Classmates.com 2011 Annual Report Download - page 33

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floral departments, including such companies as 1-800-FLOWERS.COM, Inc., Proflowers.com and Teleflora. Our key competitors in the U.S.
floral network services market include providers of online or e-commerce services, retailers and wholesalers of floral-related products and other
floral network services, such as Teleflora and BloomNet Wire Service, a subsidiary of 1-800-FLOWERS.COM, Inc. International key
competitors include mass market retailers, including Asda, Marks & Spencer, NEXT, and Waitrose/John Lewis, as well as online, catalog and
specialty gift retailers such as eFlorist (previously known as Teleflorist) and Serenata Flowers.
We believe competition in the consumer market will likely continue to intensify. Supermarkets, mass merchants and floral and gift 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.
Additionally, because we depend upon third parties for the delivery of our products to customers, strikes or other service interruptions
affecting these shippers could have an adverse effect on our ability to deliver our products on a timely basis. If any of our shippers are unable or
unwilling to deliver our products, we would have to engage alternative shippers, which could increase our costs. A disruption in any of our
shippers' delivery of our products could cause us to lose customers or could increase our
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