Jim McCann
Appearances
Money Rehab with Nicole Lapin
Inside a Florist's Valentine's Day with Jim McCann, Founder & Chairman at 1-800 Flowers.com
Well, I can only speak to what we do. And let's take, for example, the pears. We grow them in southwest Oregon. There's only three spots on the globe that they grow. in Southwest Oregon and Chile and in New Zealand. And we grow them in all three spots. So it's different seasonality.
Money Rehab with Nicole Lapin
Inside a Florist's Valentine's Day with Jim McCann, Founder & Chairman at 1-800 Flowers.com
So it gives us a much longer selling season by being able to grow in those three different spots because it's three different times of the year that they come in.
Money Rehab with Nicole Lapin
Inside a Florist's Valentine's Day with Jim McCann, Founder & Chairman at 1-800 Flowers.com
But we I never thought I'd be so focused on the impact of climate change, which I am now convinced is real and dangerous and we need to be very serious about it, because I see the weather impact that has on us and in southwest Oregon and how that has an impact on our. on our crop, our yield, the quality of our product. It's a little bit of a high desert climate environment.
Money Rehab with Nicole Lapin
Inside a Florist's Valentine's Day with Jim McCann, Founder & Chairman at 1-800 Flowers.com
Clearly, we move our flower production to different parts of the country, different parts of the world based on climate change and what temperatures are doing. And in particular, with the droughts in the west of the country, you're keenly aware of that in terms of where you live. But those drought situations are real and changing kind of quickly. And then there's a last mile.
Money Rehab with Nicole Lapin
Inside a Florist's Valentine's Day with Jim McCann, Founder & Chairman at 1-800 Flowers.com
So Valentine's Day, middle of winter, toughest time of the year from a weather point of view. So I'm keenly aware of the pass in Northern California called Donner's Pass and whether or not there's snow on it because our trailer trucks have to get through that area to the airport.
Money Rehab with Nicole Lapin
Inside a Florist's Valentine's Day with Jim McCann, Founder & Chairman at 1-800 Flowers.com
And if that pass is closed, we have a nine hour extra drive down through the southern part of California to get to the appropriate airport. So weather is a variable that as we became much more involved in the agricultural part of the business through Harry and David at all, I became much more aware of. So I have more reasons not to sleep effectively at night.
Money Rehab with Nicole Lapin
Inside a Florist's Valentine's Day with Jim McCann, Founder & Chairman at 1-800 Flowers.com
Well, you know, this is a tougher environment to grow in, Nicole. Organic growth, which has been a The primary growth engine for us for these many years is going to be a little tougher in this year and maybe the year after and certainly in the last year. So then we say, OK, we have a nice balance sheet. We have a good platform.
Money Rehab with Nicole Lapin
Inside a Florist's Valentine's Day with Jim McCann, Founder & Chairman at 1-800 Flowers.com
So when we make an acquisition like Things Remembered, which we just acquired, a very small acquisition.
Money Rehab with Nicole Lapin
Inside a Florist's Valentine's Day with Jim McCann, Founder & Chairman at 1-800 Flowers.com
Sub $10 million acquisition. All we bought was intellectual property. We bought the brand, we bought the customer list, inconsequential amount of inventory, and then we relaunch it. So we already have the technology platform. We have the fulfillment facilities. We have the machines that do the etching and the laser cutting. We have the glop of the glop of the machine in place.
Money Rehab with Nicole Lapin
Inside a Florist's Valentine's Day with Jim McCann, Founder & Chairman at 1-800 Flowers.com
So there we would expand our product line a little bit because they had a different mix than we do. And so, but we already have the backend. So we can afford the body intellectual property, spend less than $10 million for it and have every expectation that we'll grow that brand to $100 million brand.
Money Rehab with Nicole Lapin
Inside a Florist's Valentine's Day with Jim McCann, Founder & Chairman at 1-800 Flowers.com
And we'll do that fairly inexpensively because we already have 30 million customers to introduce that brand to. And we can do that relatively inexpensively. We don't have to go out and acquire new customers. We already have 30 million affluent, gifting, thoughtful people who would most likely be interested in
Money Rehab with Nicole Lapin
Inside a Florist's Valentine's Day with Jim McCann, Founder & Chairman at 1-800 Flowers.com
when there's a wedding coming up in their family to get that beautiful bride's groom and wedding gifts that Things Remembered is known for. And all we have to do is introduce them that they can use their loyalty program with us and they can buy those. We don't have to build a new building. We already have a building that has plenty of capacity. We don't have to build a new technology platform.
Money Rehab with Nicole Lapin
Inside a Florist's Valentine's Day with Jim McCann, Founder & Chairman at 1-800 Flowers.com
We already have a terrific technology.
Money Rehab with Nicole Lapin
Inside a Florist's Valentine's Day with Jim McCann, Founder & Chairman at 1-800 Flowers.com
Exactly. We already have a legal department, an HR department, a finance department, a tech. All of those things are already in place. So we buy little brands. One of the ways we grow is we buy little brands that we know our customers would be interested in. And we have the ability, inexpensively, to grow them to about $100 million.
Money Rehab with Nicole Lapin
Inside a Florist's Valentine's Day with Jim McCann, Founder & Chairman at 1-800 Flowers.com
Then it gets a little bit more expensive to grow beyond there because we've used up what we call our house media, our customer database, our social media marketing efforts, our direct marketing, our catalogs. And we've done that with a company called Sherry's Berries. We're doing that now with a company we bought a year ago called Vital Choice, which is all about better for you foods.
Money Rehab with Nicole Lapin
Inside a Florist's Valentine's Day with Jim McCann, Founder & Chairman at 1-800 Flowers.com
And then we're also looking to say, if it's tougher for us to grow, it's really tough for the new companies you mentioned who require new financing because they're not profitable yet. So maybe they're a couple of years away from profitability. Well, if they have to go back to the market for capital now, Oh, it's painful.
Money Rehab with Nicole Lapin
Inside a Florist's Valentine's Day with Jim McCann, Founder & Chairman at 1-800 Flowers.com
In a couple of conversations, a term I've heard by those companies who are in the market saying we need more capital before we can get profitable. They're hearing that the terms to get that capital are punitive.
Money Rehab with Nicole Lapin
Inside a Florist's Valentine's Day with Jim McCann, Founder & Chairman at 1-800 Flowers.com
Well, you know, when everyone's nervous, if you don't have a very clear line of sight to profitability, if you can get capital and there's a real question as to whether or not you can, you're going to be paying 25, 30% cost of capital. And boy, you better have one heck of a business because how many companies, how many businesses have margins enough to justify that kind of cost of capital?
Money Rehab with Nicole Lapin
Inside a Florist's Valentine's Day with Jim McCann, Founder & Chairman at 1-800 Flowers.com
I don't know many.
Money Rehab with Nicole Lapin
Inside a Florist's Valentine's Day with Jim McCann, Founder & Chairman at 1-800 Flowers.com
Well, not the traction, get the capital. How do you get the capital? How do you get people to say, okay, I'm going to invest in this because capital is tight.
Money Rehab with Nicole Lapin
Inside a Florist's Valentine's Day with Jim McCann, Founder & Chairman at 1-800 Flowers.com
And you see in the private equity community, for example, when you have a shop that has both a credit side to it and an equity side to it, well, the private equity guys are saying, well, I work my tail off and I commit capital to these businesses for 30%. four, five, six, seven years. And I'm targeting 14, 15, 16, 17% IRRs, internal rates of return.
Money Rehab with Nicole Lapin
Inside a Florist's Valentine's Day with Jim McCann, Founder & Chairman at 1-800 Flowers.com
Well, I can do it through the credit side of the shop and get 12%, 13%, 14%, 15% be at the top of the cap table and have a lot less risk and have my money out sooner. So you're seeing when capital gets tight, it goes to the credit markets where they're more protected and they get almost as good a return without the risk of being in equity.
Money Rehab with Nicole Lapin
Inside a Florist's Valentine's Day with Jim McCann, Founder & Chairman at 1-800 Flowers.com
A lot more expensive.
Money Rehab with Nicole Lapin
Inside a Florist's Valentine's Day with Jim McCann, Founder & Chairman at 1-800 Flowers.com
Some will go away. Some will be acquired. Maybe some will muddle through. I'm not sure how. But you have two things working. Cost of your capital has gone through the roof. It's triple, quadruple what it was a year ago. So cost of capital. And your cost of customer acquisition has exploded. It's what people call CAC, C-A-C, cost of acquisition of a customer.
Money Rehab with Nicole Lapin
Inside a Florist's Valentine's Day with Jim McCann, Founder & Chairman at 1-800 Flowers.com
You can see it in Google rates and public information. It's gotten a lot more expensive to acquire a new customer. So if you've been around for a while and you have a good customer base, You can spend less on new customers and rely on your existing customer base, which is less expensive to tickle, to stimulate the purchase from you than it is to find a brand new customer.
Money Rehab with Nicole Lapin
Inside a Florist's Valentine's Day with Jim McCann, Founder & Chairman at 1-800 Flowers.com
So if you're in a business of forming a business where you've got to go out and acquire your customers new, it's gotten a lot more expensive than it was two years ago, even a year ago. And the cost of your capital to go do that has gone up because those investors see that it's become a lot more expensive for you to get new customers. So your certainty of success has gone way down.
Money Rehab with Nicole Lapin
Inside a Florist's Valentine's Day with Jim McCann, Founder & Chairman at 1-800 Flowers.com
No. And if your motivation is a cheaper rate, you're probably going to have a different girlfriend next year. I'll give you a tip. Just you and I. Okay.
Money Rehab with Nicole Lapin
Inside a Florist's Valentine's Day with Jim McCann, Founder & Chairman at 1-800 Flowers.com
Better to send it in the office on the Friday before so everybody in the office comes by and says, oh, somebody loves you. It just reinforces the sentiment, the emotion you wanted to elicit anyway. And say on the card, I couldn't wait until the 14th to tell you how much I love you.
Money Rehab with Nicole Lapin
Inside a Florist's Valentine's Day with Jim McCann, Founder & Chairman at 1-800 Flowers.com
There you go.
Money Rehab with Nicole Lapin
Inside a Florist's Valentine's Day with Jim McCann, Founder & Chairman at 1-800 Flowers.com
Happy Valentine's, Nicole.
Money Rehab with Nicole Lapin
Inside a Florist's Valentine's Day with Jim McCann, Founder & Chairman at 1-800 Flowers.com
Nicole, the last time I saw you was very, very early in the morning.
Money Rehab with Nicole Lapin
Inside a Florist's Valentine's Day with Jim McCann, Founder & Chairman at 1-800 Flowers.com
It was five in the morning. I did your show at CNBC a couple of times, and boy, that's getting up real early in the morning.
Money Rehab with Nicole Lapin
Inside a Florist's Valentine's Day with Jim McCann, Founder & Chairman at 1-800 Flowers.com
But I was amazed at how on the game you were. But, you know, you came in, you understood what was going on in the Asian markets, what was going on in Europe. You tied the whole thing together. A few times I caught myself just going, wow.
Money Rehab with Nicole Lapin
Inside a Florist's Valentine's Day with Jim McCann, Founder & Chairman at 1-800 Flowers.com
Just the truth.
Money Rehab with Nicole Lapin
Inside a Florist's Valentine's Day with Jim McCann, Founder & Chairman at 1-800 Flowers.com
Oh, sure it does. And Nicole, we all like to keep score. No one likes to go out and play tennis and just volley around wondering who won. You keep score. And it's a good discipline being public. And I was just chatting with a friend who was saying the same thing. Wow, the market really reacted positively to your earnings today. How come you're not more excited?
Money Rehab with Nicole Lapin
Inside a Florist's Valentine's Day with Jim McCann, Founder & Chairman at 1-800 Flowers.com
I said, because I've been there when it wasn't reacting so great. It's nice to have your investment community respond positively to how things are going. But you can't get too excited about it because there's another quarter coming.
Money Rehab with Nicole Lapin
Inside a Florist's Valentine's Day with Jim McCann, Founder & Chairman at 1-800 Flowers.com
Because Mother's Day is our biggest floral holiday. Our biggest holiday overall, Nicole, is the Christmas holidays because all of our food gifts are popular there and our popcorn, our cookies, our chocolate, our gift baskets. And of course, all of our Harry and David gifts are extremely popular at Christmas time. So the Christmas season is our biggest overall holiday.
Money Rehab with Nicole Lapin
Inside a Florist's Valentine's Day with Jim McCann, Founder & Chairman at 1-800 Flowers.com
Mother's Day, our biggest floral holiday. Valentine's Day is a strong holiday, but number three.
Money Rehab with Nicole Lapin
Inside a Florist's Valentine's Day with Jim McCann, Founder & Chairman at 1-800 Flowers.com
Oh, by far, biggest roses occasion for sure. And it's quite a task to have the right number and the quality of roses for Valentine's Day. For some reason, St. Valentine decided he wanted to do his thing in the middle of February, which isn't the most optimal time for growing roses around the world. So we work with our growers literally around the world in preparation for this holiday.
Money Rehab with Nicole Lapin
Inside a Florist's Valentine's Day with Jim McCann, Founder & Chairman at 1-800 Flowers.com
It takes 14 weeks. to grow a rose from a cutting to being able to harvest the next crop. So we do a lot of things with our grower community 14 weeks before Valentine's Day and 14 weeks after Valentine's Day to use a larger amount of roses in our products to afford them the opportunity to grow all the roses we'll need on the Valentine holiday. So it's quite an orchestration and we'll sell
Money Rehab with Nicole Lapin
Inside a Florist's Valentine's Day with Jim McCann, Founder & Chairman at 1-800 Flowers.com
probably 15 million roses directly. We probably sold this week 15 million roses directly for Valentine's Day. Close off retail floral partners to sell probably the same amount again. So that's a lot of roses.
Money Rehab with Nicole Lapin
Inside a Florist's Valentine's Day with Jim McCann, Founder & Chairman at 1-800 Flowers.com
Well, unfortunately for us in the flower business of 1-800-Flowers, the cost of roses hasn't gone up probably in 10 years.
Money Rehab with Nicole Lapin
Inside a Florist's Valentine's Day with Jim McCann, Founder & Chairman at 1-800 Flowers.com
Really, inflation has whacked us on the cost side of things, but not on the product itself. So the consumer has been getting a better deal every year for the last 10 or 12 years because there's so much we've done to increase the quality and the quantity available that we haven't had to raise prices.
Money Rehab with Nicole Lapin
Inside a Florist's Valentine's Day with Jim McCann, Founder & Chairman at 1-800 Flowers.com
No excuses.
Money Rehab with Nicole Lapin
Inside a Florist's Valentine's Day with Jim McCann, Founder & Chairman at 1-800 Flowers.com
Definitely buy flowers because if you buy them stock, they're going to throw it at you. What? Come on, there's something called romance out there. I know you're a money gal, but there's something about sentiment and romance and old fashionedness and stop with the stock certificates.
Money Rehab with Nicole Lapin
Inside a Florist's Valentine's Day with Jim McCann, Founder & Chairman at 1-800 Flowers.com
Absolutely. Invest in the relationship.
Money Rehab with Nicole Lapin
Inside a Florist's Valentine's Day with Jim McCann, Founder & Chairman at 1-800 Flowers.com
Our stock will do fine if you just buy your flowers.
Money Rehab with Nicole Lapin
Inside a Florist's Valentine's Day with Jim McCann, Founder & Chairman at 1-800 Flowers.com
Well, I'll give you my best estimations. I think that the flower business is probably overall a $14 billion category all in. And the gift part of the flower business is probably a $8 or $10 billion business. And we're about 20% of that.
Money Rehab with Nicole Lapin
Inside a Florist's Valentine's Day with Jim McCann, Founder & Chairman at 1-800 Flowers.com
Sure. It's a complicated model in the sense that we deliver product every way you can imagine. And being a same-day deliverer of product, it makes it a little bit more complicated on the last mile. But frankly, it's been our competitive advantage through all the different iterations we've experienced in the 24 years that we've been public and the 40-plus years that we've been around.
Money Rehab with Nicole Lapin
Inside a Florist's Valentine's Day with Jim McCann, Founder & Chairman at 1-800 Flowers.com
So, yes, it's complicated, but that's to our advantage in the long run. So, we, we have a network of the very best florist, let's say, just in this in this country we have 6000 of the best florist in this country who work with us every day, filling our orders, and we work with them in terms of forecasting exactly what we project.
Money Rehab with Nicole Lapin
Inside a Florist's Valentine's Day with Jim McCann, Founder & Chairman at 1-800 Flowers.com
will be the kinds of orders we'll have in each of the areas that cover each of the zip codes. So forecasting and modeling is extremely important because, as you know, we're dealing with a very perishable product. And so having that direct relationship with the very best florists around this country is paramount to our success. How do we predict it?
Money Rehab with Nicole Lapin
Inside a Florist's Valentine's Day with Jim McCann, Founder & Chairman at 1-800 Flowers.com
How do we work with our grower community to say this is how we're going to need our product in each market so the distribution works? And this time of the year, you know, it's in the northern hemisphere, it's difficult to grow a lot of products.
Money Rehab with Nicole Lapin
Inside a Florist's Valentine's Day with Jim McCann, Founder & Chairman at 1-800 Flowers.com
So this time of year, we'll be reaching into South America, we'll be reaching into, in some cases, Africa for our European partners to go with where the equator is. to grow our product to get it to our markets. As we get into different parts of the year, then our buying of product will move more to North America, to our growers around the US and around Canada to provide the product for us.
Money Rehab with Nicole Lapin
Inside a Florist's Valentine's Day with Jim McCann, Founder & Chairman at 1-800 Flowers.com
So it's a lot of planning, a lot of orchestration, a lot of modeling, a lot of predictability so that a retail florist who's the very best at what they do knows their market like nobody else can. And now we're giving them a great deal of data and input in terms of what to expect in their market, make sure they have the right product, the flowers, the containers they're going to need.
Money Rehab with Nicole Lapin
Inside a Florist's Valentine's Day with Jim McCann, Founder & Chairman at 1-800 Flowers.com
They can plan their budgeting around their staffing, how many drivers they'll need, what areas they'll need to cover, and to get that data back to us so that if you place an order with us, you'll get pinged the minute that order is delivered and there's a huge smile on the face of the recipient you intended.
Money Rehab with Nicole Lapin
Inside a Florist's Valentine's Day with Jim McCann, Founder & Chairman at 1-800 Flowers.com
Well, it's a little bit different at different times of the year. So this time of the year, weather is our primary concern. So we work a lot with FedEx, for example, on moving product around the country. And so we're watching the weather maps very closely. My advice is sell sweaters. Perishable products are tough.
Money Rehab with Nicole Lapin
Inside a Florist's Valentine's Day with Jim McCann, Founder & Chairman at 1-800 Flowers.com
I mean, when you pull into a fancy town like, let's say Los Angeles, you don't go to Beverly Hills and say, this is where all the florists live. It's a tough business. It's a good business. There's lots of wonderful people in it. But there are so many variables that can give you grief. You can have everything planned out perfectly. And an ice storm. We just had ice storms throughout the Southwest.
Money Rehab with Nicole Lapin
Inside a Florist's Valentine's Day with Jim McCann, Founder & Chairman at 1-800 Flowers.com
All of a sudden, planes can't fly. Florists can't get their trucks out. So you have to plan around that. And then you have to have the customer service people in place to be able to deal with the order that was supposed to be there today, but nothing was moving. So where is she going to be tomorrow? We want to reroute the flowers to make sure they get to the right place.
Money Rehab with Nicole Lapin
Inside a Florist's Valentine's Day with Jim McCann, Founder & Chairman at 1-800 Flowers.com
So there's a lot of intricacies. It's a lot like watching sausage being made. You don't want to. But after 40 plus years of doing this, we have it down to a pretty good science. But I don't encourage it for the people who are faint of heart.
Money Rehab with Nicole Lapin
Inside a Florist's Valentine's Day with Jim McCann, Founder & Chairman at 1-800 Flowers.com
Indeed. The good news about food companies, all the people eat every day. Hmm. And they don't have quite the spikes in demand that we would have in the floral and gift business. And frankly, one of the reasons we got into food gifts is we saw that our customers, especially during, I mentioned during the COVID period, we didn't know what was going to happen when COVID first started in March of 20.
Money Rehab with Nicole Lapin
Inside a Florist's Valentine's Day with Jim McCann, Founder & Chairman at 1-800 Flowers.com
And like a week or two in, all of a sudden, demand went through the roof. At the same time, all of a sudden, we were trying to learn to work from home. for those people in office settings, keeping our people safe in production. And in answer to your question about agriculture, agriculture is a big part of what we do with all its commensurate risks.
Money Rehab with Nicole Lapin
Inside a Florist's Valentine's Day with Jim McCann, Founder & Chairman at 1-800 Flowers.com
So we have food acreage production around the country, most heavily concentrated In Oregon, where our Harry and David operations are, we have 5,000 acres of agricultural production where we grow the world-famous pears that we're known for. And we have a million pear trees that we tend to every day. We grow peaches, we grow apples, we grow kiwis, we grow grapes. So we grow our food.
Money Rehab with Nicole Lapin
Inside a Florist's Valentine's Day with Jim McCann, Founder & Chairman at 1-800 Flowers.com
So we're absolutely vertically integrated there. On the flower side of things, because the different growing seasons will take us to other countries, throughout the year. We don't own the land. We'll contract grow with people who own their land to say, I need 15 million roses this week.
Money Rehab with Nicole Lapin
Inside a Florist's Valentine's Day with Jim McCann, Founder & Chairman at 1-800 Flowers.com
So we have to guarantee them the right return on that so that they'll plant the plants, that they'll tend to them, they'll harvest them and get them to us on time. So there we don't own the land, but we're contracting with the best growers in the world to produce the products we need when we think we need the most.
Money Rehab with Nicole Lapin
Inside a Florist's Valentine's Day with Jim McCann, Founder & Chairman at 1-800 Flowers.com
Well, they're so different than the pears that you'd see normally in a grocery store. But living in LA, you would know that once a year we do a big deal with Trader Joe's and the pears that are delicious and almost perfect, but didn't make it to our gift selection. We have a deal with Trader Joe's where we have one week where we sell those pairs off.
Money Rehab with Nicole Lapin
Inside a Florist's Valentine's Day with Jim McCann, Founder & Chairman at 1-800 Flowers.com
And boy, is that a big week for us and Trader Joe's when we have those pairs in their stores.