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Dive Brief:
- 1-800-Flowers.com has offset shipping rate increases over the past year thanks to efforts to optimize its logistics operations, Founder and CEO Jim McCann said during its Q3 earnings call on May 2.
- These efforts, part of the gift provider's wide-ranging “Work Smarter” efficiency initiative, include placing inventory closer to end customers. By ensuring better product proximity,the company can use lower-priced services while still meeting desired delivery speeds, executives have said in previous calls.
- "So through the nine months ended at the end of the third quarter, our actual cost per package is flat to slightly lower on a year-over-year basis," McCann said.
Dive Insight:
1-800-Flowers.com uses FedEx, UPS and the U.S. Postal Service — along with local florists — to deliver orders. The company has worked to manage rising expenses tied to these providers since shipping and fuel costs began to surge in fiscal year 2022, per its quarterly financial filing.
While 1-800-Flowers.com negotiates long-term contracted rates with carriers, other components of delivery expenses like fuel surcharges are more variable and harder to mitigate.
To help offset those pressures, 1-800-Flowers.com has worked to place inventory closer to its customers. The adjustment appears to be paying off. The company reported a 13% year-over-year decrease in cost of revenue, which includes shipping and delivery expenses, in its most recent quarter. That outpaced a 9.1% drop in net revenues.
1-800-Flowers.com's work isn't finished. Rising fuel costs that can translate into higher shipping expenses will become a headwind for the company after it benefited from lower fuel charges throughout fiscal year 2024, President Tom Hartnett said on the call.
The company also weathered an $18 million adjusted net loss in the quarter as it navigated a cautious consumer spending environment.
1-800-Flowers.com's approach is just one way shippers can trim their delivery expenses. Others have renegotiated contracts and added new carriers to ease the pressure shipping costs bring to their bottom lines.
