Classmates.com 2009 Annual Report Download - page 32

Table of Contents
ADDITIONAL RISKS RELATING TO OUR FTD SEGMENT
Competition could have a material adverse effect on our business, financial condition, results of operations, and cash flows.
We compete in the market for flowers and, to a lesser degree, specialty gifts. In the consumer market, consumers are our customers for
direct sales of floral and specialty gifts through our Web sites and toll-free telephone numbers. In the floral network services market, retail
florists and supermarkets are our principal customers for memberships and subscriptions to our various floral network services including, among
other things, access to the FTD and Interflora brands and the Mercury Man logo, access to the floral network, credit card processing services, e-
commerce Web sites, online advertising tools, and telephone answering, order-taking, transmission and clearing-house services.
The consumer market for flowers and specialty gifts is highly competitive, and consumers can purchase the products we offer from
numerous sources, including traditional local retail florists, supermarkets, mass merchants, specialty gift retailers, and nationwide floral
marketers, such as those that use Web sites, toll-free telephone numbers and catalogs. The floral network services market is highly competitive
as well, and retail florists and supermarkets may choose from a few floral network service providers that offer similar products and services. In
the U.S., our key competitors in the consumer market include 1-800-FLOWERS.COM, Inc., Proflowers.com and Teleflora, and our key
competitors in the floral network services market include Teleflora and BloomNet Wire Service, a subsidiary of 1-800-FLOWERS.COM.
International key competitors include Marks & Spencer, NEXT, John Lewis, Teleflorist (also known as eFlorist), and Flowers Direct.
We believe competition in the consumer market will likely intensify. Supermarkets and nationwide floral marketers have been gaining
market share over retail florists as consumers continue to shift more of their floral purchases to these channels. We expect the sales volumes at
supermarkets and other mass merchants to continue to increase, and that nationwide floral marketers will continue to increase their competition
with us. In particular, the nature of the Internet as a marketplace facilitates competitive entry and comparative shopping, and we have
experienced increased competition based on price. Some of our competitors may have significant competitive advantages over us, may devote
significantly greater resources to marketing campaigns or other aspects of their business or may respond more quickly and effectively than we
can to new or changing opportunities or customer requirements.
We expect competition in the floral network services market to continue to increase as well. We believe we will continue to experience
increasing competition from the other floral network services providers. In addition, we expect retail florists likely will continue to lose sales to
supermarkets and nationwide floral marketers, which likely will result in a continuing decrease in their revenues and in the number of retail
florists. As the number of retail florists and their revenues decrease, competition for the business of the remaining retail florists will intensify.
Increased competition in the consumer market or the floral network services market may result in lower revenues, reduced gross margins,
loss of market share, and increased marketing expenditures. We cannot provide assurance that we will be able to compete successfully or that
competitive pressures will not have a material adverse effect on our business, financial condition, results of operations, and cash flows.
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