A specially designed cooker, which changes color to reflect changes in temperature on display at an exhibition in Beijing. Design-based brand-building has become a buzzword for manufacturers in the Yangtze River Delta industrial region. [Photo/ China Daily]

Business was booming until 2008 when demand tumbled as many overseas buyers were hit hard by the financial crisis that sent the global economy into a tailspin. "It was a hard time for the company," recalled Lu Chenghang, Julong's general manager. "We never knew that things could get so bad in a global recession," he said.

For Lu, and many other private-sector entrepreneurs in the Yangtze River Delta industrial region, the recession was nothing short of an alarm call that alerted them to the reality of over-dependence on OEM work. The seemingly inexhaustible supply of low-cost labor had "lulled us into believing that the good times would last forever", Lu said.

Not anymore. The recession hit at a time when labor costs and raw material prices were on the rise, further trimming the producers' already narrow profit margins. Official figures show that manufacturing workers' wages have risen at an average double-digit rate in recent years.

Running out of options, Lu talked his partners into trying something new to save their business. The company began developing its own brands in 2009 to tap the domestic market. Before then, spending on product development, mainly to find ways of cutting costs, accounted for less than 1 percent of total expenditure. Now, "we have budgeted at least 3 percent, or 2 million yuan ($316,000), a year for product and brand development", Lu said.

For that, the company looked to Shanghai for help. It started off by seeking advice from design institutions such as the University of Shanghai for Science and Technology (USST). But "we realize that if we are serious about developing our own brands, we will have to hire experts in commercial design and marketing", Lu said. "We can't skimp on such expenses," he said.

Competition in China's luggage industry is extremely fierce, according to experts. It's crowded with a host of foreign brands selling products that are made in China at highly competitive prices.

Lu said that he aims to carve out a share of the niche market for young consumers who appreciate appearance and style more than established brand names. For example, the company came up with the idea of customizing its top-end "Baoli" brand by accepting requests to print a portrait of the customer on the outside of the suitcase. The company also has another brand, "Julong", that targets the mass market.

The idea has become something of a hit in secondary cities and rural townships. Lu said that many of those who warmed to the idea of having their portrait printed on their luggage are newlyweds going on honeymoon or students heading off to study overseas. "Customer-oriented design is gaining traction in the markets in Europe and the United States," said Lu. "We hope that we can make a profit with this new idea."

Other than marketing "gimmicks", the company has employed the services of USST to design more durable products. "They (the university designers) are making our cases lighter, prettier and more user-friendly," said Lu.

But to compete on quality alone is going to be an uphill fight because Chinese consumers have a long-standing bias toward foreign brands. "Customer-oriented design is still going to be the key to getting a bigger share of the market," said Lu.

And that's not going to be easy either, because of the highly diverse tastes of Chinese customers in the country's many different regions, said Wang Yang of the Kieferzapfzen Design Studio in Shanghai. Although she said her dealings with clients have mostly been pleasant and productive, "there were times when we found we had to stand firm and defend our designs when they clashed with our clients' perceptions of the market", she said.

Wang said that clients that have been exposed to a foreign marketing culture are the easiest to work with because they are ready to accept the innovative ideas needed to compete with foreign brands in the domestic market. For instance, "we have a good relationship with a company that manufactures bathroom accessories, because its manager is forward thinking and innovative", Wang said. "He (the manager) frequently travels abroad and closely follows the latest trends in bathroom accessories," she said. This client has agreed with some of her more avant-garde designs.

A growing number of Chinese manufacturers are beginning to realize that risk-taking is part of the brand-building process. "You can never know for sure if the product you spent months, or even years, developing will become a hit," said Wang. "It's not like OEM when you can work out everything down to the last dime," she said.

Wang recalled that she once had a "terrible time" convincing a manufacturer of stationery products to improve the design of his best-selling line of pens to improve his profit margin. The manufacturer didn't see the need to go to the trouble and expense because he had no problem selling millions of the pens to buyers from around the world.

Last year, the manufacturer came to Wang for help. Dwindling overseas demand had toppled his tried and trusted business model built on economies of scale. "He now sees the need to maximize his profit margins by selling fewer, but more expensive, pens," Wang said. "He has seen the light."

Qiu Yue in Shanghai contributed to this story.