About international expansion and Brazilian bureaucracy

Andrey Makeev, co-founder of the Flowwow marketplace, spoke about how companies with Russian roots conquer foreign markets, what kind of people should be recruited into the team, and why cat houses won’t "fly" in Brazil.

Flowwow Marketplace — is a service where local local stores list their products. The company provides a convenient, simple and fast delivery service for unique goods, gifts, flowers and sweets.

Flowwow is growing by 80% year on year. In 2022, revenue will amount to more than 4.5 billion rubles. Now the service is investing in development in the markets of Brazil, the UAE and the UK. Flowwow is also represented in the CIS countries and Eastern Europe.

How to prepare processes for scaling

We've been preparing for expansion since the day — since 2014. We thought that the Russian market would be exclusive only for the first two years. But a lot of things went wrong.

We can say that we are constantly afraid of making another mistake. But in the current situation, we are ready to "burn bridges" and conquer new countries with burning eyes.

We have a complex and diverse product inside: an application for customers, an application for stores, a courier story with its branched system, offline stores. You need to prioritize, because resources will never be enough.

Before entering Brazil, the UAE and the UK, we launched a legal process to open companies, began to cast fishing rods, and attract locals to the team. It's all very laborious. We now have a legal entity and settlement accounts open, and then there is the stage of localization — reassembling all products and adjusting them to the local market.

We have developed a two-stage expansion plan:

• launch MVP — to attract partners — and adding them to waiting lists;
• finishing the product before launching — and within a couple of months the launch itself.

Founder's tasks before entering the international market

In my opinion, opening a company in developed markets, for example, in the UK, needs the attention of a founder or a person with a stake. Such a person has — a huge motivation, and the higher the likelihood that everything will work out.

But if the countries are small, then the — not even a separate one for each state, but a common one for the group. So, we have one team working with the CIS — for Georgia, Armenia and Azerbaijan. With the countries of Eastern Europe — another team.

But it's important to understand your product. For example, a yoga app doesn't need to open countries in groups. They should just promote in the App Store — and everything will fly.

You should also take into account the local landscape: in the same Brazil they love dogs — and dog houses will "fly in" clearly better than cat houses.

We have a rather complicated history in terms of business — online-to-offline. First you need to attract partners to place goods, and then — drive traffic and convert it into sales. Here it is important for the founder to be closer to the ground.

How to find partners and communities in new countries

We tried CPA, but it didn't work. Everything is decided by personal meetings, not agencies. We are recruiting a critical mass of partners in cities — for example, in São Paulo it is 50 stores. And we have a long waiting list on our hands.

In my opinion, outsourcing market knowledge or a team that deals with custom development is not worth it.

Community in Brazil — simply amazing, the best thing I've ever seen in my life. At the very first meeting, I found people for the team, marketing specialists for the future. Soon I got acquainted with CPA-shniks, who gave a lot of useful advice. For example, that people from Europe usually know how to systematize everything and lead a team, and people living in Brazil — cool performers.

People living in Brazil are very responsive. I know for sure that if someone comes to open a business, then I will share my knowledge with him.

Is it important to know the local language

It would be more convenient with Portuguese, but I can say that I don’t know much English either.

I get out of the situation with the help of knowledgeable people. I take as a leader a person who understands the language and culture. And I myself become a bridge between Russian and Brazilian companies.

About features of the Brazilian market

The country is very unusual for us. There is a lot of bureaucracy here. For example, to accept payments, you need a financial license. Here we work through payment splitting: when the client pays, the money is split at the moment — and the "landing" part to us, and part of the — to a store selling goods.

It was a discovery for me that in Brazil, people almost do not use Apple Pay and Google Pay and pay with plastic or PIX (instant payment system — ed. note). Also here, 80% of all purchases by Brazilians are made on credit, and stores receive money for orders at least 30 days later. Such a system greatly affects the accounting of finances.

It is important to use a mixture of local TIN and SNILS — CPF. Without it, nothing can be paid even in a regular store. We will make it possible for foreigners to buy flowers without CPF, which will be great for Brazil.

To open a checking account for a business, you need a local representative who has a residency. We found such a person — and I even took her to the team, because she is a very cool specialist. Really helps a lot, she's a great negotiator.

Then you need to open a company with this representative. Since we — marketplace, we have a separate pan in hell. For example, a simplified taxation system does not suit us.

In Brazil, as elsewhere in the world, everything is focused on personal communication. Yes, we quickly opened a checking account — thanks to the representative. But Brazilian banks are constantly afraid of being "banned" Americans — and may not let money through from Russia. We have to transfer funds through intermediaries.

Due to the situation in the world, I could not formally send a power of attorney from Russia to Brazil. I had to deliver the documents with a guy who just subscribed to the Flowwow group and flew in the right direction.

There are many such moments, but it is extremely interesting to understand them. It seems to me, for example, that a person from the USA would go crazy with such business conditions.

But the market promises to be promising. We tested ads with pay-per-leave contact — partners and clients. CPA-shniks offer us from $5 to $10 per client, and in Russia this cost — about $45 because there is more competition.

Which countries are suitable for flower business development

I don't know the rankings of countries by the culture of giving flowers. But, in general, choosing a country for scaling should be approached as opening a new business.

You need to look: at the volume of the market in a niche, at how competitors behave and what they are, at the number of potential partners. It is necessary to conduct experiments on the cost of attracting a client and the cost of attracting a partner. Next, you need to look at the local team.

For flowers, the volume of the market in terms of money is important. For example, a great market — this is Germany, but it is difficult to develop there in the current circumstances.

UAE — interesting story in terms of legalization. These are good taxes, access to many markets, currency, all kinds of financial transactions, investments, the road to the MENA market.

Brazil — this is a huge growing market. According to data from open sources, here the sales market on marketplaces is 5 times larger than in Russia. For us, this is a plus, because partners do not need to explain what a marketplace is. E-commerce is growing. Plus, here is real democracy, the rule of law, American money is walking around. And investment multipliers — almost the same as in the US. Here is a good investment climate — there are 16 unicorns in Brazil.

Great Britain — conservative old market, very developed, there is a lot of e-commerce penetration. Cool story, but with risks for companies with Russian roots, like all of Europe.

How to understand that the expansion is successful

We don't have internal KPIs. But there are no strong competitors in Brazil either, everything is very bad here on similar marketplaces: it is important just to make it work.

Success will be when more than 50% of all our sales will be in the Brazilian market. Then I will say: yes, guys, things are going well.