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Episode 24: Google is the new landlord for small business

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All Xero In episodes

Hosted by Jeanne-Vida Douglas and Rob Stone

With the increasing convergence of bricks-and-mortar and online retail, it’s now more pertinent than ever to think about how your location might be impacting your business – for better or worse.  

This week Xero In hosts Rob Stone and JV Douglas chat to James Stevens, founder of Roses Only. James sheds light on his experience, moving from the world of physical shopfronts to the internet to eventually building a successful, global ecommerce brand.

“The biggest online landlord now would have to be Google,” James said. “I look for media where my brand is going to stand out, we haven't put a whole bunch of flower shops next to each other in a shopping centre called Google.”

So is Google the new landlord? And what are the alternative locations businesses should think about in order to remain relevant in an increasingly online world? Tune in to find out.

Small business resources:

Small business SEO – Xero Small Business Guide

The beginner’s guide to SEO – Moz.com

Episode transcript

Hosts: JV Douglas [JV] and Rob Stone [RS]

Guest: James Stevens [JS]


JVD: Welcome back to Xero In, I'm here with Rob Stone.

RS: Hi JV.

JVD: And I'm JV Douglas and today we have a man who has probably kept thousands of Australian couples together [laughs] over the last two decades, it's James Stevens from Roses Only.

RS: Really interesting interview, focused on customer input driving innovation.

JVD: And it has to be said too, he's now sold out of the Australian business, but he really has so much insight into the way that those basic elements of focusing on quality, of being a real – really hardnosed about – about the way you do business, looking after your staff and – and reinvesting in the businesses that you own have really continued throughout – throughout his career.

RS: Yeah James has a wealth of experience, a very much a – a starter in the online space when it came to delivering gifts. So let's get started.

BREAK

RS: Hi we're delighted to have James Stevens the founder of Roses Only joining us today.

JS: Thank you it's a pleasure, happy to be here.

JVD: Yeah thanks so much for joining us James and thank you also for keeping the romance alive for so many years [laughs].

JS: Bringing the love, I'm delivering love.

RS: When was the ah-ha moment in 1995 about inspiration to start Roses Only? – And in particular that – that moment of inspiration when you – you know you're in the Chifley Plaza and you thought hey this is a good idea.

JVD: Yeah I'd be fascinated, because you're such an early mover there.

JS: A lot of people have this notion that Roses Only was an internet business. It didn't start out as an internet business. It started out purely and simply as a flower shop up in Chifley Plaza that had a whole bunch of phones out the back of a little you know a little storage area, I – I was pretty bullish about the idea so much so that I put 12 phones up on the wall [laughs], which 12 phones to be answered one day by hopefully a whole bunch of customers that are going to be calling. And it was a classic case of build them and they will come. I almost felt that I, so I wouldn't look stupid I – I – I needed to advertise and market quite heavily to make sure that those phones were ringing, otherwise I'd look like an absolute fool.

The last thing I want to do is look stupid and I think that's what probably drove me more than confidence.

JVD: You had a long sort of family history where you were involved in floristry as I understand. Can you tell us a little bit about that?

JS: Yeah look it dates back to family business – mum and dad founded a – a little flower shop at the bottom of Town Hall Station there next to Woolworths.

It was a classic monkey see monkey do and whether it was, I could see dad was very, very big on quality. And then once he you know discovered that he – he would be laser focused then on – on negotiating a deal.

I learnt all about customer service and speed in that Town Hall Station shop. We subsequently had a lot of other little flower shops, again all on railway stations, that was my dad's very, very basic I suppose business plan to – to find people in high volume locations. But we had to deal with these customers quickly, they – they could potentially miss a train, the product had to be wrapped and we wanted them to come back. It wouldn't have been good enough if the product was inferior, overvalued. You wouldn't get them again the following week. If the product didn't also get a wow factor from the recipient the chances are that you want to get some sort of an emotional response, an emotional goodwill response from a recipient when it comes to giving a product like ours that – that – that makes the consumer think oh that's a good result, I'm going to go back there.

RS: So if we just backtrack there James, when was the ah-hah moment in 1995 about inspiration to start Roses Only?

JS: We were scarred by landlords over the years and the biggest thing that I wanted to achieve from the early 90s was to create a brand that would never ever be at the mercy of the landlord. So that's what we achieved by virtue of setting up Roses Only. That was the single biggest thing that I wanted to do.

And we did have also an internal issue. We had an issue where there was no way that there was any – any – any internal controls in selling a perishable product such as ours. You cannot bar code a rose. The last thing you'd want to receive is a bar coded rose. So to that extent there was a science suddenly to this business. I knew that if I wanted to sell a thousand dozen roses, I had to order 12,000 roses. In a typical flower shop there is no – there are no internal controls. You fundamentally buy and X amount of product for an X amount of dollars and you sell it and you hope that something remains in the middle.

There was very little wastage in a Roses Only business. There was a first in first out business, that you bought stock, you had pre orders, you may have got some extra orders on the day, but you knew from one day to the next within reason how much you needed to buy.

I suppose you talk about ah-hah moments, well it wasn't much of an ah-hah moment to realise that the only product that is sold by number of stems, that almost has a classical number associated with it is a dozen long stemmed roses. Can you think of any other flower where you say that there's a – there's a – almost a – a romantic number associated with the giving of so much baby's breath or carnations?

RS: Where did you get the most bang for your buck with the allocation of marketing spend, particularly in those early years?

JS: It was a moving target [laughs] and the reason why it was a moving target is because the whole industry moved. And the – the media landscape moved. That – there – there had never been such change in the order of 70 to 80 years. Your typical flower shop again would open its doors, expect customers to – to walk in, word of mouth, hopefully be in a good location.

Typically the only media that we went to was the Yellow Pages and that was to find customers that were searching for flowers. You don't flick through the Yellow Pages because it's an enjoyable read so [laughs] that was the you know so we were probably I would say about the first – we were definitely the first to advertise in the Australian Financial Review.

JVD: So you've got – you've got a new brand that's highly focused on quality that has – you've defined a really specific customer set that hasn't traditionally been targeted or targeted effectively by – by the – by other florists. You've allied yourself with other brands associated with exclusivity, so you're [laughs] besides Tiffany's in your location, you're advertising in the AFR, where – where does the internet come into this and – and what did you learn I guess in those first 18 months, two years online that was different about the way your parent's business operated?

JS: If I was going to be online I wanted to dominate online. And the reason why I wanted to dominate online is because I thought I'd stand out a lot more than the – the big incumbents that were around at the time. I had a nice product and the product and when I say nice product, it was a nice product that – that lent itself to online perfectly. You knew exactly what you were getting. You knew that you were getting a brown box with green ribbon and in that box that exactly the number of stems that you'd ordered.

It's the classic situation of you know would you like a small, medium, large or extra large pizza. And you've got no concept of how big this thing is and you just, you know people make an assessment around size. It's just too subjective and whereas with our product you knew exactly what you were getting. The recipient would receive in the initial phase would receive rose oil and rose potpourri and a beautiful box of little chocolates. And hopefully it goes back to the wow, the wow over every other rose delivery that pre dated Roses Only.

So we you know delighted I'd like to think our recipients, such that they called their – their – the centre of the gift and – and went on about it. So we would pick up very, very quickly the recipient as a customer and have the repeat customer for customer. So – so we were getting two, you know we were killing two birds with one stone. And that's how the business grew and grew very, very quickly. It does go back to basics, it goes back to quality, customer service and – and I'd have to say bloody hard work. You know – you know so and – and at a relentless, absolute relentless pursuit of excellence. And – and improvement, constant improvement in – in our business. What can we improve, what can we, what could we do better?

JVD: So you set – I mean you set up this business essentially to escape the – the tyranny of landlords amongst other things [laughs], but has that been replaced with the tyranny of technology and the need to constantly keep up with change?

JS: Oh definitely yeah well yes and no [laughs] I'd still rather deal with the tyranny of technology. I – I think you're stuck with the landlord, because you've signed a lease and so I think it's a very, very different scenario to being able to just throw something out, explore something new. Of course you know don't tie yourself into long contracts. That's, their goal is to tie you down for as long as possible, your goal is to make it as short as possible.

RS: So since August 2014 you've been involved with Luka Chocolates, also in the gifting space. The gifting space now compared to when you first started with Roses Only, it's highly competitive, it's crowded. What do you think are the key success factors now to make sure that you are the top one or three players in the gifting space? Whatever niche you pick, be it chocolates, flowers or even luxury travel, but what do you think are the key determinants for success?

JS: I do believe the creation of a brand is where it's at, as opposed to being a generic product and generic name. Because there is a lot of – there are a lot of generic type brands out there, call it you know, I didn't invest in Chocolates Plus, I just made that name up. But I invested in people that tried very, very hard to be very measured in their approach with how they've created their brand to date – things that are packed well, beautifully presented, delivered well, where you're very, very clear about what you're selling online, again I do believe brand is – is everything.

I don't want to be in a situation that – that the next big landlord is you know the big – the biggest online landlord now would have to be Google. So again having fear of landlords I'm – I'm afraid of this big Google landlord, such that I'm more than happy to grow my business, be very, very relevant in what we do and say exactly what we do on our website, such that it does you know care of relevancy, does actually naturally rank. I think this business of SEO and trying to – to beat the system, I mean firstly basically you're in battle with – with – with – with Google and – and how many people can really appear on that first page?

JVD: Yeah it's always the challenge [laughs].

RS: James out of anyone I've spoken to, you've got the most experience in terms of negotiating with large landlords. How do you think it's going to play out with Google in the future and you know how – how do you envisage you can negotiate with Google?

JS: There's – there's no negotiating, there's – there is – there is no negotiating and it's no different to any – any large landlord. The analogy is they provide you with an opportunity to display your wares, you on a – on a 24/7 basis have to keep tendering for that spot so that you can keep showing your wares. And if you're not in that top three in Google search, you may as well not be anywhere.

RS: And this goes back to foot traffic in the train station.

JS: Well that's right. But – but – but at the same time you need to be really, really across your analytics. There is absolutely no point, you're burning cash for an – and it depends on what your – your – your situation is. I know that in my – in various businesses of ours, we look at what we need or what we're prepared to pay to acquire a customer, what our cost per acquisition can be supported, what we can support in a cost per acquisition online. And I would – there comes a point where you say well look this is just unaffordable. And – and to that point we say right well we're going to take the sum total of all these costs per acquisition and look for an alternative – look for alternative media. And – and that's what I do. And we – we and in that regard I'm also happy that I look for media where my brand is going to stand out, where you know we're on our own. We're not next to – we haven't put a whole bunch of flower shops next to each other in – in a shopping centre called Google.

JVD: Listen James that's some excellent advice that you've – you've passed on.

RS: Yeah and – and thank James, and I love that analogy between Google is the new landlord, it's – it's novel and my god is it apt.

JVD: Yeah so thank you so much for your insights and for – for sharing your experience.

JS: Alright thank you.

RS: Good on you James, good luck to you.

BREAK

RS: Great conversation, so much in there. But what I loved were the push reasons, so he didn't – he wanted to create a brand that wasn't at the mercy of the landlord.

JVD: Of the landlord that's it.

RS: And now he's going through and saying Google is the new landlord.

JVD: [Laughs] Ah-huh, yeah no and it's really interesting the way things have changed, what once seemed like liberation is now actually a different form of the controls that he was trying to escape in the first place.

RS: Yeah same issues, just through a different mechanism. The things that I took out, that laser focus on negotiating the deal, getting the right price, which makes sense, ‘cause he's in a volume game with the Roses Only, but very much focusing on quality as a – as the first priority. And also the realisation that people are only going to come back and buy again if you do get that customer service and that speed to market right.

JVD: Absolutely. Thanks so much for the conversation Rob.

RS: Thanks JV.

 

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