From Russia with decor: how an entrepreneur conquered the USA with an unusual product
Samara entrepreneur Artyom Ruzheinikov created the MiMi brand, the most popular product of which is wooden world maps. They are sold in the form of a puzzle or a ready-made decor through our own dealer network in Russia, as well as through distributors in Europe and the USA. True Puzzle maps are currently available in 32 countries. Writes about it BIZ 360.
In 2019, the founder of MiMi thought about creating new products to enter new niches. This would allow a company that produces one top product to minimize risks and increase sales.
“There was an understanding that we have a fairly strong network to sell our own products, but we need more products. So it would have turned out to increase the turnover and profit of the company. At the same time, it was important to get into the audience of our network with new products - so that they sell as well as cards, ”says Artyom.
He brought in his friend Daniil Rakhmakov, a strong analyst with experience in large companies, whose experience and approach were necessary to form a system for selecting new products. The partners formulated what they are looking for - potential top-selling hits to launch them into production.
“We have written a mission statement for the future company - to create many easy-to-use and great-looking products, making them available to millions of people around the world. There are many meanings in this formulation. Products must be in demand - this is demand, easy to use - usability, great looking - design. We have to make them available - this is the distribution model. Products are intended for millions of people - this reflects that we are not interested in sales of only hundreds or thousands of pieces, ”explains Artem Ruzheinikov.
The partners developed a selection system in which different products were ranked according to many parameters. As a result, the magnetic calendar for the refrigerator has become the leader, in which, in addition to dates, there are icons for various reminders, for example, an airplane (an upcoming trip) or a dollar icon (paying or receiving money). After a short discussion, the partners decided to immediately launch the production of magnets on the basis of the equipment available from the MiMi studio and created a new brand - Unidragon.
First failure and lessons learned
The fact that they were in a hurry with the launch of magnets into production became clear by the end of the first month of sales. It turned out that different product positioning (glider, decor, educational gift, etc.) and the launch of different advertising campaigns do not bring the desired result. Sales remained low and the cost per lead was quite high. By the end of 2019, with magnetic calendars, Artyom Ruzheinikov and Daniil Rakhmakov hoped to make a turnover of 20 million rubles. But after a month it became clear that this goal was unattainable.
“We began to ask the question, why was this product not being sold at the highest rating? And we realized that in the euphoria that gripped us, we missed an important factor - the sale test. I like the adage "You didn't lose until you gave up." Therefore, we broke rose-colored glasses, became smarter and moved on, ”analyzes Artyom Ruzheinikov.
The companions lost about a million rubles on the magnetic calendar. Then they thought about how to conduct sales tests for the selected products. At this stage, Artyom's brother, Sergei Ruzheinikov, joined the team (now Artyom Ruzheinikov owns 52% of the company, Sergei Ruzheinikov and Daniil Rakhmakov - 24% each). Sergei was one of the strongest dealers of wooden cards and sometimes suggested how the product should be changed to sell better or more expensive.
Sergey suggested for the following new products, which received a high rating in the selection system, to create lead forms - questionnaires for collecting contacts, which are "attached" to the advertising of the product. They will be tests of potential demand and potential sales.
Each product had to launch its own social media lead form. Users saw an advertisement for a product, its cost - and could, if desired, click on the "Details" button. In this case, they had to leave contact information. Then Sergei Ruzheinikov called them and explained that the goods were out of stock at the warehouse, but as soon as they appeared, the manager would contact the potential buyer. The products with the largest number of purchase orders were considered the most attractive and could be put into production.
The unexpected success of puzzles
In the summer of 2019, the Unidragon team launched lead forms for several products. One of them was wooden puzzles for adults, the parts of which were laser cut from plywood and had an unusual shape. One of the dealers pushed the founders of the brand to this product. When asked what he sells well, he answered "These are the puzzles."
“We bought several puzzles, showed them to a number of people, everyone liked it. We studied whether there are many manufacturers of such puzzles in the world. It turned out that not really, ”says Artyom.
When the lead forms were launched, the demand for puzzles was the highest. An additional argument in favor of this product was that it can be produced on the equipment of the MiMi studio - that is, additional production costs were not required.
Then work began on creating your own puzzles. Artyom and his partners bought all the samples that were on the market. It turned out that all manufacturers use the same packaging for puzzle pieces - a cardboard box with magnets. Its cost was in the region of 200-250 rubles, which was quite expensive for a new product.
“We began to contact the manufacturers of these boxes in late August and early September 2019. Chinese companies had a long delivery time. Russian manufacturers said their delivery times would increase every day as they are already starting to process orders for the new year. And since we had not started sales yet, we did not understand how many pieces of packaging should be ordered at the first stage - 500, 1000 or 10000, ”says Artyom Ruzheinikov.
At the same time, he learned about a Samara manufacturer who made similar boxes from plywood. Their disadvantage compared to competitors was more weight and not a very convenient design. This gave the founders of Unidragon the idea that they themselves could produce a box based on the production of cards. It was made from a lighter material - HDF, and it differed in its appearance from everything that was on the market.
“So we started to produce an inexpensive box and could not depend on any manufacturers. Plus, thanks to the design, they began to favorably distinguish themselves from competitors, ”analyzes Artyom.
More than 20 types of paper and 10 types of wooden materials were tested to understand what to make puzzles from. At first, printing on paper was ordered from other companies. When in December 2019 the bill for printing services was approaching a million rubles, they decided to buy their own printer. It cost the same million rubles.
The production of wooden puzzles was first launched in the workshop of the MiMi studio. But soon it had to expand - to hire additional people, rent new areas for a warehouse and new equipment. These transformations were required due to the volume of sales. In the first two weeks of the first month of sales - in September 2019 - 300 puzzles were sold. And almost immediately, the production ceased to cope with the number of orders. In November, 4 puzzles were already released and sold. Wooden puzzles Unidragon cost 1990 and 2990 rubles - depending on the size.
“We have invested about 25 million rubles in production, some of which are my savings. Previously, the production had 17 employees, now 42. We have increased the number of lasers from 3 to 13 pieces. Our own retail turnover has grown dramatically: already in February 2020 it amounted to 1 million rubles a day, ”notes Artyom Ruzheinikov.
Entering the markets of other countries
The founders of Unidragon immediately aimed not only at Russia, but also at the markets of other countries. Firstly, with the cost of puzzles in rubles, it was extremely profitable to export and sell them in euros or dollars. Second, due to the small number of competitors in the US and Europe, it was relatively quick and easy to conquer new markets.
Initially, Unidragon launched sales in Europe. But the first buyers after receiving their parcels from Russia received customs payments. With a puzzle cost of 50 euros, the payment from customs was 34 euros. Of course, the buyers didn't like it. It turned out that puzzles must first be cleared through customs in Europe, so that they can then be safely sold without additional duties for the buyer.
The founders of the project thought that they needed to open a company in the USA or Europe. In this case, you would not have to pay customs duties. When studying the issue, it turned out that the most suitable option would be to register a legal entity in Ireland.
“Ireland is a member state of the European Union that can trade in Europe and the United States. Plus, Ireland has a small income tax (12,5%), you can get tax deductions in the first years of the project's existence, ”explains Artyom Ruzheinikov.
Buyers of Unidragon wooden puzzles abroad are adults, as it is rather difficult for children to assemble a picture. In Sweden, retirees most often order puzzles. In the first month, Amazon managed to sell products worth 27 thousand dollars.
The crisis was good
With the onset of the coronavirus epidemic, the demand for Unidragon jigsaw puzzles in the United States has grown significantly. Because of the quarantine, many people ended up at home, and in order to keep themselves occupied, they began to order puzzles. Sales of the project through Amazon grew to $ 2500, and then to $ 6000 per day.
Even when Amazon temporarily suspended shipping of non-essential goods, the Unidragon founders found a way out. They began to actively develop their own English-language website for US sales. Now products are supplied to this country through logistics companies that have their own warehouses. “About 75% of all US sales are realized through our website,” notes Artyom Ruzheinikov.
According to him, Unidragon is currently using several traffic channels in the US: Google Shopping, Facebook, Amazon organic search, paid advertising on the same marketplace. It also helped in sales that several local sites wrote about the company from Samara.
Once the entertainment portal 9gag.com published a video about assembling Unidragon puzzles. This video has received more than 5 thousand likes on the resource. The day after publication, Unidragon received orders from 17 countries.
The project has now received an interview offer from Business Insider, one of the leading online business news outlets in the world.
Artyom Ruzheinikov admits that the crisis was good for Unidragon. It allowed to get closer to competitors who entered the puzzle market earlier than the Samara company. The project has diversified in the USA and uses several sales channels instead of one.
“In Russia, we sell about 20% of our US sales (in pieces). From the point of view of the project development strategy, it is more profitable for us to sell all products in the USA. Puzzles, which cost 2990 rubles in Russia, are sold for $ 79 in the United States - almost twice as much, ”explains Artyom.
The founders of Unidragon assume that the Russian market for their project will become less attractive in the near future due to its decline.
“Now it is just starting to fall, and this is not a peak at all. Many people think that as soon as people come out of self-isolation, everything will work out. But this is not the case. In our opinion, things will only get worse. The number of non-redemptions will grow, and the cost per lead will go up, if we talk about our company, ”notes Artyom Ruzheinikov.
In addition to increasing sales in the United States, entrepreneurs plan to strengthen the project's presence in Europe and enter the Japanese market. The first sales tests will start there soon.
“This year our big goal is to overtake the world leader in wooden puzzles. It is the American company Liberty Puzzles, whose annual turnover is about $ 9,9 million, "admits Artem.
Next year, the Unidragon project plans to try its hand at cardboard puzzles, the market for which is incomparably larger than wooden ones. For comparison - last year the turnover of the world leader in cardboard puzzles, the German company Ravensburger, amounted to 524 million euros. At the same time, there is still no strong brand focused on online sales in this niche.
“We have interesting solutions and new approaches in development and marketing. In addition, the army of our "fans" subscribed to our groups and mailing lists has already exceeded 100 people. And the total coverage around the world is already more than 000 million people, and we know how to increase it. With proper investment, an excellent product and the right strategy, I believe we can achieve a turnover of 10 million euros with cardboard puzzles and even more, ”says Artyom Ruzheinikov.
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