Farmgirl Flowers Founder Sees Resilience Amid Fuel Cost, AI Uncertainty

0:02 Bloomberg Audio Studios. Podcasts.

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0:08 You're listening to Bloomberg Business Week with Carol Masser and Tim Stenevek on Bloomberg Radio.

0:15 We are surrounded by flowers because she is back. She's a go-to for us a couple times a year. She's a great gauge, not just on the American consumer market, but also on small business and really understanding what it takes to bootstrap and run a business in this country and this environment.

0:31 She is a fave. We're just going to put it out and lay it out for you.

0:33 Christina Stembel is CEO of farm girl flowers, founder of it.

0:37 She bootstrapped this company.

0:38 We, I feel like have been with you through a lot of different business cycles, um, and momentum.

0:44 How are you? First of all, and how's, how are things going?

0:47 Good.

0:47 I'm great. Um, yeah, I, I feel like I come out, you've been with me on this journey for so long. I appreciate it so much. Um, And I come on and I'm always like, oh my gosh, this is going on and this is going on. And we do have some things going on this year. But I think the thing I've learned the most, I'm going to turn 16, or Farm Girl's going to turn 16 November 7th, is that we can get through it. We can get through it.

1:09 So I'm coming here with some more optimism this time. But yeah, things are going. The economy affects us all, small businesses as well. And yeah, but we're getting through it.

1:20 Just to contextualize for our viewers and for our listeners, What numbers can you share with us about the size and scope of your business?

1:27 Yeah, I can share anything because I'm bootstrapped, like you said.

1:30 Yeah, you're the boss.

1:31 Okay, so really revenues, for example.

1:33 Yeah, we are just running a flat year. So again, $ 34, $ 35 million. We're happy with that, which feels weird to say we're happy to run a static year. But given everything that's going on with fuel surcharges and... aeo changes that have like impacted traffic organic and paid traffic so much in the last few months um we are just going to get through this year being happy to stay the same aeo means yeah it's everything.

1:56 You see engine optimization.

1:58 Yeah so it's all the you know when you now search for anything you have all of those ai overviews and summaries that you read now yeah so that changed completely there was three really two major updates that google ran in the last few months that changed the way that search is handled um online just to say it kind of like you know, rudimentarily, you know.

2:17 Like it's worse. Yeah.

2:18 Like overnight, you know, the average, I think it's 44% of businesses traffic went down. Ours is at about 21% year over year right now, we're doing everything we can to get it back up. So, you know, we really like kind of felt like we had mastered as much as we could master anything as a small business, um, SEO.

2:35 And then overnight, the things that made you good with SEO made you look like spam to AEO. And so you have to change everything overnight. And while your traffic takes a dive. At the same time this year, we have huge fuel surcharges, like huge. Can you?

2:51 Yeah.

2:52 This year we will end spending over $ 2 million more on outbound transportation. So like FedEx, UPS, all the companies that we ship with, you know, the regional carriers as well. That's real money. Real money. And it's understandable. I mean, the fuel prices have gone up, right? They can't absorb that either.

3:07 Right.

3:07 I would like to ask for more regulations like the railroads have. So a surcharge is actually just a surcharge and not a moneymaker. But that's a whole other story for another day probably when you can have me on for a half hour at least. But that means we're shipping less packages this year and we're shipping closer distances.

3:24 So we've been working for years to try to open more distribution, to change our distribution to get closer to the end consumer, meaning opening more distribution centers, partner facilities.

3:31 Right.

3:33 We did that so we can ship closer. So our zones can go down from a six to a five to a four. That's what you're trying to do when you're shipping products. so we did that thankfully we were, I was just talking about how we were profitable last year and I was feeling so good.

3:45 Okay.

3:45 So we're not, we're, we're going to run flat this year. We're not going to be very profitable. Um, we're just trying to break even because when you're spending $ 2 million more on fuel at the same time, your traffic declines by 21%. That's not a good, it's hard.

3:58 You can't pass along those costs to the end consumer.

4:01 You can't say, we've had two price increases, but.

4:04 Are the price increases like their overall price increases for a bouquet? Or is it when you're going to shipping saying, Hey guys, Uh, fuel has gotten more expensive. We're getting these fuel surcharges.

4:13 We can't do that.

4:14 So we have to absorb it in the price of the products. We already charged $ 25, which we've done focus groups and that's the highest we.

4:19 Can charge $ 25 for shipping and we pay around, you know, 34 to $ 36 for shipping a box. So you're losing.

4:27 So the price you pay for shipping does not cover the shipping cost.

4:30 No, not at all. But you add to the product price, right? So we've raised the prices, but we can't absorb it all. If we did that, we would go out of business. We can't compete.

4:38 It's so true because I will say as a consumer who does ships, like I will look in the delivery, like if you went to 35, 40 bucks.

4:44 It would probably make me like, I gotta go find somewhere else.

4:47 No one would do it.

4:47 Yeah, exactly. What about in terms of your, we've talked to you about supply chain, how like.

4:53 Flowers are more expensive because inbound transportation costs more as well. So flowers have gone up in price too considerably. So like, and in a very short amount of time. So it's hard to do, you know, like the ideal situation would be everybody would absorb a little bit, right? But I, it seems to me, and I'm not an expert at all things, obviously, but it seems to me that B2Bs don't absorb it, but B2Cs have to, is what it seems like. So- Almost everything gets passed on to you as the business that's going to sell to the consumer.

5:21 But all the B2Bs before that, they're passing it on to you. So it would work better in my utopian business world if everybody would be like, I'm going to take 10%. I'm going to take 10%. I'm going to take 10%.

5:33 I want to go back to shipping because the logistics part of this is just, I know it's a huge challenge, but do you have, like, are you shipping with UPS or are you shipping with FedEx? Both.

5:41 Both and some regional carriers.

5:42 And regional carriers. And you, ostensibly, they should have reps who you meet with and they cannot do anything to budge on the price.

5:50 I mean, one of them, and, you know, we're up to sign a contract right now, so I'm going to be careful what I say. One of them is working with us much more than the other one right now. So we will be moving more to another one.

6:00 Okay.

6:01 Maybe all of ours to one soon in the next couple of weeks. If you're listening, please let us sign that. The other one is not being very helpful right now. And, you know, I do think when I get five seconds at one time, I would like to write a bill. So, and come on here and try to get some support for it. Where, you know, the railroads have, there's, you know, governing bodies that make you, that transparency be there on how much they're making on the surcharges. And so, Reuters did a thing on $ 91 million that was made in profit, not in surcharges for the railroads. And I think that we should have that for every. company like that. So just like, if it's a surcharge, I understand it. Just make it a surcharge, not a profit center for the company. So,

6:41 and I can't, I don't know. There's no, it might be, they might be running it that way. I just don't know because you don't see it.

6:47 Well, speak to, you know, how you feel like your representation when it comes to policies, whether at the state level or really at the federal level, like, do you feel like small businesses are really heard?

6:57 No, not at all, at all. I wish they were. I mean, we all know, I mean, lobbyists run, you know, like it's in small businesses, you know, notoriously do not have money to pay for that, to get the support that we need to be heard. So, I mean, you know, I don't know if that's going to change. I tried to get on a small business council in California when we were in California and got nowhere with it. And the people that were put on it were all, you know, startups that had, you know, hundreds of millions of dollars investment.

7:21 And I'm like, that's not a small business. Come on. You know, like we have 200 wage level employees. Like, how would you not want us on there?

7:26 Christina, what do you say when we constantly remind everybody about small business being the backbone of the U.S.

7:30 Economy?

7:31 We just did a big event just outside Atlanta, JPMorgan Chase and banking and all.

7:37 That small business.

7:37 She would not have qualified because her revenue exceeds $ 20 million.

7:40 Right, they go up to $ 20 million.

7:41 So she wouldn't necessarily be considered, at least for these purposes, one of these small businesses.

7:45 But reminded how important this is in terms of economic growth. And yet the representation doesn't always seem to be there.

7:51 It's not even like we moved to Washington state and I feel like we brought a lot of California with us. I'm sorry, Washingtonians for that. Um, you know, there's like highest, you know, minimum wages and, you know, salaries now, you know, highest salaries in the country are there. And it's like, all these restaurants I see that are not, you know, they're doing a million or 2 million at most, or could be three or 400,000. And they're trying to pay, you know, the, the minimum salary of, you know, $ 85, 000 for an employee, you know, or 82,000 for an employee.

8:16 Like you, the consumers have to then pay more, which they're not going to pay that, then they're not going to go there. You know, I don't know the solve for this other than to actually get some businesses together and actually care, you know, like to get them together and say, how is this going to impact you before I make this law?

8:32 We had this moment with Christina years ago, Carol, that in hindsight, in retrospect, just seems so quaint. You came on our program, and this was in the early innings of AI. And you said, oh, we're using AI. We have this button in our program that says make it nicer. And what it does is it makes it so you're happy.

8:49 Good memory.

8:50 And we were like, oh, my God. Wow. That's amazing that this AI can do this. And it's like now it's like that's the most elementary thing you could even imagine. And this was like three or four years ago. Yeah. How are you using AI now?

9:03 Yeah.

9:04 Blow our minds now.

9:05 Totally.

9:05 Okay. Um, that I have so many moments like that too. Um, yeah, yeah.

9:11 AI, we are, um, we are very simple people.

9:14 We're still making it nicer, but so AI is, um, we are definitely using in ways that make us more efficient and coding and, you know, a lot of our coding, all the same ways that most companies are.

9:25 And it does help. It does help.

9:28 We saved $ 350, 000 in not hiring some more engineers that we had opened.

9:32 In not hiring.

9:33 In not hiring.

9:33 So it allows you to reduce headcount.

9:34 Yes, reduce headcount. On the other side, and this is the part... I just wrote an op-ed that I've not placed yet, but if anybody would like it, about this. Because the thing that's not... I'm waiting to see this reported on. It's all like, oh, the way is that it's helping. There's an and. The and is... We had to freeze every other job as well at the company because of the AO changes that have made us lose 21% of our traffic So everything that we're doing right now is to like, literally the, the, the savings are 350,000.

10:03 It's cost us millions and tens of millions of dollars in traffic and lost sales where I'm like, the end is everything we're doing to fix it. I am writing, this is going to blow your mind. What I spend my day doing right now, four to six hours a day, I'm writing for robots, for bots. I'm writing for the computers to scrape. I am writing blogs every day. I am writing everything for scrapability to get traffic back up.

10:32 And I'm like, this is not what I should be doing, writing for four to six hours a day per scrapability.

10:37 Go ahead, Carol.

10:39 We have 45.

10:39 Sorry.

10:40 No, Carol.

10:41 Well, are the.

10:43 The large language model. Are any of those folks helpful?

10:46 Uh, no. I mean, I, I, you know, I think like what we've all said, like it's, it's about money and we're a drop in the bucket. There's nothing, you know, I'm sure that some, the company, you know, overall, every company has lost a lot of traffic and there's ginormous companies that have lost a lot of traffic and I'm sure they're talking to them, but a $ 35 million company isn't going to rise to the top.