Different strokes

Chinese company looks to establish presence in US markets with own brand

Even though it is the off-season for swimsuit makers in Huludao, the production lines have not stopped humming at Huludao Stava. Rather they have been running at peak capacity to churn out even more products for the export markets.

Liu Jing, who has been working with the Huludao Stava Sportswear Co Ltd for more than four years, says that she often needs to work overtime to ensure that the products match up to the global quality standards. Standing next to a huge pile of colored dots-on-yellow swimming trunks, Liu says she has to ensure that the stitching and printing on each trunk are of the desired quality.

"The entire range is being shipped to Italy," she says.

The employees get a short break after the current export shipment is finished before the company goes back to full production for the busy autumn season ahead.

Starting off in 2002 as a factory with just 30 employees and an investment of 300,000 yuan (38,600 euros, $47,000), Huludao Stava has developed into a company with more than 380 employees and more than 400 machines.

Zhang Dongyuan, the founder of the company, says that very early on he had realized that the original equipment manufacture path would not be long lasting.

"Profits were shrinking and the conditions in the global markets fast becoming murky. I did not want to be reliant on the foreign brands. I wanted to control the fate of my company by having the ability to design our products and also have our own sales channels," Zhang says.

In many ways Zhang was also a pioneer in breaking away from the mold in Huludao and blazing a new trail. In 2009, he teamed up with Huludao Derong (Group) Garment Co Ltd, a swimsuit maker, to acquire US-based Ingear Corp, a supplier of swimsuits, holiday clothing and leisure clothing. Through the deal, the company got the Playboy swimsuit dealership for the US market.

This was a major breakthrough as it brought a sea change to the existing business profile, reliant largely on the OEM orders from supermarkets in Europe and the US. The turnover of Huludao Stava at that time was around 40 million yuan. The Playboy range made a profit of 700,000 yuan in 2011. But Zhang sees it more as a long-term return with the added benefits of a new sales channel."The total income for the company was 54 million yuan in 2011," he says.

The average price for each Playboy swimsuit is $60 to $80 while the average manufacturing cost is around $8, along with customs duty of about $11.

"We are finally entering the high-end market in the US and the profits are much higher than the OEM business," Zhang says.

Compared with the wholesale price of 30 yuan to 40 yuan and the 10 percent profit for the OEM, Zhang says it is much more valuable.

"Right now, the OEM business just accounts for one-third of our total sales, and the trend for the whole industry in the city is going through a transformation," he says.

Taking advantage of Playboy's sales channel, Zhang is also promoting his own brand, Beach Joy, which was registered in Los Angeles in 2009. To promote the brand in the US, Zhang has set up an office in Los Angeles with 12 employees.

"Most of the products are mainly sold in Latin America. We have teamed up with local distributors to offer the swimsuit products at a wholesale price of $20," Zhang says.

Though he has started to make profits from Beach Joy, Zhang says the road ahead for the brand is not promising.

"Beach Joy virtually had no sales in 2009, the first year of operations, as it was a novice in the highly overcrowded swimsuit market. Subsequently we spent a lot of money and energy to understand the market and promote the brand. These efforts have started to pay off now," Zhang says.

"Though there is still a huge gap between the foreign and Chinese swimsuit brands, I will continue to invest money in promoting our brands."

Boosting Playboy and Beach Joy sales will be the main priority for Huludao Stava next year and the company plans to farm out some of the manufacture as an OEM business to other companies.

Zhang maintains that he remains confident that the brand will establish itself in the US markets.

"The US market is much better than last year, but has still not gone back to the levels before the economic crisis," he says.

Contact the writers at yaojing@chinadaily.com.cn and liuce@chinadaily.com.cn

(China Daily 07/20/2012 page16)