— Any kind of schools or training establishments where you can learn to make watch straps just don’t exist – says Herve Marcel. – So I got to know all the subtleties of the profession in Belgium, at one of the oldest manufacturers. I was taught by masters who had been in the trade for several decades. Then I worked for a long time at famous watchmaking companies.
— What made you decide to move to Russia?
— I married a Russian girl. Arina is her name, and she visited Paris, which is where we met. She was a journalist who made documentaries for one of the Russian TV channels. We lived in France for a year, but Arina began to miss Moscow and her relatives. In 2000, when our daughter Julie was born, we moved to Russia.
— And how did you master Russian?
— For the first two years I was working in Moscow at a French company which sells deluxe watches. At my suggestion, they set up a watch repair centre there. I was working with Russian watchmakers. And I learned Russian from them. And of course, I mastered the idiomatic expressions first.
As someone in Russia who has long been very much involved in leather and the tools used for working with it, it appears that today the market segment here connected with the manufacturing and selling of leather accessories still finds itself almost at its formative stage. And this market, it cannot be denied, has a big future ahead of it.
Are there prospects in a similar business for foreigners in Russia? Of course. What is more, if someone has the opportunity to get involved in such a business, then they really should do it, and do it now. Simply for no other reason that time is elapsing. And fashions are, too. And someone’s ideas can become banal and outdated. But here, I think, it all depends on two main components: first, on the product which you want to offer people – it should most definitely be in demand. For if there is demand, sales channels and everything else needed for a successful business will appear. But this is only one side of the coin. Secondly (although this could quite easily be in first place), anyone who takes up such a business (although it doesn’t matter whether it is exactly related to leather or not), must have the desire to and the means of putting their ideas into practice. Figuratively speaking, they should be aflame with their idea and the aspiration to make it a reality. Then they can count on succeeding. Also, it is essential to have a name, a history, so that the customer knows exactly what he is paying for. Given the quality of the product, it goes without saying, is as expected by the customer, whatever we might be talking about (be it a watch strap, wallet, or anything else).
As for the precise sums of money needed to set up one’s own leather workshop, atelier or larger-scale manufacturing, that, in my opinion, is not so important. No doubt it is not difficult now to find such business plans on the internet which calculate the initial expenses for renting premises, and buying equipment and raw materials. I repeat: the main thing is to offer people what is “destined” to be in demand. And then, your business will be “destined” to succeed.
— What made you decide to start your own business?
— All my life I have loved working with my hands but am by nature an entrepreneur. And of course, I had always dreamt of having my own workshop. Working in the shop, I saw how customers would lament the lack of watch straps as they do need replacing from time to time. They had to be ordered from abroad. But people didn’t want to wait. I decided to meet this demand as well. And in 2009, we started to custom-make hi-tech watch straps to order. We rented a room of 20 square metres along with artisans who made bags for a well-known French brand. Then, there were all of two master craftsmen in my workshop.
— How difficult was it to register your enterprise?
— It is all quite straightforward for me: I am a sole trader (IP in Russian). I went through the state registration procedure as set out in law, but I can carry out entrepreneurial activity without needing to form a legal entity. It is the easiest and most convenient way there is in Russia. And it helps avoid problems with the unwieldy accounts reporting process. I mean, starting up and registering as an IP at the tax authorities takes no more than 5 working days, and the state duty is only 800 roubles.
Overall, the Russian market for raw hides is now contracting. Over the last five years, production has dropped by 23.6%: from 26.8m m2 in 2011, to 20.5m m2 in 2015. The downturn in production observed over the last five years is linked to the shortage of raw materials on the market. According to estimates in professional circles, the industry requires hides to the tune of 200–220,000 tonnes per year. Output is running at under 60% of this.
There is a lack of output of these products in Moscow itself. Raw hide production in Russia is concentrated in Ryazan (with a share of 32.6%), Tver (with a share of 28.5%) and Nizhny Novgorod oblasts (12.2%). Output of hides in Moscow oblast in 2015 amounted to 430,500 m2.
The marked and vital difference between the leather materials market in Russia and that of other countries is the high proportion of export demand. In 2012–2014, the proportion of exports in the demand pattern grew to the detriment of domestic producers. In 2014, the proportion of raw hides sent for export amounted to 64.4% of the total demand pattern, with the proportion of domestic sales at 35.6%. This trend has emerged as a result of the devaluing of the rouble: transporting of untreated hides abroad became highly profitable for companies engaged in buying them up and selling them on. These raw materials go out mainly to Kazakhstan, from where, via Kirgizia, they go to China. According to estimates by BusinesStat, a reduction in exports in Russia for 2016–2017 is predicted. In 2018–2020, exports will grow again at the rate of 2.6 – 4.1% annually, and in 2020 will amount to 16.3m m2.
— How much did you need to start your business?
— To start up, I had to put in about 1.5m roubles. I had to buy a car, the leather, and to rent premises. The equipment is rather expensive. One knife for cutting leather can cost around a thousand euros, and each model of watch strap (and there are hundreds of different types) requires its own special knife. The raw materials we buy only in France. I go to the factories myself, select the leather which is then sent to me in Russia over the course of the year. The materials are the same as used by such global brands as Louis Vuitton and Hermes.
Of course, I tried to find the right kind of leather in Russia, too. But for every piece of hide of good quality that would come my way, two would be poor. The local skinners explained: “In Russia, such quality is not yet appreciated”.
— What other materials do you use?
— Awls for stitching alligator, lizard, ostrich, and calf skin. The most expensive hide is alligator; it is further worked by hand to produce an ageing effect. Working with this hide is very demanding. You can’t afford to make any mistakes. But the trickiest of all to work with, in the purely technical sense, is supple calfskin.
— Who developed the logo for your company?
— Aleksey Druzhinin, a well-known designer in Russia. We paid 150,000 roubles on developing the corporate style and logotype.
— How did your client base develop?
— A lot have known me since the time I worked with watches. Clients used to come to the atelier. They would buy a watch strap, then order and second one, and a third one... After all, watch straps are accessories and you can change them. For example, you can choose one where the colour of the stitching around the edges matches with the colour of your tie. Customers started to recommend me to their friends. Also, they started sending over clients from watch boutiques to the atelier. There was an occasion when one of their customers wasn’t going to take a watch for 12m roubles due to it having a rubber strap. We made an alligator skin strap for the watch. And the sale went ahead. So, our client base developed gradually. A year later, we already had several hundred clients.
— Do your clients in Russia differ in any way from those from the West?
— I don’t see any difference. Coming to us we get high-status people who wear expensive Swiss watches, drive expensive cars, and want to look stylish. Such clients are as demanding in Russia as they are in the West.
Overall, the market for fashioning watch straps is fairly saturated both in Moscow and St. Petersburg. Its major players are small ateliers which carry out the stitching and repair of all types of leather goods. In Russia, watch production is not hugely developed, which means that there is not the requirement for making this product on a large scale. For owners of inexpensive watches, having a strap custom-made doesn’t make sense, which leaves only the owners of top of the range watches who might need to replace such an accessory once it is worn out or who might want to own something exclusive.
On opening a watch strap-making business in Moscow, it is necessary first to identify your market. There are two possible directions you can take: one is large-scale production, but to do this would require negotiating with Moscow (or other) watch factories over supplies, which is fairly complicated. The other is making straps to order. With this, the main sales outlets would be watch vendors and watch-repair workshops.
Overall, costs for starting a similar set-up are not particularly unreasonable, and will depend very much on the kind of products you want to offer. On average, to start a similar set-up would require from 2 to 5m roubles of investment. Costs are typically as follows: setting up of an ООО (LLC) or sole trader status 10,000 – 20,000 roubles, a six-month lease of premises 250,000 – 300,000 roubles, equipment from 300,000 to 1,500,000 roubles (depending on the manufacturer of the equipment and the scale of production), website creation 100,000 roubles, spending on marketing for 6 months (site promotion, advertising, PR) 400,000 – 800,000 roubles, and employee wages for 6 months 400,000 – 1,500,000 roubles (depending on the scale of production). And here, as ever, the Russian market is loyal, doesn’t require huge capital investment, like in Europe, and the bureaucracy is kept to a minimum.
— How quickly did you recoup what you had spent setting up the business?
— We were in the red at first. All earnings were going towards production costs. We opened our first boutique near to TsUM (TsUM is one of the best-known stores in the centre of Moscow, situated next to the Bolshoi Theatre – Ed.). The business brought in a small income; on average, we were getting about 100 orders a month. But we really started to gather momentum when we made the ultrafine iPhone covers.
I gave my wife the new iPhone 5 as a present. Arina went around the shops to buy a cover for it but couldn’t find anything suitable. That’s when we had the idea of stitching such covers ourselves.
We worked out that the leather should be resistant to wear and tear and pleasant to the touch. But the flap had to be flexible yet durable (this was the whole point of it – so that it didn’t hang down like a rag). For help we turned to the founder of the Ideal Product Factory, Alexei Noniashvili. His team developed a special flap for us which is both flexible and durable. The leather for the cover became fine and flexible. And the covering afforded by the flap made of microfibres not only protects the screen but also removes finger-marks – grease marks and stains.
All that remained was to make the idea a reality. During the May Day celebrations, we shut ourselves in the workshop. We left the children with my wife’s parents, and over 5 days, and employing a special technique of crimping the edge on the thin leather rather than cutting it, we made the first specimen. And we sewed ultrafine magnets into the flap which keep it in place when you are talking. And the phone can be attached to any metallic surface.
We sold the first covers for 2,800 roubles each. The entire range of colours we offer was displayed on our website. Sales increased when we shot and posted a 20 second promo where you could see all our product’s advantages. Arina, by then, had become the atelier’s Creative Director.
Six months later, re:Store – the official partner of Apple in Russia and Europe – came to us and proposed to sell our covers in their shops at 5,000 roubles apiece. We were surprised: who was going to buy them at that price? But the covers sold very well. At re:Store, seeing our specimens made of alligator, ostrich, snake, and calf skin, they said: “Give us 400 right now”. In six months, we had made them. But we had to substantially expand production. And later we also signed a deal with Aeroflot. Our ultrafine covers were displayed in their SKYSHOP catalogue. They ordered 1,800 of them.
— How difficult was it to find the right craftsmen?
— Very difficult. Everyone who came was put on a three-day trial. We looked to see how much each person was able to learn. But then we realised that a craftsman needs to be experienced. I mean, working with leather is a delicate, difficult business, and a person can’t be taught from scratch in a short space of time. We are always looking out for craftsmen.
— How many people work at your atelier?
— We have 15 employees, 11 of which are involved in the production side.
— How did you find the right premises? Isn’t the rent enormous?
— We found the premises we needed at one of the old factories. We rent premises of 100 square metres. We pay 72,000 roubles in rent a month. It’s not expensive. And it meant that the workshop could stay in the centre of Moscow, which is handy.
— Did you buy more equipment to speed up the process?
— If we invested money in professional equipment, we would simply “go to the wall”. It costs tens of thousands of dollars. It was cheaper to commission a Russian handy-man who, using a 3D printer, made the small tools we needed. But we are still considering buying on credit a professional tool for cutting leather.
— How much do your covers cost now and which colour is the most popular?
— The covers cost from 5,000 to 30,000 roubles, depending on the leather: whether it is calf or alligator skin. The cover for the “7” made of alligator skin taken from the belly we sell for 30,000 roubles; that taken from the sides, for 16,000. The covers in coral, green, and bronze sell well, but it is still black that sells the most. It is a classic. The best-seller is black calfskin. Although the deep blue, and turquoise covers do well too.
— What about the competition?
— In St. Petersburg there is an atelier which makes straps for high-end Swiss watches. But we are in different cities, and we each have our own clients. As for the ultrafine covers, there is no competition there. In 2013 we patented our invention at the Russian Authors’ Society. Somehow someone copied our covers, but we found out about it and warned them straightaway: “Guys, we have the patent”. They wound up their sales and left the market.
— What plans do you have now?
— We have designed a new iPad cover made of natural leather with a foldable flap. We want to make laptop cases, wallets, jewellery cases and various collections in a matching style. We were granted the patent for it in Europe. We are hoping that our covers will soon hit the European market.
— What do you think: is it worth it for Europeans to go to Russia to start a business there?
— The risks in Russia are, of course, many. But it is worth trying to set up a business here.