In 2010 Farid Garipov decided to launch an online shop to sell office furniture. He then opened further 42 identical e-shops in other regions. His business took off so well that he chose to stop his own production and to open online retailers offering other types of goods. He therefore set up web-stores selling air rafts, cross bows, children’s playgrounds – 50 various goods altogether. Currently, 6,000 online shops generate for Toruda (which is an abbreviation for e-commerce) RUR 180 million ($ 3.1 million) per annum. It is anticipated the number of the virtual stores will further grow to reach 12,000. How has Farid Garipov managed to become a captain of e-commerce?
Farid Garipov used to be director of a small furniture manufacturer in Izhevsk, numbering merely 15 employees. When the 2008 financial crisis stroke, the company lost 80% in sales and the business owners came to consider an option of abandoning it. Since long, Garipov had thought of buying a stake in the company. In 2009 he bought it all for RUR 3 million ($ 100,000) having invested RUR 1.5 million of his own savings and having undertaken to repay the rest under a loan agreement.
“I had no clear idea of the direction to follow”, Garipov recalls. “To cut costs, we shifted our production from the rented facilities to four hardly heated garages of 250 square feet each. To end the negative profit situation, we had to come up with some new idea”.
Our major customers were companies looking for some office furniture to buy. To maintain a regular flow of orders, it was necessary to build up and keep personal relationships with corporate executives.
“A business built on kickbacks, personal contacts and joint partying was quite tiring for me though”, the businessman says.
So Garipov set up a retail shop to sell computer desk chairs to private individuals. To support the retail sales, he also launched an online shop. Additional investments reached further RUR 200,000 ($ 6,500) but started to generate new orders.
Some day Garipov was checking online calculator of a logistics company to see its fee for shipping a chair to some other town. It was RUR 300.
“I remember I could hardly sleep that night thinking of the way to sell and ship our chair to Novosibirsk”.
Next morning Garipov gathered all his eight employees in a garage and announced the company would launch nation-wide operations. The employees were all handymen and each one could make and assemble a piece of furniture, deliver it to a customer and do the paperwork. But the character of work was becoming much different now. Garipov decided there should be 42 new web-shops selling computer desk chairs in selected regions. For each region, a webpage was in a separate domain. Phone calls to the numbers on those webpages were referred to the company phones in Izhevsk. Pickup points of logistics companies were indicated as addresses of local shops.
“If a retailer appears to be local, it is a double benefit as the customers have more trust in local companies while search engines put them on priority positions”, Garipov explains his strategy.
Websites for online stores were designed and put together by Garipov’s schoolmate. The costs were RUR 700,000. Nowadays, 95% of Toruda websites are inhouse production. The schoolmate also explained that being on top positions requires search engine optimization.
“As he said, optimization results may be seen in a year, but that did not embarrass me”.
For each key request which was expected to be on a top position, high quality content was required and hence texters were employed. Garipov did not specifically pay for any webpages or products promotion.
The work on building websites was launched in March 2010. In June, they were put in operation, but generated their very first sales in December only. The revenue was merely RUR 200,000. At that same time corporate customers in Izhevsk usually placed five to ten orders a month for an aggregate amount of about RUR 1 million ($35,000) with retail sales generating further RUR 400,000.
The online orders augmented every month so it was clear it was a promising business. A year later, the very same 42 online shops ensured a RUR 2 million turnover. So Garipov decided to expand his business and set more e-commerce stores. The next web-store was aimed at selling office furniture (executive office and office sofas). That time, online shops were opened for 100 cities simultaneously. Later, the number grew to 123 to include all regional capitals, all cities with population over 250,000, nine cities in Kazakhstan, six cities in Belarus, Yerevan in Armenia and Bishkek in Kyrgyzstan. The RUR 1 million order for the websites design was received by Garipov’s schoolmate. Besides, special copywriters and content managers were hired to look after the goods presentation on the websites.
In 2012 Garipov abandoned his retail shops and furniture production in Izhevsk since the online sales kept growing and it was getting hard to ensure high quality supply. He then became a dealer for furniture manufacturers in Izhevsk and other cities, with his margin averaging 100%. He also stopped direct office furniture sales to legal entities.
“I felt a great relief when I realized that I do not need to maintain personal relationships with corporate customers and have regular parties with them”, he tells.
Earlier, the company had phone calls with requests to send an employee to make the measurements. There was no service like that any longer. Besides, there were no grace periods, or discounts, or finished furniture at the warehouses. Customers now had to make all measurements by themselves and wait a week for the order delivery. With such an approach, some of the long-standing customers were gone.
“But I got a great deal of new customers from other regions instead”, Garipov says.
“Once we learnt doing business in the web, attracting customers with no additional costs, dealing with them online, presenting our products properly to stimulate demand, shipping our goods swiftly and carefully to any location within the Customs Union, I realized that I am capable of selling any products whatsoever”, Farid Garipov tells.
In 2012 our virtual stores generated turnover of RUR 35 million ($ 1.2 million) and sales grew 15-fold within a year. In 2013 our company found new niches in the market and launched sales of street lighting, quadcopters, children’s furniture and outdoor playgrounds on new 100 e-commerce sites each. The trade reached RUR 53 million. Inspired by that success, we opened a large web-store House and Cottage Interiors where we started selling various types of goods. To advance the project, we invested several million rubles, but got no sizeable profits in return. Our another experiment was 500 Sofas webstore, but nobody wanted to buy sofas online without first seeing and touching them. As a result, the revenue growth slowed down reaching RUR 81 million in 2014 and RUR 95 million ($1.5 million) in 2015.
Garipov then realized it is quite rare that a customer is looking for several goods at once and that as a rule needs one good only. So after the unsuccessful experiments he started to set online stores of very narrow specialization, selling, for example, just bows and arbalests, or inflatable boats only, or nothing but home exercise equipment.
Toruda got its current name three years ago. It now operates 60 e-commerce platforms in 100 cities, which means 6,000 web-stores in the aggregate. Its online stores are also present in Kazakhstan, Belarus, Armenia, and Kyrgyzstan. This year, online shops selling moonshine stills were launched in the US and the UK.
The company currently has 76 employees, most of them office staff. Earlier, cargoes were delivered by transportation companies. A fee of such a delivery in Moscow ranges RUR 600 to 1,500. Once the aggregate costs of deliveries exceeded RUR 100,000 a month, a decision was made to buy a company vehicle and to hire a driver. Now, there are two company owned vehicles operated in Moscow, one in Yekaterinburg and one in Izhevsk.
To withstand competition and cut advertizing budgets, it was initially planned that Toruda’s SEO department analyses its competitors in every goods category, regularly monitors the markets and finds new search requests. After that, 17 ad writers write articles for the web stores, for every search request.
Garipov incessantly looks for reliable suppliers for his online shops.
“Almost weekly I travel to Moscow to visit special exhibitions where high quality goods for the existing and prospect virtual stores may be found”, he says.
Most goods sold by Toruda are manufactured in Russia. It takes about six months before a newly launched e-commerce site can start its robust functioning. To manage its online trade, Toruda uses CMS system NetCat where all orders and details of the customers are kept.
The company does have certain problems, though. More than half of the calls to the web stores are currently missed as the employees can not handle the traffic.
“There always is a weak point somewhere. At times, we lack content managers, or advertizing copywriters, or client consultants”, Garipov explains.
In 2016 the sales of the company reached RUR 111 million and are approaching RUR 180 million this year. Farid Garipov nevertheless plans to start selling 60 new goods more and thus bring the number of his online stores to 12,000.