Russia, to be honest, is a rather sanctimonious country. It is not customary to talk about many things in our country. It is not customary to talk about money, and it is not customary to talk about sex. Today we will talk about both. The Supplier of Happiness Company is a distributor of goods for adults.
We really don't talk about both. But you somehow live and work, and quite successfully, right?
Probably, it is not customary to talk about this to the general public. On the whole, our people are quite active and positive. Life always goes on, develops, multiplies.
How active are we in terms of money? I mean, how much is the turnover of such a market?
Unfortunately, there was no research on this market. Therefore, the figures that appear are approximate... There are estimates that this is about 20 billion rubles a year. There are ratings above, below. Someone counts on the revenue of large wholesale companies (there are not very many of them, and you can roughly estimate). Someone is trying to count by the number of outlets. There are different methods, but there are no exact estimates for today.
The company “Supplier of Happiness”, what market share does it take out of these twenty? Is the market consolidated or not?
We occupy about 5% of the market. The retail market is not consolidated at all. For example, there is not a single retail chain on the market that had at least 150 retail outlets. There is a large network there of about 102 or 110, the rest are still smaller. The average statistical network consists of 5-10 retail outlets within one city. In retail, it is absolutely not consolidated. We can say that there are probably 5 large wholesale companies here. And there is a second echelon, which is two times smaller. In general, there are about 20 distributors in total.
How high is the marginality of this market? At least in retail?
There is a myth, and, unfortunately, this year it became a myth completely. If in previous years retail margins were 100% or more, then the dynamics of the last two or three years has changed this picture very significantly. The situation changed in 2020-2021, when marketplaces began to actively sell this category. Now retail margins are 50% of the strength.
Are all manufacturers of this kind of goods foreign? That is, there are no Russian ones?
In Russia, there are manufacturers of this product group, and there are great manufacturers. In our turnover, the share of goods produced physically in Russia is at least 20%. Firstly, these are lubricants, cosmetics, massage oils, stimulating creams, prolonging creams, perfumes with pheromones. There are a number of Russian manufacturers with local production, which are doing very well. There are manufacturers and sex toys. For example, in Krasnodar there is a fairly large factory, in the Moscow Region there is also a factory. In general, I will not say that there are many local industries, but they do exist and occupy more than one or two percent of the market.
How is the average bill distributed? After all, there is a big difference in value between goods. There are, for example, condoms for 50 rubles, and there is a Real Doll, which is half a lama. How then is the average check calculated?
The average receipts in online stores now vary, if the very average count is somewhere in the order of 2,000 rubles. There is a trend towards an increase in the frequency of purchases and a decrease in the average check. About 3-4 years ago, it was probably still in the region of 3000, and, of course, this strongly depends on the specific project. There are projects that specialize in more expensive, branded goods, and there are projects that, like hypermarkets, are selling more and more cheaply. There are, of course, lower checks, simpler goods, and so on. In general, the trend of recent years is hardly ours purely in the industry, but rather a general trend in our country. The low-cost segment is growing significantly and the expensive segment is falling significantly. Although, the trend of 2021 is still an expensive segment to increase. At least in our lineup, expensive manufacturers began to feel better than in 2020. And in 2020, low-cost was going with a bang.
And what is the share of economy goods here?
The share of economy goods is generally high, according to various estimates it reaches 50%. This is very important. The reason is the specifics of the industry itself. Many people prefer to order online, so as not to communicate with a consultant, but calmly choose what they want. Moreover, the Internet now allows you to read reviews and compare prices. In general, there is a choice. You can buy it on the marketplace, or in an online store that has been respected and has been working for a long time. On the Internet, whatever one may say, you get incomparably more choice than offline. An offline store is about 2 thousand items. If 3 thousand is just a rarity, and this is a huge store. In an online store, for example, we have an assortment of about 38 thousand items. It is clear that this is heaven and earth.
How does marketing work in this industry? How does a person make a choice in general, does he look at reviews, read everything about it?
Today there are a lot of bloggers who publish reviews. There is an industry portal in this industry, sexshopers.ru, which publishes daily product reviews, brand reviews, new collections, exhibitions, seminars and everything, everything, everything. There is a huge amount of information, professionally prepared, a team of journalists works, which writes on this topic quite extensively and in detail. Bloggers are also very active on this topic. I often hear fr om our offline clients that people come and say: “I’m at Masha’s Let’s see a pink thing, show me it, I want to touch it in reality”. Of course, no one has canceled the classic marketing stories, publications in the big media, and so on. But now social media play a big role in this area.
There is a whole webcam industry, this story, in general, is not that legal. And as I dived into economics, I was impressed by all of this stuff in real time. This is a whole big market. What share can he take here?
You know, this market is still different. Our clients had stories when the guys carried out all sorts of branded joint projects in order to try to make some kind of sales through webcams for subscribers or someone else. The efficiency of this channel is not very high. People don't come there to buy a toy, their goal is different, much more fun. Therefore, from the point of view of sales of toys, lubricants and other goods, this channel is not wh ere the main sales are made. Webcam models themselves, like clients, buy toys, since this is their working tool. There is a whole category of devices with remote control, when you can transfer control to a certain third person. Just another category of users, and it is not massive. This is from the category of questions to me: "Dima, you advertise on all sorts of pornographic resources, you probably have colossal traffic from there?" No. The traffic of such projects is not highly converting for e-commerce. People who come to these projects come there with a specific purpose, and it is quite difficult to distract a person from this goal.
Yes, the story is clear here. What is the future of this market? Do you think it will grow?
All over the world, this market has been growing for many years at a rate of about 6-8% from year to year. Not to say that it is just mega-fast, but in general, it does not sleep. In Russia, it grows a little faster. According to various estimates, at a rate of 10-15% of the market, from year to year. In 2020, according to my feelings, we have grown by more than 15%, by 20-25 percent. Because a pandemic, because everyone was at home, and the demand for this category increased. Even though offline stores were closed, given the high penetration of e-commerce in this category, and the fact that marketplaces began to actively sell this category, in general, the volume of sales has grown! Everyone was very afraid that in 2021 there will be a rollback. Of course, there was a rollback, but not a fall off the cliff, and there was some kind of stabilization. We have now reached the classic seasonal curves. For example, according to statistics, May is the lowest month of the year. And last year it was the highest month of the year. That is, we have 2.4 times more sales from May 2020 to May 2019! This year this picture has already stabilized. Now we are already following the classic seasonal curve. I think that this year we will have an increase in the industry of about 10-15%, year-on-year.
It will be interesting to see after a while how you are doing. Thanks for the interesting story!
The interview in video format is on the website of Radio Mediametrix.