My Children's Textile Business Is Dying, and I Have 7 Reasons Why

DISCLAIMER: The article was written by the author of the blog based on an interview with the founders of the children's textile production Tatyana and Igor Semkov.

I grew up in Omsk in an ordinary family, in a very ordinary five-story building. I had no start-up capital or connections. I worked as a wedding decorator, and when my son was born, things became difficult.

Then, as in the vanilla business story, I tried to choose bed linen for my son, but I couldn’t find any and decided to sew it myself, I’m a designer. My wedding clients are former brides, and they get married to have children. So when I posted my work on the pink social network, I was immediately ordered 7 sets.

At first I sewed at home, and then more and more. As a result, for 10 years now I have been developing my own production of children's textiles.

In the best times we made 15 million turnover per year. Now the turnover has fallen many times, instead of 20 people there are 7, and my husband and I, as owners, would earn more if we hired.

And before I move on to dying, I'll give you a little background.

Children's textile business from scratch

In total, there are about 9 stages in the production process.

1. I draw

   

Office equipment required – 275,000 ₽.

2. We find fabric

We order some of the fabric immediately with the print in Novosibirsk. When the fabric arrives, we inspect it for defects.

There are always defects in fabric, the manufacturer usually says that 5% is the norm, if there are more defects, they compensate. Once in Turkey they ordered 300 kg, and returned it all, it’s good that they worked according to the contract, the situation was tense.

3. We are cutting

There are a lot of small pieces, so we cut them in batches of 12 pieces at a time. The rolls are large, and women work in production, so it’s more convenient so as not to constantly carry them around.

The cutter has a technical chart.

4. We sew and embroider

For this we have 5 sewing machines at 40,000 ₽/piece. Overlock – 40,000 ₽. We embroider by hand.

4. We stuff the products

We stuff in a separate workshop, then we sew up the technical hole for stuffing, we call it a butt. Also by hand.

4. Wet heat treatment

For this we use an ironing table (60,000 ₽), a professional ironing board (20,000 ₽), a steam generator (2 pcs. at 30,000 ₽/pcs.)

7. Quality control

Quality control is carried out before moving from workshop to workshop. The faster we find defects, the less losses.

7. We are sending

8. Ready

To produce our range now, we will need a total of 2,168,000 ₽.

I didn’t have any start-up money, at first I bought equipment and cars with the money from the wedding decor, and when the business grew, I gradually bought the rest.

Cost price of children's textiles

I will show the cost price for a popular item.

The total cost of the side, which we sell at retail for 1000 ₽, is 578.28 ₽.

Of these, work – 248 rubles (42.8%)

Materials – 122.4 (21.1%)

A lazy seamstress gets 25,000 ₽. On average, it is 35,000 ₽. From 175 to 215 ₽ per hour.

When new seamstresses came to us and received 35,000 a month, they were happy, because at another factory they would have their arms twisted for that money when they sewed tents.

To set prices correctly, we have a constant value in the cost price.

Constant is the sum of indirect (fixed) expenses that we spend regardless of the number of products per month. The constant included, for example, rent, utilities and advertising. I will describe it in detail below.

The constant was calculated depending on the number of products that the production facility produced.

For example, when you produce/sell a small quantity – 1000 pieces, then the share of the constant in the cost price increases sharply and instead of 150 ₽, as in the example, it is already 475.28.

As you understand, in this case you are already selling at a loss in wholesale, so you have to constantly recalculate and change prices, which, by the way, are constantly changing. Unfortunately, we did not always have time to recalculate often and traded at a loss.

Production costs of children's textiles

I will calculate income, expenses, profit for a good year and a good month. On the back 2 150 000 ₽.

We divide fixed costs by the total number of manufactured products and include them in the cost price.

Previously, we paid rent of 50,000 ₽/month, then we took out a mortgage because the payments were the same, but the mortgage is finite (I would like to believe).

I calculated salaries in the cost price, but fixed costs include taxes on salaries and work, which is not counted per item: going somewhere, picking up something = 15,400 ₽ per month.

Total fixed costs that are not included in the product itself, with a turnover of 2,150,000 ₽, it comes to 459,700 ₽

Income from the production of children's textiles

In a good month (2020), our production brought in ₽2,150,000 in revenue. That's about 2,000 items. But globally, our sales are a roulette. Once I sold 1,000 items, and once 2,500.

– Wholesale sales – 860,000 ₽

Wholesale discounts up to 35%. Our main partners are retail stores. We got our main wholesalers at the exhibition.

There are wholesalers to whom we sell via dropshipping. The partner does not take our goods to their warehouse, but simply offers them to their customers. For example, we work with the production of children's furniture using this scheme.

They have our catalog, and some in stock. They say: we need bumpers, and I give them the wholesale price plus 10%. If the wholesale discount is 30%, for dropshipping 20%.

Website – 537,500 ₽

The site took people from all over Russia, and before all events from 65 countries.

Social networks – 645,000 ₽

Shop in Omsk – 107,500 ₽

We have a showroom right at the production site. Omsk residents bought it there.

Payback period for the production of children's textiles

In total, in the month under consideration, on a turnover of 2,150,000 ₽, we received 306,300 in profit.

But it is worth remembering that today you have a good month and you are in the plus, and tomorrow the month is bad and the plus of the previous month will have to be returned to compensate for the losses. Therefore, there was no rush to spend the profit.

I like to draw, but I like to count less. I didn't make business plans and I didn't start my business for the money. We spend something, and then bam, we buy fabrics from China for 500,000 ₽. Today we sell 1,200 items, next month 2,000.

We spent only our salary, which we set as a constant (100,000 ₽).

When you work a lot, you have nowhere to spend money. I'm not a shopaholic, I saved up for travel to be impressed and to dive into work with new strength. I think it's important for a designer to be well-read. True, when we traveled, we sat at our computers in a rented apartment until lunch, because you constantly need to communicate with clients.

When the profit accumulated, we bought more equipment. And now we are beginning to understand that, apparently, that's it. We were adding up the figures for the article and saw that the cloudlet had already been calculated incorrectly, and was being sold at a loss in wholesale. Unfortunately, this is a common story.

And so there was never a stable income. The staff is either sick themselves, or their child is sick, someone does not show up, does not fulfill the plan, and there is no plan as such, because one works quickly, another slowly.

You try to record all this in a table, calculate it all, and then a person came not at 9, but at 11, and in 2 hours the person had to embroider 10 items. Out of twenty, 5 are constantly late, in a month this is minus 20 days, minus 160 items. Simply because he was late. This is life, these are risks.

But… That's how it was before, now we can't even pay ourselves 100,000 rubles in salaries for two.

Why do we die?

1. Copiers

Women on maternity leave or simply seamstresses copy products if they see that they are being sold.

The main problem with copyists is that they can't count. My product costs 800 ₽, and theirs costs 450 ₽, I think:

What the hell, how do they do it? The cost price of these bumpers alone is 450 ₽.

I go to sewing communities and they write:

Yeah, damn, how much can you sew in the minus! It's better to have a guaranteed salary at work, and not all this!

That is, they start doing it and then quit because they are in the minus. They think: now I will make the price lower, while I work at zero, build up the base, and then I will make the price higher. But our client gives birth to a child and often orders one-time, and by the time they give birth to another child, a lot of time will pass.

And if people started buying at the cheapest price, they won’t buy at a higher price.

And I, as a textile startup, am losing sales.

Okay, you say. It seems like it would be possible to patent everything and organize a witch hunt with lawyers. But.

A patent for one product costs 100,000 ₽. We thought that several million rubles would need to be spent on the entire range. Which we don't have.

But let's say I patented everything. And the women who copy are not individual entrepreneurs, not self-employed, they are just selling counterfeit stuff. I will come to court and say: look, I have a patent, and Marya Ivanovna is copying me. And I can't even prove that Marya Ivanovna made the sale. And there is not just one Marya Ivanovna, there are thousands of them, so it would be nice to have a couple of million for this enterprise for lawyers. And if Marya Ivanovna changes the design by 20-30%, that's it, the patent doesn't work.

To somehow reduce the copying percentage, I changed the fabrics. Previously, I used Polish fabrics: stars, zigzags, polka dots. These fabrics were widely available, and non-IP workers could take them, and copyists actively took them. I started buying satin, it became more difficult to copy, but the cost price increased significantly, and you can’t raise the prices much. I can’t say that it saved me.

2. Certification

There is serious certification in the sewing market: with laboratories, tests. Since the products are checked there meticulously, such certification costs around 60,000 ₽ for one certificate.

And there is a fictitious certification, where you are sold a certificate for 3,000 ₽ in a small town in Uzbekistan without even looking. That is, not only do you save money, but you also don’t have to worry.

I have children, and I always tried to be completely white, so I overpaid for certificates, but, for example, to certify a bed rail, you only send a description of the product and that's it. That is, everything turns out to be on the conscience of the manufacturer.

Whether you produce safe products or products from God knows what is the manufacturer's exclusively moral choice. The system does not catch those who want to save money at the expense of safety. In the end, being safe is expensive, which means that those who save on it will beat you on price.

I have lived in Omsk all my life and I love my city, but it becomes offensive when our wholesaler from Israel certifies our products, he is asked a lot of questions about safety.

– You can't make a tag so that a child's finger can fit in it. God forbid a child sticks a finger in the tag, falls asleep, the finger turns blue and atrophies.

– Our mothers ask for longer ties so that they can make a bow and the outside of the crib will look beautiful. In Israel, the requirement for ties is no more than 22 cm, because 22 cm is the circumference of the child’s neck.

– Each packaging bag must have holes so that the child does not suffocate if (when) he puts the bag on his head.

Once we failed the inspection control for bed linen, sent the fabric for testing, this should be done once a year. I sent them a piece of a pillowcase, which we buy in Novosibirsk at a certified production facility, they print on satin, certified specifically for children. The air permeability and hygroscopicity (moisture absorption) of the pillowcase were below the norm, even for adults. That is, as if I lay down on oilcloth. I panicked, I thought:

“Oh my God, what am I sending to my children?”

I call the printing factory:

Guys, what are you doing? Do you understand what you're selling?

They show a certificate: here we are in Vologda buying satin.

And we in Vologda take the back side of the pillowcase ourselves, because the printed side is expensive. I ask them to send me the certificate, I want to fight with the laboratory where it failed the test.

As a result, they send me a certificate from that same fictitious Kazakh laboratory, which simply did not have tests for these 2 indicators. I shake Vologda:

– “I need tests!”

– What are you worried about? We ship tons of our fabrics to large networks, everything is fine with us.

And they stopped communicating with me.

It turned out later that we had failed the test because the factory had applied a finishing coat to the fabric. This is a powder that is applied to make it easy to work with the fabric during final production. The fabric should lie tightly and not move when it is cut with an electric knife. This requires a finishing coat, which makes the fabric slightly starchy.

But once the dressing is wetted in cold water, it is immediately washed off, so they write that the product must be washed before use. The dressing is washed off, and the pillowcase passes any tests.

At first, the state laboratory was not convinced by the story about the sizing, and we contacted an independent laboratory. They conducted experiments (1,700 ₽/piece) on washed and unwashed fabric. It passed on the washed one, but not on the unwashed one. That's how we managed to convince them.

The first layer items must be washed before use.

It turns out that Rospotrebnadzor notified everyone that everything had to be washed, otherwise not a single product would pass, and all production would have to be closed.

3. Marking

Oh, do you know what marking is? You don't know what marking is!

Each product now needs to be entered into the national catalog, where you will receive a unique QR code. And the buyer points the phone and looks: where did BabyToys produce this pillowcase, oh, in Omsk! Well, that's what's written on the label.

When we asked about labeling, the Ministry of Industry told us: this is a fight against counterfeiting. They even held a separate round table to tell textile manufacturers that labeling is good. The minister did not come to that meeting, and his grandmother-deputy was half an hour late.

In fact, I can order products from China, in the grey market, bring them in cargo, and then stick barcodes on them, and everything will be legal.

That is, life has been made more difficult for those who sew in Russia, but oxygen has not been cut off for those who work on the left. As a result, every production facility, every small shop should have an IT specialist. And how much will we pay him? He will say:

No thanks guys, I'm going to make apps.

I'm lucky, my husband is a bit of an IT guy and if it weren't for him, I would get rid of the products that need to be labeled. Minus my husband's time.

Also, 90% of our wholesale orders for bed linen immediately dropped off. They started taking things that didn't need to be labeled. Minus customers.

4. Marketplaces

Preliminary conclusion: in the long run, marketplaces kill business. Now let's go into more detail.

One of the wholesalers was trading at Yagody. We need to make sure that goods are not sold below the minimum retail price. Otherwise, retail will get upset about the injustice. Wildberries ended up having the lowest prices and retail got upset. We start calling the partner.

It turned out that partners raise prices even higher than recommended, but Wildberries, without asking, make promotions, sales. Sometimes discounts are 2-3 times and they can sell even below cost.

They had 1,000 items, and a separate person monitored the prices, but even he couldn’t keep up.

That is, all this time we were losing sales due to Wildberries dumping, and all because the partner was selling at zero and minus, and we lost him too.

We started trying ourselves and got on Ozon. And here the platform also does whatever it wants. Ozon says that the goods are on sale, and you need to have time to get them out of there, so as not to sell them three times cheaper.

You sold for 30,000 ₽, and you receive 11,000 ₽. And to understand where the money went, you need to track 28 positions.

On social networks, people buy things from people. Sometimes we would talk to customers for several days. For them, it’s not a toy, but the work of a specific person.

On Ozon, the buyer found it, bought it and forgot to pick it up. The product is returned, and for delivery there and back we paid from 300 ₽ one way, and my product costs 600 ₽.

Our familiar masters abroad are already asking us not to go to marketplaces, they are killing authors.

For example, Amazon analyzes the market and looks at whose business to crush. To do this, they look for a seller whose product sells well, and he has followers, and they also sell well. At this point, the marketplace creates its own brand, and its capabilities are much higher than small businesses, and so it hammers these manufacturers with prices.

That is, the 90s have not disappeared anywhere, businesses are still being squeezed out, but in such a civilized way. Yandex is picking this up in our country.

Recently Yandex.Market started calling us:

We're cool, come join us!

We think, maybe they really are cool, we kill a lot of time, we get up on the court.

2 orders drop after connection. And our daily schedule is from 9 to 6 in Omsk, Sat, Sun – day off. All this is written on the website.

On Monday we start writing about these orders, and we are already on the Yandex.Market blacklist, because they did not respond within an hour. It turned out that these were orders from Yandex.Market managers who were checking us and deliberately left orders on the weekend.

It is clear that online stores are basically a front, where there are 40 sellers per warehouse, but we have production. And there, managers work according to one manual and they don’t give a damn that we are a production and cannot support a team of sellers.

5. Women's collective

Seamstresses need to be pampered and cherished, because there is a huge shortage of personnel.

Children do not go to study to become seamstresses and designers, colleges are closing. Girls who are seamstresses are 40. In 10 years, it is not known who will be sewing. And people drop out for natural reasons. Allergies can develop, even to natural fabrics, for example, silk can cause scabs on your hands. The team is female, and now 5 people are on maternity leave.

We seat people according to their interests: one needs heat, another needs air conditioning. And they also chat less this way. At first there was a deal – for the finished product, then we switched to hourly rates (175-200 per hour). But this does not solve the problems.

“I sew better, why do we have the same salaries?”

Managing a female team is a separate art. I used to imagine a sewing shop like this: employees sit in kerchiefs and aprons and sew like bees, going out only for lunch. But in fact, everything is like in an office: have some tea, discuss something, talk on the phone, smoke.

We have a corner where everyone eats, I asked: “Just please take out the trash.” In the summer, trash smells bad, which is bad for fabrics. But no one could agree, taking out the bin is a dirty job, and no one wanted to do it. And it's not about a specific bin. When I decided that the cleaning lady would clean the bin, new whims began.

My position is: if there is a problem, it needs to be solved somehow. But these are women in production, and they want scandals, intrigues. Girls do monotonous work all day, and they need to put their energy somewhere. They wanted heat, and I didn’t give it heat. Once they asked for swivel chairs, then they asked for a massage chair. Toilet paper is only 4-ply. Then there was a fashion for watching movies.

What's wrong with me if I sew and watch movies, I always sew like this!

We had to cut off their internet connection.

Sometimes they ask for additional tools for work, but I am a master myself and I know that she does not need it, and it is just a whim. But every time I weigh: is it cheaper to put the person in their place or to satisfy the whim, and she will work calmly for another month, then the next whim.

So you need a person that everyone is afraid of, and she's like:

Oh, I'll get you now!

And for us, it's the production manager. We just assigned roles: she's bad, I'm good, because losing someone is also scary when you've invested so much and there are no new employees. And you don't want to lose a seamstress because of a cheap whim either.

Every Monday there was a meeting, and every time I was asked the same questions:

Why do we need a new range again? Enough is enough!

These are new patterns, a new process, you need to get used to it all over again, but people don’t want to.

We tried to build bridges. We were only fired a couple of times.

Once we went to an exhibition and left an employee behind, but she decided that this time she didn’t want to fulfill her duties and was simply doing something other than what was needed.

I arrive, see that the orders have not been given, and ask:

– Mash, what's wrong?

– Well, you bend your stick all the time, I'm tired.

– Well, you know about your responsibilities, you get paid for them. I didn't dump something new on you.

– You bend your stick all the time, I'm tired.

After this incident, I take precautions: when orders are tight, I have two employees.

5. Pandemic

When it all started, I thought I was going to strike it rich:

Oops, now everyone will lock themselves at home and have children, because what else can they do?

But women became more expensive, who needed to become more expensive, and then they got scared. When I went to give birth myself, I also didn’t go anywhere, I was afraid that I would get sick and go to a separate coronavirus maternity hospital to give birth.

And instead of an increase in the birth rate, there was a decline.

Then the president says: send everyone on vacation, pay salaries. Minus the stash.

During the vacation, several smart employees managed to get a second job, received double salary, and never returned to us. Minus 2 employees.

For a long time it was unclear who could work and who couldn't. They threatened with fines, either 300,000 ₽ or 500,000 ₽. That is, salaries and rent are being paid, but orders are standing still. They started to release them little by little.

The employees told me: “Tanya, what are you afraid of? Let’s all get out already!” And our employees were stopped on the highway and asked:

– Where are you going?

– To work

– No, go back.

6. Prices are jumping

Since we are small, we do not have a separate person or software that constantly recalculates the cost price. Material prices fluctuate, people are late, there are many elements of the equation, and sometimes we do not have time to recalculate the selling price, since there are many positions. If in retail this is not scary, then in wholesale every 10 rubles is decided and, sometimes, in wholesale we can sell even below cost price. And this is a disaster.

7. The end of foreign countries and the pink social network

It became really sad when they banned the pink social network, where we had 80% of buyers, they turned off PayPal and purchases from abroad also ended. Previously, we took from 65+ countries.

Conclusion

Sometimes it seems that the system is specially organized against small business, so that we simply get tired of fighting, we give up and go to work at the plant. Before, there were small shops everywhere, but now if you look to the left – Pyaterochka, to the right – Krasnoe i Beloe. In every residential building there is a KB, of course, I am not in white, I like wine, but this is also not right.

Now we are riding on the loyalty of old clients, but this also cannot continue for long. They tell me: retrain for clothing, but this is a completely different process and different sales. Although they have already started trying.

They tell us:

You hang in there.

And soon there will be nothing to hold on to. We are trying not to lose heart. I recently made a new blanket for my son.

I also want some kind of magic, some kind of miracle, but it never happens, and never happens.

Subtitles

DISCLAIMER: The article was written by the author of the blog “fell, rose”based on an interview with the founder of the children's textile production LoveBabyToys, Tatyana and Igor Semkov.

I am blogging “fell, rose” with stories about real business, and not this successful success of yours.

You will read: how I opened and destroyed a chain of night clubs, how to properly glue cardboard to sell it on marketplaces for 50 million a year, how a farmer spent 250 million in a village, why the production of dumplings in the provinces is dying, why a taxi company with 300 drivers and 40 cars is no longer a business, how a techie restored a Soviet camp, but flew into a cash flow gap of 60 million and other stories.