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Table of Contents
Competition
The industries in which we offer products and services are highly competitive. A summary of competitive factors is set forth below and in
"Risk Factors," which appears in Item 1A of this Annual Report on Form 10-K.
Floral, Gift and Related Products and Services
We compete in the market for flowers and gifts. In the consumer market, consumers are our customers for direct sales of floral products and
gifts through our websites and 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 access to the FTD and Interflora brands and the
Mercury Man logo, access to the floral networks, credit card processing services, e-commerce website services, online advertising tools,
clearing-house services, order transmission, and after-hours telephone answering and order taking services, as well as floral-related products,
such as fresh flowers and containers.
The consumer market for flowers and gifts is highly competitive and fragmented 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. We believe
the primary competitive factors in the consumer market are price, quality of products, selection, customer service, ordering convenience, and
strength of brand. The floral network services market is highly competitive as well, and retail florists and supermarkets may choose from a
variety of providers that offer similar products and services. We believe the primary competitive factors in this market are price, order volume,
customer service, services offered, strength of brand, number of members in the network, and fulfillment capabilities. In the U.S., our key
competitors in the consumer market include online, catalog and specialty floral and gift retailers and mass market retailers with 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. Although we believe that we compete favorably with respect to
many competitive factors, some of our competitors have an advantage over us with respect to certain factors.
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, mass merchants 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 is expected
to intensify.
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