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adair

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									David Adair put his head on the block when he agreed to lead ISA, the group of Interflora
florists who were against the sale of Interflora to 3i. A Chartered Accountant, who also
happens to be a director of his Mum’s flower shop, he felt the Interflora family silver was
being sold at a knock down price and that members were being hoodwinked into accepting
a price that did not reflect the true value of Interflora.
   Given just 15 months later Interflora was sold to FTD for nearly three times the original
price and has now been sold for another huge profit, does he feel vindicated? We asked
him how he saw the latest move.


A sorry story where
only florists lost out
F&WB How do you feel about the latest sale, and do you think                 F&WB Do you accept the argument that United Online will bring
this was all part of the plan?                                               Internet/customer power given in the last quarter Soenen said
David To be totally honest I don't think anything about it much. This is     Internet promotion was getting tricky?
simply one American corporation taking over another, which happens to        David I'm sure there's some truth in what they say but on the other side
include the Interflora UK business. The damage was done a long time ago      of the coin I believe there is a steady exodus away from the Interflora and
when the Interflora members agreed to the original deal.                     FTD brands. A combination of poor customer satisfaction and the fact that
   As to whether this is all part of one big plan I would be astonished if   more customers are going direct to florists will result in a marked slowing
FTD had not approached Interflora at the time of incorporation and been      in growth and eventually a decline in order volumes.
prepared to offer a lot more money than the members accepted from
                                                                             F&WB Do you regret not having a formal strategy/alternative
the 3i deal. Of course, they would not have been offering the executives
                                                                             when incorporation was still not resolved?
a quarter of the company and it was very simple to dismiss them as
                                                                             David Hindsight is a wonderful thing but yes I should have gone out and
something the members would not like.
                                                                             got a better offer for the Interflora UK business and made my self a few
   The sad thing is that many millions of pounds of Interflora members’
                                                                             million in the process. However, Mike Hynan and I gave up a year of our
money ended up in the hands of greedy executives and financiers both
                                                                             time and spent a lot of money in the belief that the value should stay with
sides of the pond or those on the inside who knew of the overall strategy.
                                                                             the members who had worked so hard for it. We naively believed members
Richards is now bailing out with his millions and others will follow.
                                                                             would see through the lies and spin but we were wrong.
F&WB What impact will it have on Interflora florists and the                    Sadly, the Interflora hierarchy was full of unpleasant and greedy
industry as a whole?                                                         individuals and most of the membership lived in fear for their businesses.
David Interflora florists already find themselves in a position where        Whatever we had come up with they would have found some spurious
they have to produce better products for a lot less money. Given the         grounds to reject it or claim we had our own agendas etc. They
current economic climate and the competition in the marketplace I            threatened to sue me a few times so I’m sure the legal attack would have
predict that 20% of Interflora members reading this interview will not       come as well, of course using members’ money.
be members in a year’s time. Not because they have left Interflora but
                                                                             F&WB Is there anything a current Interflora member can do to
because they have sold up or gone out of business.
                                                                             mitigate future problems?
   Industry wise I don’t see it changing much in the short term.
                                                                             David The major problem is that too many florists are reliant on relay
Interflora will have yet another owner but the strategy will remain
                                                                             orders and they have to reduce that reliance if they want to survive. It was
the same; drive up order volumes, increase sales of gifts and centrally
                                                                             fine while the old business model existed – i.e. orders in and out of shops
distribute products. Growth will be hard to come by particularly in the
                                                                             balanced the cost - but now the relay company takes most of the orders
current economic climate so I believe things will remain tough for the
                                                                             so the money stays with them and isn’t distributed around the florists. The
poor florist.
                                                                             bottom line is if a business cannot stand on its own two feet without relay,
F&WB Given Tesco has pulled out of flower delivery, do you                   in a few years time it will not be standing at all.
think this bodes well for Interflora or is it a warning sign?                   I know it might sound like a broken record to many but there is really
David I always maintained that supermarkets would do to flowers what         only one relay of the future and that is the Internet. More and more
they have done with other products. They identify a market to go into,       consumers are becoming used to using the Internet and contacting
put small traders out of business along the way and then once they find      florists direct. Customers will order online or more likely, finding a
it's not as easy to make money as they thought they pull out. Tesco is the   website they like the look of and call the florist direct. And I know that
first to pull out but others will definitely follow. Even Marks & Spencer    works because it’s what we do.
and John Lewis, who I think will stay in the market, must be seriously          We stopped executing Interflora orders in January 07. I’d done
looking at their business model.                                             calculations, similar to those mentioned by Leslie Nash in your last issue,
   At the same time, I don’t believe it bodes well for Interflora. As the    and decided there was little money to be made executing orders for
supermarkets leave the market so others will take their place. The           Interflora but a lot of grief and hard work, especially at peak periods.
barriers to entry are so low that it is very simple to set up a flower          We already had a successful web site and have built on it to the point
delivery website and distribution service and try and take a piece of the    whereby we have now basically replaced all the Interflora executing
market. I could set up a business tomorrow and compete, its not rocket       business with our own from the website at full margin. I know it is
science, but the key is a reliable distribution system and this is where I   difficult for the average florist to get their head around websites, the
believe Tesco failed. The relay companies have the advantage in having a     Internet and everything that goes with it, but I’m afraid it is something
network of tame florists to carry out the same day deliveries and the ones   they do have to learn. Simply signing on to something like Interflora's
they don’t want to do centrally.                                             Florists Online is not enough. It’s all very well having a website but if
                                                                             nobody can find it, it is no use to anyone.
F&WB What advice would you give the industry as a whole?
David I’m not sure anyone will listen but here goes!
   Start thinking about the small good florist and helping them stay in
business because if the number of shop closures continues at the present
rate the whole thing is going to come tumbling down. We will be left with
a few large operators sourcing their own flowers in large quantities and
sending everything out in boxes.
   Wholesalers, start giving a better service and prices to the small
well established shop who pays you on the dot every week or month
because they are your bread and butter. Keep chasing the new large
player who is here today and gone tomorrow and they’ll probably go to
the wall owing you money which puts you at risk.
   Relay companies, without a network you die. There are already holes
appearing in the coverage of the big players and without good same day
coverage your USP has gone. So look at your model; more money to the
executing florist guarantees a better product, customer satisfaction and
hence improved customer retention. A short-term loss of profit will pay
dividends in the long term.
   But overall I believe to survive the industry will need to consolidate.
There are too many florists in some areas competing for a market already
damaged by the large supermarket offerings. There are new wholesalers
popping up every week online and offline and there is not room for them
all. There are too many relay companies / order gatherers who have cost
structures and profit targets they have to meet in an ever increasingly
competitive market.
F&WB Will you stay a sending member of Interflora and why?
David Yes. We need to offer a relay service to our customers and at
present Interflora is the best available. There are times when I question
this as there are an increasing number of members letting down the
system but there are still a large number who care about the image of
Interflora/the industry and will bend over backwards to help.
F&WB Is there room for another relay player in the market – would
you support it
David Relay as we know it is a thing of the past. Back in the good old
days florists put as many orders in to the system as they took out and
so your sending orders made up for the large commission being paid
on the orders executed. Then the world started to change. Credit cards
came along, orders could be placed over the phone and the smart florists
realized that the money was in sending and not executing and so became
order gatherers. The Internet took the game to a different level as relay
companies realized they could gather the orders themselves and so
started to compete with their members.
   There are now order gatherers and florists who do the work. The
problem is that the game is skewed in the favour of the large order
generating relays. Interflora was the last chance for a true member
owned relay service. The extra money on centrally gathered orders could
have been passed on to the executing florists but that wouldn’t have
paid for the large bureaucracy and gravy train for member directors that
Headquarters became.
   Given the theoretical restrictions on dual membership, the problem for
any new relay player is tempting members away from other relay services
in order to get the coverage. Florists cannot risk losing relay orders,
even in the short term. So any new player would need a huge marketing
budget to convince prospective members that they can generate enough
orders to replace those lost.
   We are in the lucky position of not needing relay orders but if we were
to be tempted to start executing such orders we would need to have at
least 80% of the money. If such a service was established with quality
collections etc we would consider it. Will it happen? I doubt it but it
would be good.

   "The sad thing is that many millions
     of pounds of Interflora members’
  money ended up in the hands of greedy
  executives and financiers both sides of
                the pond"

								
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