Classmates.com 2010 Annual Report Download - page 32

Table of Contents
credit card processing services, e-commerce website services, online advertising tools, telephone answering, order taking, order transmission,
and clearing-house services.
The consumer market for flowers and gifts is highly competitive as consumers can purchase the products we offer from numerous sources,
including traditional local retail florists, supermarkets, mass merchants, gift retailers, and floral mass marketers, such as those that use websites,
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, Inc. International key competitors include Marks &
Spencer, NEXT, John Lewis, Teleflorist (also known as eFlorist), Flowers Direct, and Flying Flowers.
We believe competition in the consumer market will likely continue to intensify. Supermarkets, mass merchants and floral mass 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 mass merchants to continue to increase, and other floral mass 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
engage in more significant discounting, 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 floral mass 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.
We are dependent on third parties who fulfill orders and deliver goods and services to our customers and their failure to provide our
customers with high-quality products and customer service may harm our brands and could have a material adverse effect on our business,
financial condition, results of operations, and cash flows.
We believe that our success in promoting and enhancing our brands depends on our ability to provide our customers high-quality products
and a high level of customer service. Our business depends, in part, on the ability of our independent floral network members and third-party
suppliers who fulfill our orders to do so at high-quality levels. We work with our floral network members and third-party suppliers to develop
best practices for quality assurance; however, we generally do not directly control or continuously monitor any floral network member or third-
party supplier. The failure of our floral network members or third-party suppliers to fulfill orders to our customers' satisfaction, at an acceptable
level of quality and within the required timeframe, could adversely impact our brands and cause us to lose customers, which could have a
material adverse effect on our business, financial condition, results of operations, and cash flows.
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