How I glued cardboard and sold it on marketplaces for 50 million a year
DISCLAIMER: The article was written based on an interview with the co-founder of the production of scratching posts K. Pozdnyakov in St. Petersburg.
In 2020, my employer began to squeeze me under the terms, I took the team, rented a warehouse and launched my own production of scratching posts. It would seem nothing complicated: you buy glue, cardboard, and find people who are ready to repeat the same operation 5,000 times a day. But there are nuances.
Cost of a cardboard scratching post
Cardboard – 183 ₽
A matryoshka doll is cut out from 5 scratching posts in 1 sheet of cardboard. 1 sheet costs about 11 rubles. We seem to have a lot of forests, but for some reason the price of cardboard varies greatly from a dollar (+10 ₽ for 2 weeks – easy.)
To get 5 finished scratching posts, you will need 83 sheets of cardboard. This is 83*11 ₽/5pcs. = 183 ₽.
Glue – 38 ₽
Assembly work – 65 ₽
Then the employee repeats the operation of gluing the cardboard 83 times.
To the finished structure we glue the rims (37 ₽), thrust bearings (4 ₽), and a logo sticker (4 ₽).
Wrap it in film (8 ₽), put it in a box (30 ₽)
Production of scratching posts from scratch
To open our own production, my partner and I needed a million rubles. Which we didn’t see again for the next year.
Equipment of the premises and deposit to the landlord – 88,000 ₽
It seems that a scratching post can be assembled both at home and in the garage, but the reality is a little different.
– A special feature of cardboard is its sensitivity to temperature and humidity. If the humidity is high, then the glue does not dry, and when wet cardboard enters a dry room, it goes in a “wave”
– Cardboard and the scratching posts themselves take up a lot of space.
Therefore, we decided to start immediately by renting a workshop.
Purchase of cardboard – 220,000 ₽
The cardboard factory has a minimum order, so this money needs to be prepared at the start. This is not a whim of cardboard manufacturers, it is a feature of the production process.
How is three-layer cardboard produced? A roll of cellulose is laid out, then a corrugated sheet, then another roll of cellulose. The roll goes along the production line. It is not profitable for the plant to stop the conveyor in order to cut off a piece for you from a full roll. This entire roll, approximately 500 sq. m of cutting, and there is your minimum order. There may be 20,000 sheets (220,000 rubles) or 40,000 sheets (440,000 rubles), we took 20,000 sheets.
Of course, you can use second-hand cardboard, we bought our first cardboard exactly this way, as it turned out later, they charged x2 of the factory price. But there you can take any volume.
Cardboard can be ordered immediately cut to your size, we charge +50 kopecks per blow.
Tables for assembling scratching posts with supports – 12,000 ₽
Trademark registration – 30,000 ₽
We decided to immediately attend to the registration of the name, so as not to later lose all the investments in its promotion. The process took a long time, and it turned out that Magnit has a trademark, Tom Cat, which is similar to the Tommy cat that we wanted.
Once, in the description of a product card, I used the word “kogtedralka”, the owner of the “kogtedralka” trademark called me and asked me not to use their trademark.
Cash reserve – 600,000 ₽
Firstly, you ship and make scratching posts right away, and you receive money for them later, and secondly, at first you will work at a loss: sales will be low, and no one has canceled rent, utilities and salaries.
Income from the production of scratching posts
We sell scratching posts wholesale and retail.
They buy wholesale:
– Pet stores
– Nurseries and shelters
– Sellers on marketplaces, or as we call them “one-offs”. They come right after the courses – “a billion on marketplaces”, and try to find the miracle product: which-will-buy-me-a-Mercedes-and-my-wife-Maldives. Usually they are purchased once.
Wholesale revenue for the 4th year of operation is from 1.2 to 2.5 million. Some take it once a week, and others once every 4 months, so the average figure varies.
We sell retail:
– on marketplaces
– through the website and social networks
– at exhibitions
Total retail turnover from 2.5 to 3 million
The first year production worked at zero and in minus. I remember when Ozon sent money, deducted the cost and threw it back into advertising.
And all this time, my partner and I took only for living expenses.
“Is there a way for me to pay for the house? – yes, hold it.”
Production costs of scratching posts
Since expenses differ depending on the number of scratching posts sold, I will assume the average turnover of revenue is 4 million, in pieces this is 2,759 scratching posts.
Marketplaces – 1,173,000 ₽
I’ll use Ozone as an example; it brings in 80% of sales on marketplaces. I will try not to use swear words.
Ozone commission – 14%, bites off immediately. When I wrote these numbers, I saw that there was ozone AGAIN! raised the commission.
Acquiring – 6%, fee for servicing the received payment, I think this is how Ozone compensates for its taxes.
Logistics from the Ozone warehouse to the client depends on the size of the scratching post, for example, a medium-sized model will cost 382 rubles, which is about 27% of the sales price.
The last mile, I don’t know what it is, but Ozone will take it. A medium-sized model will cost another 59 rubles, that is, another 4%
UPD: I googled it, the last mile is the delivery of goods to the point of delivery of orders, a parcel locker or courier and its transfer to the buyer
In total, Ozone, the friend of all sellers, takes about 51%. The average bill for a scratching post is 1,450. That is, it will cost 739 ₽, which is almost 2 times more than the cost of the scratching post. 2 years ago this amount was approximately 2 times less.
What is especially frustrating is a sudden change in tariff, for example, we are delivering 600 scratching posts, and if ozone changes the tariff for logistics, then we will sell all 600 at 0 or minus. He doesn’t care that the goods are already on the way, new tariffs are applied immediately.
To bring Ozone to the pickup point, I pay 1,500 a day for a driver with a gazelle. The driver picks up about 170 finished scratching posts per day.
Out of 1,000 scratching posts sent, approximately 10 are returned. I, as a seller, pay for the scratching post's travel around the country back and forth.
Wildberries did a cool thing: to make people return goods less often, they introduced a fine for returns, but this fine is eaten up by the greedy berry, and the seller, as he paid for the useless journey of the goods, still pays.
In general, I almost never work with Berries now. They either have fires or a lot of fines; in the off-season, I gave up my entire monthly profit of 400k on fines, and decided to take a break from them. Fined for incorrect product dimensions.
After several hours of conversations with support, I was still unable to overcome this fine.
Communal apartment – 50,000 ₽
50,000 is the average, in winter you can pay 90-100k, in summer 20-30k.
In the meantime, we were looking for the ideal combination of temperature and humidity, whole batches “went in waves” and went into the trash. Now the shop manager can determine the temperature and humidity of a room by touch.
Production employees – 179,335 ₽
If from the 1st to the 15th employee makes more than 300 scratching posts, he will receive 65 rubles per piece, if less than 300 pieces, then 45 rubles per piece. So there is motivation to glue the required volume.
Theft is not observed, probably because no one really needs cardboard at home, and maybe because a sheet of 2 by 1 meter is difficult to hide under a sweatshirt.
Office employees – 335,000 ₽
Sales
There is now 1 manager in wholesale sales; with a turnover of 1.6 million, he received a salary of 107,000 rubles.
Of this, 30k is salary, the rest is interest. Depending on turnover from 3 to 8%. The seller receives a percentage for the entire time he works with clients, and not just for the first sale. Such a system motivates to constantly be in touch with customers, clarify orders, offer new products and discount promotions.
Marketing
3 marketers receive a total of 88k for content on social networks, advertising in Yandex and VK.
Head of retail
I lured away a good manager from large networks whose names are known to everyone. She has no salary, only a percentage and bonuses for connecting new sales points and launching new products. From 5 to 10% depending on retail turnover. Based on the volume of revenue on which I make calculations, she received 130k
Founders – 240,000 ₽
We are 2 founders. Arthur is in charge of wholesale, I'm in charge of retail.
We adhere to the approach – for the first 5 years, we invest everything we earn back into the business, so we take our salary and return the rest back to development. Of course, sometimes you want to take money and go to the islands, and it seems that debit and credit fit together normally for this. But I don’t want to be those entrepreneurs who, as soon as they feel the money, spend it on an expensive car and travel, so for the New Year I went with my wife to Omsk to visit her parents (minus housing costs in Omsk, minus food costs).
Charity – 48,000 ₽
Thanks to our customers, we donate 1% of our turnover to animal welfare funds. Some in money, some in free products. I don’t like to talk about it, but since this is possible thanks to our customers and, it turns out, this is their contribution, I must report.
Payback of scratching post production
I find it difficult to say exactly when we got back what we invested in the business. The first year we worked at zero and minus. We are now throwing the main profit back into circulation. So, they gradually opened new workshops, made their own mold and began cutting cardboard themselves. Thanks to reinvestment in advertising, cards have risen well on marketplaces.
There are also nuances with the cash flow in our volume that must be taken into account so as not to go too far in the calculations:
– marketplaces pay with a delay, in fact, we give the goods for sale, from unloading to the warehouse to the purchase of the scratching post it can take a month
– suppliers give deferments per month
– we give wholesale clients a grace period of 1 month
– we pay taxes once a quarter
Due to such fluctuations, there are disruptions in cash flow. A common situation is when in one month there are a lot of orders and you pay a lot for raw materials, labor, advertising, and in another month there are few orders, but money begins to arrive for that month where there were a lot of orders. And when you see a good price for cardboard or glue, you try to stock it up to the fullest. For example, in December I bought cardboard for 2,666,000 rubles.
Wholesalers can take a lot at once in one month, and then not take at all for three months. For this, it is important to have a fund for such movements. Otherwise, you find yourself in a situation where mentally there is money and everyone around you owes it, but there is no money in your account to withdraw and distribute to people, and, as you know, employees do not accept promises for payment.
A new gluer and a new manufacturing entrepreneur often have the same problem. On the first day of work, a novice gluer makes 10 scratching posts, receives 650 rubles and thinks, “why the hell does he need so little money for so much work” and leaves. Although the gluer, who has trained his hand, makes his 50 scratching posts and takes 3,250 per shift. So a novice entrepreneur-manufacturer starts working, sees no profit in the first 3 months and gives up, deciding that it was a bad idea. The pet business doesn't work that way.
Thank you for your attention!
Do not take away the bags from cats that they rustle at night. He hugged everyone, lifted them up, kissed them, and threw them up, especially the cats.
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DISCLAIMER: The article was written by the author of the blog “fell, rose” based on an interview with the co-founder of the scratching post production K. Pozdnyakov in St. Petersburg.
I blog “fell, rose” with stories about real business, and not this successful success of yours. Stories based on interviews with entrepreneurs are published once a week.
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