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Disrupting the Floral E-Commerce Industry: Farbod Shoraka, CEO of BloomNation (Part 2)

Posted on Thursday, Aug 7th 2014

Sramana: Where were you when you made the decision to strike out on your own and start a company?

Farbod Shoraka: I started out in Los Angeles. Once I realized there was a problem, I wanted to validate it, so I started walking around and talking to various florists. I just started talking to them and learning about the industry. I knew the industry from an analyst’s perspective, which means I understood the bigger market players. I felt that it was important to gain the same understanding at the local level.

I had an aunt who was a local florist and I used her as a resource. After that, I went around to various florists in Los Angeles to gain a better understanding of the resounding issues. Why were they closing their doors? I wanted to understand why the trend of retail flower shops was declining. To me it was an exciting problem to solve.

Sramana: You said you had some ideas about what the problems were. What were the problems on which you build your core investment thesis to go into this market?

Farbod Shoraka: The thesis behind BloomNation is that these large incumbents such as 1-800-Flowers, FTC, and Teleflora are middle men creating high inefficiencies in the industry. They also cause a lot of customer dissatisfaction to both the end customer and the florist.

The problem we wanted to solve is the fact that in today’s day and age, we are not able to connect with a local florist, see the real product that they have available, and purchase directly. Today I can go on Yelp and see what people have eaten at every restaurant because everyone posts photos and reviews of their food. We wanted to create the same environment for the floral industry.

By empowering the florists to provide their real designs to the BloomNation marketplace, consumers can see what is happening in each local market when it comes to floral gifting.

Sramana: When you took your idea out to the Los Angeles florists, how was it received?

Farbod Shoraka: As a consumer, I have shopped online and been unhappy with what was sent. I always thought that at least the florists were making money. The thing that really struck us and made it feel like this was something that we needed to do was that the flower shops despised working with the big service [companies] as well. They don’t get any of the profit. The brokers take half of the money off the table. If you spend $100 on an order, the florist gets only $50 and they have to put their own flowers in the vase and deliver it themselves. There is not a lot of money left for them to make a profit. The resounding frustration is that they were not making money from the orders coming in.

They also had no customer retention because the brokers were a wall between the customer and the florist. There was no ability to have retention and lifetime value.

Sramana: Virtual businesses such as 1-800-Flowers are customer acquisition plays. That’s their entire play.

Farbod Shoraka: Exactly, and that made the florists feel like employees of these services. They get a recipe and have to fulfill an order. It’s almost like a McDonalds for florists. The real problem is that florists are artists. You don’t go into the industry to be a millionaire. It’s not a lucrative industry. They are creative and artistic people. The brokers take away their creativity as well.

It was very clear to us that those major pain points existed across the board.

This segment is part 2 in the series : Disrupting the Floral E-Commerce Industry: Farbod Shoraka, CEO of BloomNation
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