Classmates.com 2009 Annual Report Download - page 6

Table of Contents
product orders. Our Classmates Media and Communications segments do not generate products revenues.
• Advertising revenues. Advertising revenues are derived from a wide variety of advertising, marketing and media-related
initiatives in each of our operating segments.
Industry Background
FTD Segment—Floral and Related Products and Services
Consumers
Floral industry retail purchases, including flowers, potted plants and seeds, in the U.S. were approximately $21 billion in 2008, according to
the U.S. Department of Commerce. Floral industry retail purchases in the United Kingdom, including fresh cut flowers and indoor plants, were
approximately £
2.2 billion in 2008, according to Mintel, a market research company. Both the U.S. and U.K. markets are highly fragmented with
thousands of floral industry participants. The retail marketplace has evolved considerably in recent years. The following sets forth some of the
key market trends:
• The increasing role of nationwide floral marketers, particularly those marketing floral products over the Internet, has resulted in a
growing percentage of floral orders being placed through nationwide floral marketers versus traditional retail florists;
• Consumer purchases of "cash and carry" flowers for every-day occasions have continued to shift away from traditional retail
florists and increasingly occur at supermarket and mass merchant retail locations;
•
Traditional retail florists have become increasingly dependent on floral network services to provide incoming order volume to
offset business lost to the Internet, supermarket and mass merchant channels; and
• Traditional retail florists and nationwide floral marketers have expanded their product offerings to include a larger selection of
specialty gift items.
Nationwide floral marketers, such as FTD and Interflora, attract floral orders from consumers via the Internet and telephone. Nationwide
floral marketers typically partner with third parties to fulfill and deliver the marketers' floral product orders, including retail florists and direct
ship merchants. The nationwide floral marketers' share of retail floral purchases has expanded due to shifting consumer preferences towards
purchasing floral products online and the emergence of prominent brands with national exposure. Growing consumer interest in floral
arrangements shipped directly to the consumer via common carrier has also benefited the nationwide floral marketers in recent years.
Traditional Retail Florists and Other Retailers
There were approximately 19,600 retail florists in the U.S. in 2007, according to the U.S. Census Bureau. The total number of retail florists
has declined in recent years, primarily because floral products have become increasingly available for purchase on the Internet and in other retail
channels. Supermarkets, mass merchants and other retailers are becoming increasingly important distribution channels in the floral products
retail market. During the past several years, these retail locations have increased their presence in the floral products retail market by adding a
variety of floral and related products to their merchandise assortments. The emergence of supermarkets and mass merchants within the floral
products retail market has led many traditional retail florists to expand their merchandise offerings to include giftware, indoor plants, outdoor
nursery stock, and seasonal decorations, among other items.
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