Nikita Shilovsky, Fadu Drum: ‘We don't pay off at all, in the red — on international market’

“Although there is an opportunity to go fraudulently, but this is not a mass story”

What has changed since the end of February?

Nothing has changed in terms of production. The only thing is that metal has slightly fallen in price. But since we order 5 tonnes each, this difference is not tangible. For us to feel it, we need to order 100-200 tonnes. Paint has gone up in price because it came from Poland. It has risen in price significantly, two times. In terms of shipping almost nothing has changed, although at first we could not send parcels to the south. It was not possible to deliver orders to Krasnodar Krai for 3-4 weeks.

The biggest problem is advertising, it's finding customers. What was good about Instagram* is that it has a very solvent audience. It is created for beautiful photos, it is a social network — like a showcase in an expensive jewelry store, everything looks attractive in it. Accordingly, people there like to buy online, they have money. Its algorithms know their users very well and can easily find customers, no matter what a person sells. The service will even automatically find an audience, you don't need to think too much, customers themselves come like bees to honey.

What about sales abroad?

We sold mainly in Russia, less often abroad. We didn't have many such sales, there have been about 50 parcels for all time, and all to Russian-speaking citizens. After we gained a little foothold in the Russian market, we tried to enter the international market. We had a foreign profile, advertising for foreigners. But then we postponed this topic, and now, of course, it is even more difficult with it.

At the moment, in order to sell abroad, you need to register a legal entity. Albert (co-owner of the business — editor's note) went to Armenia for 2 weeks for this. Previously, when the company was registered as an individual entrepreneur, it was possible to accept payment to a Russian account. First, now there is no such possibility, second, the cost of delivery has increased, and third — taxes from Europe. Some countries have taken a very tough approach to this, such as Turkey. Now, in order to clear products from abroad, you need to pay 100% of the cost.

Since the beginning of the special operation, there has been only one sale abroad, but this is a Russian-speaking user. Most likely, he came from an old advertisement or from an advertisement of bloggers. One Frenchman wrote, he tried to pay through the website. I saw his application on the website, contacted him. He said it was expensive. I think that if there was a terminal, he would have purchased the goods.

It has become unprofitable to sell to other countries now, we have already invested a lot of money in this. We do not pay off at all, in the international market — in the red. At the moment, the task for us is to establish stable sales.

Although there is an opportunity to go fraudulently, but this is not a mass story. You can specify the cost of the product at $10, it will work out a couple of times. Then they will just see that a drum costs $200, and the customer will have to pay 200 for the drum, 75 for delivery, and another 275 to clear customs. Therefore, it is very difficult with the international market.

What we are doing is irrational. We are trying to register everything legally, to do the technical part. It is very important for us to install a payment terminal so that one could pay with any card. This is also a problem. That is, even if Instagram* is unblocked, this is half the battle. Advertising doesn't work right now anyway. This won't solve the problem. It is necessary to unblock, to return advertising, to return monetisation. Then it will be possible.

What is the difference between sales in Russia and abroad?

The site is important on the international market, there is no way without it. That's the difference. If Instagram* was blocked in any other country, for example, in Germany, the Germans would say the hell with it. Because the Germans don't use it, they don't need it.

Russian users occupy the top 5 on Instagram*. It includes Russia, Turkey, America, Brazil and Indonesia. That is, in Russia they just love it. By the way, blocking proved it, everyone continued to use it anyway. Absolutely all my friends continue to post stories every day. Everyone has installed a VPN and continues to use it. No one is confused by lags, everyone continues to use it.

We have only bloggers left, then we ake advantage of the background from advertising

How are things with advertising?

The biggest problem for small businesses in this situation is still advertising. I noticed that when it all started, people started switching to VKontakte, Odnoklassniki, Telegram. There have already appeared a lot of specialists who will help to promote in VK. Bloggers have become more in demand because there is simply no advertising. But I see that all this is unprofitable.

Bloggers are asking for a cost 4 times more expensive than we can afford to invest in a client, this is a lottery. After the start of the special operation, we ordered advertising from about 20 bloggers. Only one took off. It was only thanks to this advertisement that we generally paid back all previous expenses on it. It's all unstable and unprofitable. The machine works better. What's the logic? You're flipping through stories, you can watch five or six ads in 10 minutes. That's why it's cheap.

We have been doing business for 1,5 years. Instagram* helped us just instantly take up, with a snap of the fingers. They put money there, and it went with some kind of geometric progression. We were in the red for two months, because the money was in metal, and that's it. Then, with advertising, everything immediately began to pay off.

Why didn't you like advertising in VKontakte?

We, like everyone else, went to VKontakte, created a community and invested money there. We spent 350 thousand on advertising there. Not too much, but it didn't pay off. There was such a suspicion that when we started advertising on VKontakte, our percentage of sales on marketplaces changed a little. If before that we had 70/30%, now it has become 65/35%. As if the audience from VKontakte is buying on marketplaces, there is such a possibility. It's still very expensive, and we abandoned the idea of advertising VKontakte.

What are the options for advertising?

We want to continue working on Facebook*, because it is interesting, and there is an influx, clicks, likes, people write, visit the site. We like it, but it's not profitable yet. So far, these are just investments in nowhere, just to develop your personal skill.

A click is more expensive — I don't know why. Subscriptions have become more expensive, shipments have become more expensive, additional taxes, fees, problems with receiving money, endless commissions again. We opened an LLC in Armenia, but this has its own difficulties, so in September we will reopen a legal entity in Kazakhstan. We will pay a tax there, a tax here, a commission there for some acquiring, there are only two in the world that can work with us. It is a problem. If you have only two acquiring companies in the world that can work with you, then they have no competition, they inflate tariffs.

To advertise abroad, you need acquaintances, friends, people who will guarantee that they will not cheat. One of the options is to arrange everything yourself in Georgia, Armenia or Kazakhstan, but at the moment, it is indecently expensive, and a huge bundle of documents is needed. In general, we need an international card, international connections.

However, advertising, thus, work worse than before. I do not know why. Maybe something has changed this year. Still, advertising gets more expensive every year. But now it seems like it has become unrealistically more expensive.

But it is a quite strange situation with foreigners. We can get only 10 subscriptions for advertising in a day, but then we will look at the site statistics and see that 100 people visited the site in a day. That is, people from abroad do not want to subscribe to stores on Instagram*. They immediately go to the site and see what's there.

In Russia, people buy a lot on Instagram*, there is less of this abroad. They rely on a website, on some marketplaces, on services that they have been using for a long time. Because it's been built there for a long time there, but not in our country. Ozon has appeared recently, Wildberries 10 years ago. In general, not so long ago people started ordering something on the Internet, in the mass sense. Mostly young people are engaged in this. And then the coronavirus affected it.

From advertising, we have only bloggers left, then we go to the background, which we have already developed. We've just managed to get into some kind of top in the niche. We still have advertising on Yandex, but it is passive. We spend about 10 thousand rubles a month on it. This is on request. If you enter “buy a glucophone” in the search engine, our product will be in the top. These are targeted requests, we work through them. This cannot be called advertising.

Yandex has high engagement, high conversion rate. A person initially knows what he is looking for. But we can't sell it to new people, but we could on Instagram*. No one knows our product, 70% of buyers see this thing for the first time at all. Even if it's the first time they see it, Instagram* somehow manages to find these people. Other platforms can't give that.

Instagram* was like Harry Potter's wand. You don't have a wand, and you're nobody. For small businesses, this was the starting point.

We treat it now in such a way that if an unblocking happens, then we will already survive everything. We cannot grow in sales, we are only falling. The only thing is that we can maintain a minimum level. We are fighting for it now.