Magazine Article | May 1, 2000

Retailers Bloom With E-Commerce

Source: Innovative Retail Technologies

American Floral Services (AFS) is a well-established and prosperous business. The company, however, doesn't want to maintain its market position - it wants to improve it. That's the reason behind its enterprise-wide IT initiative.

Integrated Solutions For Retailers, May 2000
Everybody hopes for prosperity with their business - "the days of wine and roses." At the very least, when you're working in the floral industry, you're already halfway there. Take AFS (American Floral Services), a provider of business-to-business services for the floral industry. The $150 million company has become prosperous with its flowery offerings. Figuratively speaking, though, it wanted more wine. To achieve that goal, AFS began an aggressive IT campaign to place it on the forefront of the floral industry.

"Fortunately, we are a private company," explains Terry Byers, CTO and senior VP. "We aren't living quarter by quarter, hanging on the advice of financial analysts. We have the freedom to make very large investments in order to support our strategic vision."

Taking AFS' smaller size into account, the company's IT investments are indeed significant - according to Byers, the company has recently invested millions of dollars. AFS, however, realizes that the long-term benefits of IT investment, when well-planned, far outweigh initial costs.

Satisfying Customer Needs: Free E-Business Services
AFS provides business-to-business services to 24,000 North American and nearly 55,000 worldwide affiliates - not bad for a company that burgeoned from a garage apartment only 30 years ago. AFS florists range in size from large chains to mom-and-pop shops, but they all pay a fee for the AFS designation - and carry it exclusively (similar to FTD or Telefora - AFS' two largest competitors). Beyond services and consulting, the company also acts as a wire service. When a consumer places a phone, Internet, or in-store order, AFS acts as the bank handling the financial transaction - and makes sure all parties receive their due amounts.

These offerings in themselves are impressive and overwhelming. AFS' emerging strategies are even more so. On April 1st, the company launched an initiative to provide free e-business services to all its North American affiliates. The program's name, "Flower Power," conjures the image of a moldering, latter-day hippy with yet another screwball e-business start-up. Discount your initial impression. The Flower Power initiative is cutting-edge technology. And, AFS is betting that it will establish the company as the floral industry's e-business leader. Current services to retailers tell of its imminent success: free e-commerce-enabled Web sites, free management software, free wire-order relay network software, free help desk support service for six months, and limited free Internet service.

All of the AFS technology is proprietary, bearing the umbrella name "EagleNet." IBM partnered with AFS in developing much of the technology. IBM hosts EagleNet from a Web hosting server farm in Raleigh, NC. Additionally, AFS will host the Web site, which will run on Microsoft 2000, SQL server, and Microsoft Commerce Site Server.

Bolstering Business With An Industry-Wide Portal
In a similar development, AFS is creating a business-to-business portal that it hopes will serve as a resource for the entire floral industry. In political terms, AFS wants to be the Switzerland of the flower industry: a neutral and guiding force. "We want to move into a more unbiased role in the industry, one in which everyone can turn to us as a reliable source of information," explains Byers. "The ‘Flower Channel' Portal was created for anyone who cares about our industry: retailers, wholesalers, growers…even consumers."

Industry Supply Chain Management
AFS has two unique interests in the supply chain: one as a floral industry expert, and the other as a retailer of floral-related products. As an industry expert, the company has focused narrowly on retail services. It soon plans to encompass the supply chain in that focus, though. "Providing advice to retailers about managing the supply chain is like walking a delicate tight rope," explains Byers. "Retailers take offense to unsolicited advice or heavy-handed persuasion tactics. We have always avoided those methods, and we've established a trustworthy reputation because of it. People know they can rely on us for retail-related technology, publications, and education. Extending those offerings to the supply chain seems like the next logical step."

Byers also credits AFS' interest in the supply chain to a pervasive industry trend: consolidation. Recently, the floral industry has undergone significant changes, particularly in the supply chain. Large companies have been buying top retail stores to start florist chains; growers, wholesalers, and importers have been consolidating the supply chain; start-ups have been taking business from brick-and-mortar operations. Byers describes this phenomenon as "disintermediating" retailers, an attempt to leave florists adrift, but unite consumers with the back end of the supply chain.

"At AFS, we do not believe that the total collapse of the supply chain will occur. For example, you could wait until 3:00 p.m. to order a custom floral arrangement and still have it delivered by the end of the day. That floral arrangement is a custom-manufactured product - it's not just sitting somewhere waiting to ship. Someone has to remove the flowers from the coolers to allow the petals to open, prep them, and arrange them. For these reasons, the direct-ship model [from grower to consumer] will never work."

Enterprise Supply Chain Management
AFS is fortunate that it can extend its floral industry expertise into the management of its enterprise supply chain. The company also runs a mail order catalog business with garden- and plant-related products: business forms, custom imprint products, giftware, tools, aprons, and customized gift baskets. Currently, the company has approximately 1,500 SKUs (stock keeping units) which it distributes from its six domestically located distribution centers (DCs). Back office operations are run from the same Oklahoma City location as the business-to-business services.

To manage the enterprise, AFS uses a suite of products from Lawson Software (St. Paul, MN), a provider of Web-deployable, enterprise-wide, client/server business applications. Specifically, AFS runs the Lawson Software enterprise resource planning (ERP) system in the Oklahoma City office, and Lawson warehouse management systems (WMS) in the six DCs. The ERP system also hosts a number of modules, including human resources (HR), financials, and accounts payable. As orders come into the call center, they are routed to the proper systems until picking, packing, shipping, and billing have all been fulfilled.

Partnering With Retailers
Because AFS focuses on retail store operations, it pays particular attention to technologies that retailers are using. The company has established flexible hardware guidelines that allow AFS florists to work with scalable and customizable solutions, yet still maintain a consistency among all AFS affiliates.

"We are fairly specific about hardware, cash drawers, and printers," comments Byers. "It is a fairly complex configuration, but one that all retailers, no matter what their size, can realistically install." The majority of the company's POS (point of sale) hardware comes from Dell, but retailers have the freedom to supplement stations with bar coding or scanning, for example.

All the POS stations offer data mining, but unusually, AFS as a company neither receives nor uses any of the collected data. Rather, AFS affiliates each use data mining to run their individual businesses. "Our florists are very specific about us not being in their databases," remarks Byers. "So, we offer them the tools to build their own databases that are rich in target marketing." With the launch of the "Flower Channel," portal, however, data mining will no longer be absent from AFS. The company plans to use the portal to monitor activity and record analytics for the industry as a whole.

Technology, Flowers, And The Future
In accord with the "Flower Power" e-business initiative and the "Flower Channel" Web portal, AFS also has imminent plans for an online version of its catalog. "There's no question the catalog will go to the Web," says Byers, "but for now, we are focusing on the Flower Power program with our retailers. It's the biggest and most exciting IT project we've ever undertaken. Without its success, other installations don't make a lot of sense."

In the end, AFS sees its IT initiative in terms more important than just "e-commerce" or "Web presence." Rather, the company believes its overall success could hinge upon its technology strategies.

When asked to explain, Byers responds, "Three or four years from now, nobody is going to hype e-commerce. By then, it will be normal, everyday business - an enhancement to brick-and-mortar operations. We don't see e-commerce as a replacement, we see it as a new sales channel."

Other eager retailers will pay attention to AFS' vision. The company recognizes the Internet for what it is: a powerful and emerging tool for business. Many still view the Internet as an empty mark of presence, a business fad. Those individuals will be buying their spouses flowers from AFS's Web site - to ease the painful news of unemployment.

I can hear it now: "Honey, remember that e-commerce thing? Yes, yes. You did say it was the next big business trend - but anyway, there's something else we need to discuss…"

Be smart. Think long and hard about your IT decisions. The future of your business (and your marriage) could depend on it.

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