According to the BusinesStat survey, in 2019, more than 2.16 bln cut flowers will be sold in Russia, which is 23.1% more than in the pre-crisis year 2014. Imports account for more than 90% of the Russian flower market. The MFlowers startup platform effectively connects foreign flower plantations with Russian wholesalers, planning to expand around the world. Sergei Mudretsov, co-founder and CEO of MFlowers, spoke with Invest Foresight about the idea of the project, its operation and the flower market specifics.
A platform for all
MFlowers is a global B2B platform that connects producers and wholesalers of floral and plant products ruling out intermediaries; it also provides a comprehensive financial guarantee of trading operations and logistics services. The service was launched in 2016 by Economics students of Plekhanov University of Economics Sergei Mudretsov and Nikita Beigul. MFlowers disrupts the conventional format of flower deals via Skype and Excel spreadsheets: transactions on the platform are conducted automatically, and suppliers are provided with a stock accounting system. The online platform users effortlessly purchase a wholesale batch of flowers by picking a plantation, the desired items and quantity. The system assists in organizing the delivery of the products ordered and provides a financial guarantee for the transaction. In other words, it offers the fullest list of services required by the market.
Buyers and sellers cooperate directly, which saves them time and money. Logistic operators are also connected to the platform, and can independently contact the consignees and set freight rates. The company is focused on small and medium-sized customers – retail chains of any level, retail stores and floristic companies.
An idea prompted by customer needs
Previously, Sergei Mudretsov developed e-commerce projects to order. As a freshman, he also had a job as a manager at a company importing floral and plant products to Russia. Once promoted to head of regional sales, he began working in close contact with the customers. He used that position to assess their needs – they wanted to buy flowers in bulk on their own and control all the transaction processes avoiding a large number of intermediaries. Therefore, after six months, he had an idea to create a digital product – an online platform connecting plantations from around the world with customers who will make direct purchases, pay for them and coordinate their orders. Nikita Beigul was engaged in digital marketing in his own company which is still in business. The two founders began to generate hypotheses and test business models. According to Mudretsov, they had a fear common for all new business leaders: that they would build something useless, for which there would be no demand. Therefore, even before the official launch, they held consultations with potential clients about the idea and got feedback; the business model turned out to be promising and functional.
According to Mudretsov, the flower market is quite conservative, which is a problem for both sellers and buyers. Wanting to minimize their costs and efforts, increase the speed and frequency of transactions, as well as profitability, customers are turning to new digital solutions. Therefore, for the MFlowers team, a conservative market is both a disadvantage and an advantage, he said. In a rapidly changing market environment, suppliers and customers realize that an online platform is necessary for successful operation and development.
The startup founders spent their savings of about $20,000 for the product development. First orders were processed manually; seeking responsible technical specialists was the most difficult task at the initial stage of the company’s development. Their absence among the founders led to large initial cash investment. Developers were sought everywhere – in universities and recruitment websites, but the word-of-mouth method proved the most efficient, with the employer receiving am honest opinion about the candidate regarding his working skills and gets an idea of a person’s worth.
Startup enters active growth phase
In 2017, the MFlowers platform was already producing profit, although at a minimum level. Mudretsov and his business partner were aware that their own finances were not enough for the company’s expanding and development, and investments were required. In the summer of 2018, Samara’s YellowRockets venture fund made investments in the startup, and the company TechSensor joined the deal as a strategic partner. The total investments amounted to RUR 2 mio ($30,000). From then, the project received new opportunities for further development and expanding.
Currently, the company employs 16 people – developers, marketing experts, and the sales office. Most employees work at the office. Previously, the company founders saw remote working in a positive light, but now they lean toward the traditional method of work. They believe that having the key members of the team together in one place increases the labor productivity and makes for fast solutions and instant feedback.
In 2018, the startup made top ten of the most promising projects at the Russian Venture Forum in Kazan and InnoWeek in Tyumen, and in April 2018, the project ranked second in the Russian digital leadership program Preactum, which aims at developing the business community. In the past few months, the company has shown a progressive growth dynamics, with revenue increasing by 70% in September and by 100% in October. The company founders plan to keep the dynamics and preferably to boost it. In October, the startup’s revenues were about $11,000 (RUR 737,000), with 12% of this amount being the service fee, which shows a quick turnover of the invested money.
As of early November, the platform had over 200 registered costumers, producers and carrier companies from the Netherlands, Ecuador, Colombia, Kenya, and Russia. Soon the company plans to expand its presence in the Russian market. while the goals for 2019 include testing the product in the European, Arab and US markets, with the existing demand for it and a similar purchase model. The main task is to create a global ecosystem that would satisfy customers’ major demands.
Mudretsov believes that hard work and persistence are the main things that make a successful businessman. Emerging obstacles can be easily overcome if one clearly sees the goal. It is important to spend the time efficiently and take every effort to achieve clearly set strategic plans.
By Christina Firsova