Planting the seeds for 1-800-Flowers.com

  @FortuneMagazine February 27, 2014: 7:33 AM ET
HOW17 jim mccann

McCann at the flower shop at 1-800-Flowers.com headquarters in Carle Place, N.Y.

(Fortune)

How did a nighttime social worker at the St. John's Home for Boys in Queens, N.Y., get the audacity to think he could launch a national chain of flower shops? As Jim McCann says of his younger self, "Sometimes naiveté can be an asset." McCann parlayed a single shop into the easy-to-remember 1-800-Flowers.com (FLWS). Today it's a florist and gift-shop company that serves 70 countries and generated $1 billion in revenue last year. McCann, 62, has been running the business for 38 years, and, he maintains, he's still not quite ready to stop and smell the roses. His story:

I grew up in Queens in a small-business family. My dad was a painting contractor, and I worked for him as a kid, learning how to do plumbing, carpentry, and electrical stuff.

I thought I'd become a policeman, so I enrolled in the John Jay College of Criminal Justice at the City University of New York. At night I worked as a bartender, and a friend told me about working in a group home for boys, which intrigued me.

So in 1971 I went to college in the daytime and went to work for St. John's Home for Boys in Rockaway, Queens, at night. I had my own room in the home and lived there with 10 teenage boys. It was a great learning experience. After graduating with a B.A. in psychology, I went on to become an administrator, and continued working with the home for 14 years.

In the meantime my wife and I had started a family. You starve in the nonprofit world, so it was back to bartending at night. One of my customers there had a small flower shop he was thinking of selling. I thought I could scrape the money together to buy it and asked if I could work a few Saturdays to see if I'd like it, and I did. I loved the smiles people had when you put together a bouquet for them. It was a simple-to-understand business that required low capital to start.

There was no McDonald's-like player in the business, so I bought it for $10,000 with the intention of building a big company. It was 1976, and I kept working full-time at the home while learning the business.

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The Thursday before that first Easter, I was way overstocked on plants. We had a piano keyboard in the shop and merchandised it with arrangements. It looked really nice, but I thought I was really going to take a bath. Then William Zeckendorf, a real estate baron in New York, stopped by. He had a piano and loved the look. Zeckendorf bought all the arrangements and flowering plants in the store to re-create the look in his home. He saved my bacon that weekend.

I knew I wanted to build a chain and was always on the prowl for a location. Every six months I'd open another store. But retail is tough. Flowers are tough because they're a perishable product that has to be delivered, and you're required to know the craft. I'm the oldest of five children and recruited the entire family to work. Ten years later I had 20-odd stores, and it was time to make the floral business my full-time endeavor, so I left St. John's Home.

Cash was the biggest challenge in the early years. What I knew about business came from my family and the kitchen table. I didn't know anything about venture capital or bank lending. It was the school of hard knocks. I discovered that you could work like the devil through a holiday period like Christmas and still lose money. We'd hit January, when sales were slow, and we didn't have the cash to pay the vendors. We found out quickly who our friends were.

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By 1986 we had worked on buying better and delivering more efficiently. One day I was taking a shower and heard a radio commercial about 1-800-Flowers, the first company where you could order through an 800 number, and the phone number was mnemonic. I contacted the company and became their New York florist. For a while it was great, but then the orders stopped coming.

I flew to Dallas and discovered that the owners had raised $10 million but had to stop operations because the business wasn't there. I offered to buy what was left of the company for $2 million. I naively decided to save some money by not hiring corporate lawyers, accountants, and bankers to do due diligence. I gave [the sellers] all the money I had accumulated. What I didn't realize was that I had also assumed their debt, which was $7 million. I had made a colossal mistake.

I gutted my shop in Queens and made it a telemarketing operation. But we got fewer than 10 orders a day. I talked to friends and mentors, who all said declaring bankruptcy would give me a fresh start. But my grandmother, who was the matriarch of our family and who had run the family painting business, said, "We don't do that. Figure out another way."

So I went to everyone who was owed money and asked them to trust me. I paid off those who didn't want to continue with us, but most worked with me.

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Over the next five years we worked hard, and the idea caught on. To dig out of the hole, I had to swing for the fences. In 1986 I was in Dallas when Larry Zarin, who was doing marketing for Kellogg's Nutri-Grain, came knocking on the door. He suggested we put ads on 10 million of their cereal boxes saying if you buy Nutri-Grain, you can get a dozen roses for $14.99. We got 30,000 orders but didn't have enough florists across the country, so we had to invent a box we could ship roses in overnight. We worked with FedEx (FDX, Fortune 500) to do it, and it got us known across the country.

Everyone had said no one wanted to order flowers over the phone or use credit cards, but shipping orders overnight changed the way the floral industry does business. Companies started calling us after the Kellogg's (K, Fortune 500) promotion.

We did another promotion that year with Zales (ZLC). We put up signs in all its jewelry stores, saying, "If you buy something today for more than $200, you can send a free poinsettia plant anywhere in the country." Its sales went up, and we worked like dogs, sending out 25,000 poinsettias. We didn't make money because we had to give a serious discount to Zales, but it was great branding for our network of florists, which we now call BloomNet.

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We continued to grow every year. My brother Chris, who's 10 years younger than me, became my business partner. He was always interested in new technology, and in 1991 he wanted to go online. We had dinner three years later with Ted Leonsis and Steve Case, AOL's co-founder, and while I had no idea what they were talking about, I knew I liked them. So we became the first company to do a transaction online on AOL (AOL), and grew along with them.

The Internet took over the world, and 21 competitors in the floral and gift space emerged. We decided to go public in August 1999, and raised $150 million, most of which we used to build a new technology platform for the company. Most of our competitors dried up and went away. By the late '90s, we had about $120 million in annual sales. Today revenue is $800 million; $1 billion when you include the franchises.

We always try to stay on the cutting edge. Local, mobile, social is the biggest wave crashing on our shore now. We were the first company on Facebook (FB, Fortune 500) with gifts starting at $5, because you're going to have more $5 friends than $50 friends you'd send flowers to.

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Today everybody is our competitor because everything is giftable and deliverable. Chocolate, for example, was always important to us, but we didn't have a good American chocolate at a popular price point significantly less than Godiva's. So in 2008 we found Fannie May, invested $85 million to $90 million over time, and partnered with them. We did the same thing with Cheryl & Co., the Popcorn Factory, and others.

At this stage of my life, I'm happiest that I have a wife who's tolerated my imperfections for 40 years, great children, and this little flower shop that has kept our whole family together. I'm never going to retire.

My advice

Manage individuals, not groups. My job as CEO is to understand people, motivate them, and keep score. People want to love, be loved, and be trusted. So establish a relationship with everyone individually and know that each relationship is going to be different.

Look after your employees. When the recession hit in 2008, we had to cut 10% of our workforce, which was very painful. We put together job banks and followed people until all but three of the 300 were re-employed. Happily, we've been able to rehire some as well.

Share the wealth. Business is the engine of a community. If you run your company only for a profit, there's no return to serve stakeholders: your vendors, communities, customers. Good business creates more capital so there's more to go around for everyone.

This story is from the March 17, 2014 issue of Fortune. To top of page



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