Starting with a flower shop on the Upper East Side of Manhattan 41 years ago, Jim McCann, 66, built a publicly traded flower and gift franchiser with revenue of $1.2 billion. His strategy: pounce on new ways to market his products. In 1986, believing customers would respond to an 800 number in the company name, he bought 1-800-Flowers from a defunct firm. Five years later, betting that ecommerce would take off, he launched a website, eventually adding “dotcom” to the company name in 1995. His latest bet is that customers will want to order flowers with voice commands to a virtual assistant like Alexa. The company went public in 1999 but its stock has underperformed, never rising above its offering price of $21. In March 2016, McCann announced he was turning the CEO job over to his brother Chris, the company’s president since 1995. Now executive chairman, Jim is investing in startups and exploring alternatives to traditional advertising. In this interview, which has been edited and condensed, he talks about building the company, embracing new technology and how to talk to customers about death.
Susan Adams: Were there any flowers in your childhood neighborhood?
Jim McCann: I grew up in South Ozone Park, Queens, on the way to Kennedy airport. We had two little plots that were quote unquote our front lawn. We didn’t have flowers.
Adams: How did you get into the flower business?
McCann: My dad was a painting contractor. The role models in my neighborhood were small businessmen, policemen, craftsmen. I was going to school and working Fridays and Saturdays at a bar on the East Side. A customer, a guy who owned a flower shop across the street, was putting it up for sale. I had just earned $10,000 from the sale of a building I had bought and fixed up and I used it to buy the flower business. That was in 1976.
Adams: Where did you get the idea to expand beyond the one shop?
McCann: I looked around and there was no McDonald’s of the flower business. Once I opened, I immediately started looking for a second shop. Six months later I bought a second shop and then opened another 30.
Adams: Why did you call the business 1-800-Flowers?
McCann: I was watching TV and seeing companies like Sheraton Hotels trying to get people to remember their phone numbers. I thought, wouldn’t it be better if people could just dial up and remember our name?
Adams: How did you get the phone number?
McCann: In 1986, the company that had the number went kaput. I took over the number but didn’t realize I was signing personally for the company’s $7 million in liabilities. I didn’t have anything close to that.
Adams: What did you do?
McCann: The advice I got was to file for bankruptcy. Instead I talked to all the creditors and told them I’d feed them money when I could. Over the next five years I worked my way out. We also had the good fortune of the fights between the phone companies. AT&T asked me to appear in one of their commercials touting their service. The commercial did so well they called me back, saying we want to sign a contract with you.
Adams: How many stores did you own at that point?
McCann: From 1986 on, I started selling stores to franchisees. Because I needed the capital to feed this 800-number idea. I didn’t know how to work with banks or private equity.
Adams: How did you make sure the franchisees maintained your standards?
McCann: We had an operating manual and a representative from the company who was responsible for a group of stores would make sure the franchisees were in compliance with company policy like education and training programs for store managers, and implementation of marketing and promotion programs.
Adams: What was your next big step?
McCann: In 1994, we were the first merchant on AOL. By ’97 and ’98 the web was taking over our business. Then the fourth phase was mobile, four or five years ago.
Adams: Once you started franchising, did that mean you were basically a marketing business?
McCann: Yes, we became much more focused on marketing. We spend $100 million a year on it. But we were still dealing with customers every day if they called the 800 number and then when they came to the website. The franchisees did fulfilment and they built their brand in their local community.
Adams: Why did you go public in 1999?
McCann: It was the dotcom boom and we had been funding everything out of our own pockets. Also, we went from having no competition to having 21 different competitors.
Adams: A lot of entrepreneurs hate the idea of answering to shareholders and dealing with the regulations. How has going public been for you?
McCann: Net net it’s been positive. We acquired the capital we needed and it imposes a set of disciplines on us that we’ve benefited from.
Adams: Most owners hate those disciplines. How did you benefit?
McCann: Most of our stockholders are institutional investors like pension funds. We get the opportunity to sit down with investors who have 40 years of experience. If we weren’t public, we would have to pay a lot of money for that kind of wisdom.
Adams: Your stock never rose above its offering price of $21 and in the last year it’s fallen 10% at a time when the market has surged. Have you failed your investors?
McCann: During the bust of 2009, we went down to 80 cents. Today it’s near $10. We’re not properly priced. We should get a much higher value.
Adams: What percent of the company do you still own?
McCann: Put together, the family owns a little more than half. Individually I own 40%
Adams: Where do you think 1-800-Flowers’ growth will come from?
McCann: The next wave is artificial intelligence and voice access. The first thing you could order on Alexa was from 1-800-Flowers.
Adams: When did you start thinking about stepping down as CEO?
McCann: A long time ago. I’m 10 years older than my brother. We’ve worked together since he graduated from college. We were never competitors. I had more of a parental than a sibling relationship with him. I have two sisters in between and a brother who has developmental disabilities. We created a nonprofit called Smile Farms, where we offer work opportunities for people with disabilities. My brother Kevin works in a greenhouse on Long Island.
Adams: Do you still see the company as a family business?
McCann: No I don’t. When we went public we shed the idea and we became a business owned by the stockholders. No one in the family feels entitled to a role in the company. But we do try to retain a sense of family founder involvement. We have those values, that no one was too big to do any job.
Adams: Did you consider other candidates than your brother to be CEO?
McCann: We never did. We had gone through a process with a special committee of our board that set benchmarks for Chris over four years. After their last interview with Chris, the board said, he did everything we asked him to do and he’s been here for 30 years.
Adams: What finally made you decide to give up the top job?
McCann: When I was running my flower shops, I thought I could do every job better than everyone else. A good friend said, the best thing you can do is fire yourself. Hire a manager for each shop and do the things only you can do. My brother is a much better CEO than I was. He’s good at running things and making sure the details are followed up on.
Adams: Was it hard for you to let go?
McCann: No. Our evolution was that Chris was running the company anyway. It gave a clear definition of that to the public. It gave me the freedom to do around the edges what I think will be beneficial to the company.
Adams: What are you working on now?
McCann: Thinking about how we have the right kind of tough conversations with our customers about sympathy and death. More than half of deaths in the U.S. result in cremation. How does our outside team have a conversation with customers about that? What should happen when someone loses his father and has to travel to India for services? If I had an everyday job making sure our database was working properly and the right people were getting hired, I wouldn’t have time to do that.
Adams: How are you communicating with your customers about sympathy, death and flowers?
McCann: We’ve developed a program with radio personality John Tesh. We advertise with him, but not using commercials. We ask him to stimulate conversations about the rights and rituals around sympathy and he discusses that on his show.
Adams: How does that discussion about sympathy generate sales?
McCann: I don’t know. Except I can tell you that the engagement with our customers on social media is going up. We’re helping them have a difficult conversation. In my gut, I know it’s the right thing to do.
Adams: How much are you spending on radio conversations?
McCann: In the first phase, about a half million dollars.
Adams: That’s a lot of money. How will you know if it’s working?
McCann: It’s a leap of faith on our part. We’re betting on our instincts that meaningful conversations will inure to our benefit.
Adams: How do radio listeners know that 1-800-Flowers has anything to do with the programs?
McCann: In a conversation I had with John Tesh about cremation, he said his grandmother created a memory garden for his grandfather in her back yard. On the air John Tesh will say, “In my conversations with Jim McCann at 1-800-Flowers, I learned that the company makes it easy for people to plant memory gardens.” We’re working on memory garden kits right now.
Adams: You’re also investing in startups. What kinds of ideas get you excited?
McCann: There’s a venture fund in Manhattan called Compound that invests in early-stage technology companies. We’re investors in Compound. One company we’re invested in through Compound is called Stanza. It’s run by a young lady out of Stanford and a team of 30 and they’re doing all kinds of calendaring technology. Eight million people use their calendar
Adams: Is there some way Stanza could benefit 1-800-Flowers?
McCann: Through Stanza, you might get a list of all your friends’ birthdays a week in advance and Stanza would make free gift suggestions like writing on their Facebook wall or sending them an email. Then it might suggest that you send them a $5 cookie card from us. Then if the person who gets the cookie card likes it enough, they might decide to order flowers someday.