gets puts to the test and FTD's product proves to be inferior, will this move backfire?
You can't blame FTD. It doesn't just rely on its network of independent local florists to fulfill the orders it receives. Of FTD's revenues, 36% comes from selling products and services to those same FTD members. If it allows its "consumer direct" mantra to be misunderstood, it may lose customers and revenue to ProFlowers.
The other major player here is 1-800-Flowers
Provide Commerce got singled out earlier this year in our Motley Fool Rule Breakers newsletter service. The company's platform of expediting perishable goods such as flowers, prime meats, and fruits makes financial sense, and it's also resonating in the marketplace. Provide Commerce grew its sales in the June quarter by 28%, while FTD grew its top line by only 2%.
That's why FTD has little choice but to attack before ProFlowers steals away even more market share. If FTD is able to rough up the consumer perception of ProFlowers, it may even trickle down to disrupt some of Provide Commerce's floriculture partnerships with retailing heavies like Amazon.com
However, if FTD is aiming to educate the market -- and if ProFlowers' product turns out to be better -- FTD had better hope that it doesn't get what it bargained for.
Longtime Fool contributor Rick Munarriz has been a satisfied Provide Commerce customer in the past, but he does not own shares in any of the companies mentioned in this story. The Fool has a disclosure policy. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.