Monthly Archives: February 2006

Apple Takes the Open Approach With Their New Products

Like every other Mac fan today, I was eagerly awaiting the new announcement from Apple. And I was, at first, let down. I, like many of my Mac peers was expecting a wider screen iPod video, possibly a “media cube� machine, and maybe if I was really luck…a Mac Tablet. Steve Jobs wasn’t quite the Santa Claus we were hoping for today.

But, when I really started to look at what was introduced, I’m excited for a different reason. Let’s take a look at what was announced.

First, the initially least exciting item, the iPod Hi-Fi. This product is not unexciting because I think it won’t be great, I know that it will produce wonderful sound. It’s unexciting because, for the most part, it already exsisted. Other companies have been filling the space in the estimated $100 million dollar industry Apple created. There are plenty of other “boom box� type devices already on the market. But, it’s good to see Apple take a bigger step into the market itself. They created the market, and they sure should be able to profit from it.

The other big announcement was the Intel based MacMini. This was about 75% of the product Mac fans were hoping to see. We wanted a media center for Mac. We want something that acts as a Tivo, DVD player, and media storage for movies and music. We got some of that. The new MacMini has some great features. The first is that the unit now has an audio (both digital and analog) out that allows you to jack the unit into your home stereo. The unit has a DVI out that will let you plug into higher end televisions with a DVI input, but more importantly you can now get a dongle that will convert DVI to other video inputs on a television. The inclusion of Front Row and a nice, simple remote finish off the offering.

What we end up with here is a very introductory version of a home entertainment media center. In practical use, you can plug the Mini into your television and stereo. Then you can play DVD’s through the system (you can dump that outdated DVD player), you can also play iTunes not only from the songs stored on the Mini, but also on another other Mac’s on the network. So, if you keep your music on your laptop, you can actually scroll through that catalog with you remote on your television and play that music. This in itself is a bit exciting, but really just expected. You can also browser through photos now on your television, and if you’re into making movies on your computer, you can views those as well.

But really the most interesting thing I found about Apple’s release today is how open it is for the future. The Mini does not have a Tivo, but…with the sales of television episodes doing so well through iTunes, you have to start thinking that we are going to see an upgrade that allows us to watch these (probably in Hi-def) on our televisions through the Mini. And then how far behind will movies be? In terms of Apple taking more control over downloadable media sales, this was a very strategic chess move on Job’s part. Who wants to bet that the first movies for download on iTMS is a Disney or Pixar film?

There is also a new sense of adventure with Apple on this. Check out the links to “mod� and enthusiasit sites that show new uses for the MacMini. This makes it clear that the MacMini is meant to be an open device that Apple hopes to see people run with new ideas. I have seen some great examples of MacMini’s in home theatre, and even cars.

I had a theory a while back that with the Intel move, OS X may come out as an OS option on PC’s. I didn’t think that Apple would make this an official release, as the support required for so many different machine specs would be a nightmare. I had more thought that Apple would just benefit from people doing this on their Dell’s. But then I thought that would be too risky for Apple to encourage. They like keeping in control of their technology. But, with this new, adventurous move on encouraging people to alter the Mini, I wonder….

The new MacMini will have some issues right away. First, in order for them to make this a complete device, they need a Tivo type option. A few months back, Apple hired the former CEO of El Gato…guess what they do. They made a Tivo type software for Macs. But, I strongly feel that Apple should just acquire Tivo. It’s such a strong brand, and the ease of getting machines in living rooms with that brand would make the acquisition make a lot of sense. Second, Blue-Ray comes out next month. I don’t think anyone is going to rush out and buy a new DVD player until they see how things transpire in the format wars (which Blue-Ray will win). But, a simple upgrade will take care of that.

In the end, I remain a solid Mac fan. I will of course purchase my iPod Hi-Fi, possibly 2. And I will eagerly await the next big thing from Apple. Please, please make it a tablet!

I’m Finally Reading Malcolm Gladwell

Last week I finished off The Tipping Point, and I’m about 60% through Blink. I have to say, I’m really into these books. I had the chance to see Gladwell speak at SXSW last year, and I didn’t attend. I was tired from the previous events of the day, and I knew it was going to be packed. But I regret that decision. Hopefully I didn’t miss anything too profound.

The Tipping Point really made me think a lot about USWeb. And while I’m reading Blink, I’m eyeing The Big Moo by Seth Godin, which I purchased this weekend. I sometimes get frustrated at the rate of growth for USWeb. It’s difficult to build a business in this space without taking venture capitol. And it’s even more difficult when you see the lame companies (180Solutions comes to mind) that get funding. I have recently had some inside knowledge about a competitor who is really imploding. They are a public company, and obviously should be profitable. But I’m witnessing them getting publicly portrayed as a joke of a search marketing firm, and they have laid off about 75% of their staff. Not to sound vindictive, but it helps me sleep at night knowing that we are building a remarkable company, not a big company at USWeb.

I’m thinking of reading Good to Great next. If anyone out there has read it, let me know what you thought. And if you haven’t read The Tipping Point, or Blink yet, you should pick them up.

The Future of the Local Florist

One of the things I love about my position at USWeb is that I get exposure to different industries on a daily basis. I have come to believe that the ability to adapt your consulting to any business model is what separates good consultants from great consultants. But there are times when you look at an industry and you see the future coming like a train, and the industry participants laying on the track, usually complaining about the noise of that damn train. Say goodbye to your local florist, because they are laying on those tracks.

One of the projects I am directly involved with at USWeb is Dot Flowers. They are on online floral site, or what the local florist call an “order taker�. I should point out that Dot Flowers is not an ordinary floral site. It is one of the most advanced, bleeding edge sites for ecommerce. The entire site is in Web Standards, XHTML (strict!), has it’s own blog, a CakePHP shopping engine, and a viral (maybe even open source) marketing component. In summary, Dot Flowers is a Web 2.0 site. But as great as Dot Flowers may be, it is not the train bearing down on local florist. Dot Flowers is simply a passenger.

The train ready to collide (I mean run over) the local florist is simply the future. A future made up of the Web, enhanced fulfillment concepts, and big (I mean the biggest) business. To understand this, let me first take a moment to explain how the floral industry really works.

When you place an order for some flowers, how do you do it? Do you use the Web and go through a site like Dot Flowers or 1800Flowers? Do you call a well-known network like FTD or Teleflora? Do you go to your local florist and ask them to take care of the delivery? Or, do you pull up a phone book and manually look for a florist in the area you need your delivery to arrive? Believe it or not, many florists still believe that people do the later of these.

When you place your order through a website like Dot Flowers or 1800flowers, you are not doing anything different than if you were to call one of the major networks directly. FTD and Teleflora simply have pre-constructed recipes that the local florist should know how to create. And the pricing is standardized for the different bouquets…or, you would think. Here lays the major issue. Florists don’t like getting these orders. They recognize the fact that these orders make up a large amount of their business, but their margins are much thinner because of the number of middlemen in the order process. You have to pay the network and the original order taker. And with customer acquisition prices for floral customers averaging nearly $20, the order takers on the Web have a real issue when it comes to marketing.

The price difference for florist is a major issue in this industry. When Dot Flowers sends an order to a florist, the customer has already agreed upon a price with Dot Flowers. The floral networks like FTD and Teleflora usually set this price. So, let’s say a simple birthday bouquet that runs $50 according to FTD pricing. Dot Flowers sells the bouquet to the customer at this price, plus $10 for a service (delivery) fee. The amount due to the actual florist is about 60% of the $50, or approximately $30. Dot Flowers receives 20% of the order amount, and FTD receives 20%. Dot Flowers should in theory make $20 from this transaction, which should just about cover the acquisition of the customer. But, you will see that in fact his rarely plays out so simply. These are approximate numbers, but fairly represent a standard floral transaction.

What happens when the florist decides they don’t want to handle the delivery? Chaos ensues. The initiating order center (Dot Flowers) now has to call the florist and find out why they will not deliver the order (usually because of price), and negotiate a settlement. Often this involves letting the florist keep the $10 service fee, which in turn lowers Dot Flowers profit to $10, half of the industry average for acquiring that customer. Where is FTD in all of this? Nowhere. They collect their percentage and don’t concern themselves with the relationship of the order taker and local florist. In my opinion, FTD is one of the most worthless business models in business today. Most order takers are simply left to their own resolutions with local florists. FTD states to the order takers that they will enforce the pricing guidelines, but watching them do so has be likened to a dismissive parent disciplining an unruly child. They simply send a notice telling the florists to behave themselves.

Now lets talk about the other business models in the floral industry, primarily the drop shipped model. Early users of sites like ProFlowers were shocked when their floral arrangement came in a box delivered by FedEx. This was a new way to receive flowers. ProFlowers defended their model (which many feel take the romance out of flower giving) with the idea that their flowers are “direct from the growers�. This is a claim that has been dismissed by just about every floral industry expert. ProFlowers operates distribution centers that help facilitate the delivery of the flowers. That doesn’t mean that the flowers are not fresher, they very often are. But the great thing about the logistics of this model is that it rids itself of the petty element of the local florist. The pricing is standardized and controlled. The delivery is stabilized by using a well known carrier, FedEx. ProFlowers was one of the initiators of this business model, but now just about every florist site on the Web offers this option. When I say, “offer�, I should say “pushes�. Dot Flowers has relationships with growers all over the country, and they far prefer the business done through them. Flowers are delivered on time and with no substitution, at the price point agreed upon.

Oh, one more thing…these flowers are cheaper by a large margin. Most times of the year, a dozen roses sent directly through growers is approximately $30. The same dozen roses delivered by a florist are nearly double at $59. Delivery fees are nearly the same at $10.

To what extent is the drop ship model preferred in ecommerce floral sites? Every product on the current FTD page is available through drop shipping. Think about that for a moment. The floral network itself, when it comes to their own website, prefers drop shipping to florist delivery. The florist, in their attempt to squeeze extra margin out of order takers, and leverage the fact that the order taker is over a barrel because they have already agreed on the order with a customer, has broken the primary rule in business…keep your end of the deal. Florist don’t like order takers. That’s going to work out well, because everyday more order takers are sending their orders direct to growers for drop shipping.

But, there will always be a market for same day delivery, and you need florist for that…right? Wrong. 1800Flowers has their own chain of flower shops, and also distribution centers. Imagine the ability for 1800Flowers to set up a couple main floral centers in major metropolitan areas. When orders come in, semi-skilled floral arrangers work quickly in a warehouse, pulling flowers and arranging them in a vase they way the pictures show on the website. They then load the flowers up in their well-branded, well-refrigerated van and start their delivery process. Once again, no petty florist trying to squeeze an extra nickel out of the deal.

So, florist are being knocked out of a good percentage of flower orders by lower priced, “fresh from growers� drop shipping. And they are losing metropolitan areas to big floral players who set up distribution hubs and fulfill orders themselves. That leaves the suburban and rural communities. Wait! Did someone say rural and suburbs? Then you are speaking of Wal-Mart country. That’s right, the biggest florist in the country is the same company that is also the biggest pet store, biggest auto parts store, biggest toy store, and even the biggest chain of optometrists in the country. Wal-Mart is such a huge player in the floral space that they have an open order to buy every rose in the country during Valentine’s Day (as long as you sell to them at their incredibly low price point, and the quality is acceptable). What Wal-Mart doesn’t do very much of is delivery. Rumor has it that Wal-Mart has been in deep discussions with FTD. As you might guess, few women swoon at the idea of getting Wal-Mart roses, so Wal-Mart is going to need a brand to lean on. If Wal-Mart joins up with FTD, they could intercept a huge amount of orders, process those orders at their local stores, and deliver them same day. If of course Wal-Mart can afford some refrigerated vans.

What does this mean for companies like Dot Flowers? It’s Hard to say. It could be great because now pricing for local same day delivery is stable. Or, it could be bad if Wal-Mart decides to try to put a strangle hold on the market by only allowing orders directly through them. Either way, this spells disaster to florists. And should we feel bad? These florists have had the opportunity to organize themselves and work with the dreaded orders takers. Instead they have tried to stick to a business model that is long gone. No one is going to dig up the phone number to a local florist in a town so that they can call the florist directly.

Obviously this will not kill every local florist. Some talented local flower shops will be able to hang on by serving weddings or other local events where a floral designer is required. But for the most part, the local florists days are numbered. And with good reason. Much like the record companies and other industries that have tried to fight the future, they cannot win. The evolution of business demands its sacrifice.

Welcome To My New Blog

If you have been here before, you have noticed a big change. I could no longer handle the Rapidweaver system. It’s not that it’s bad, it’s just not really for blogging. I tried using the new iWeb stuff from Apple, but they really missed the mark. It’s still early for Apple, so hopefully they will make some improvements.

On the upside, the new blog give me a chance to play with some new toys. I integrated my del.icio.us and Flickr account into the site. I also got to play with the look a bit. When I say “I” when it comes to my site, I mean “I” got to ask Russ and Shaun to help me out.

Let me know what you think ofthe new site.

I will also be mentioning the occasional sponsor on my own site, which I think is a pretty cool way to cover the costs of hosting and domain name.  For example, you can get cheap wedding favors here.