Huaqi keeps flying high

Feng Jun, president, Beijing Huaqi Information Digital Technology, is probably the best salesman in his 1,900-person company even today.

The ebullient man is ever ready to display video clips and music in his Aigo wristwatch. When he talks about the Aigo digital camera, he would quickly plucks the latest model off his belt to demonstrate its "supreme" qualities. After that, he conjures up a credit card-sized flash memory disk from his wallet and then smashes it on the floor to showcase the toughness of Aigo products.

The 39 year-old Feng is one of the many entrepreneurs in China who are striving to break the myth of Chinese brands and low-end manufacturing. Feng expects Huaqi, meaning the flag of China, to eventually symbolize Chinese brands, just as Sony does for Japan. And not just that, the company's logo "Aigo" literally mean "Patriot" in Chinese.

Over the years Feng has built Aigo as one of the most recognized domestic electronics brands. He also managed to tap the marketing opportunities from top international sports events, like the Olympic Games and Formula One races, to woo overseas consumers.

"China will have its own Sony and and Panasonic at the end of the day. And we will be one of them," he said.

'Feng Wukuai'

Feng's life as an entrepreneur started with just 200 yuan and a shared counter in Beijing's Zhongguancun area, an area once dotted with small outlets for computer accessories and now the home of Beijing's largest consumer electronics stores.

After graduating from the civil engineering department of Beijing's Tsinghua University in 1992, Feng was assigned to a government construction company. But when he got to know that the company was planning to send him to Malaysia, the young man left the company.

Just before graduation, Feng's father passed away after working for seven years in Yemen. Thus, a job abroad was not such an attractive option for him. Feng then decided to build his future in the bustling lanes of Zhongguancun.

With just 200 yuan as seed money, Feng had to share a counter with a friend to sell keyboards. But in a couple of years, he had become the largest distributor for a local keyboard brand.

He sums up his secret for this period as "staying stupid". Everyday, Feng, the general manager, salesman and deliveryman, would knock on the doorsteps of every computer store in the area. And his sales talk would always be the same: " I only earn your five yuan".

Instead of just talk, he would show his clients his own purchasing price and reassure them that five yuan was all he asked for each keyboard, rather than the 50 yuan charged by some of his competitors.

His only requirement was for payment at the time of delivery, with no default or even delays.

Feng soon earned a nickname for himself as "Wukuai", which means "five yuan" in Chinese. Soon the 'hard-drive' salesman expanded his business from keyboards to computer cases and then monitors.

Changing fortunes

Aigo's big time finally came in the mid-1990s as its computer memory devices became popular, thanks to the rising need to store content downloaded from the Internet. The company later maintained an annual revenue growth of over 60 percent for a decade and its total sales crossed 2 billion yuan in 2006. Today, the Aigo logo is seen on products like digital cameras, MP3 players, portable media players and digital recorders.

Much of Feng's business success can be traced back to his Zhongguancun experiences. Most of the Aigo products are still priced 20 percent lower than their overseas competitors, including the MP3 players that commands the largest market share in China. When Aigo decided to enter the digital camera market in 2005, Feng ensured that his cameras were sold at prices that were 50 percent lower than their comparable Japanese models.

"The image of Chinese products unfortunately has been destroyed by some business men who made quick money by selling shoddy products. So now Chinese companies have to pay a price," he said.

Feng, however, expects Aigo products to change this perception both at home and abroad. Huaqi now employs 1,900 people, including 700 who work in research and development. The company also ploughs back over 80 percent of its profits into R&D.

Like most of his established rivals, the company does not make its audio and video players, digital cameras and flash memory devices. "We outsource our manufacturing to contract manufacturers, just as it works for Apple and Samsung," he said.

Spreading wings

The company has now decided to take its products global. Huaqi opened its European office in France in 2007 and its first US office in San Francisco in 2008. Feng said his brands have already enjoyed a good reputation in Singapore, the company's first trials in an overseas market.

Trying to gain greater brand awareness abroad, Aigo also managed to become a sponsor in Formula One and displays its logos on the helmets of Lewis Hamilton and the engine hood of all McLaren racers.

Feng has even persuaded Michael Payne, the first ever Marketing and Broadcast Rights Director for the International Olympics Committee, to become Huaqi's consultant. Payne, who had overseen the marketing effort for the 15 Olympic Winter and Summer Games, now spends two days in Beijing each month, helping Feng map out the company's marketing strategy.

A survivor of the chaotic competition in the hustling street markets, Feng also learned to be extremely cautious about cash flow and stay alert to risks. Even today, he still insists for payment on delivery, making it difficult for Aigo to clinch deals with big retailers such as Wal-Mart, who usually pay only after four to five months.

Such insistences have undoubtedly delayed Aigo's overseas expansion, but Feng believes one has to be careful when testing uncharted waters.

In 2004, State-owned Sichuan Changhong Electric, one of China's largest TV makers, sued Apex Digital for defaulting on payments of nearly $500 million. Changhong had become the main supplier for Apex since 2001 and the brand dominated the sales of low-cost televisions and DVD players in chain stores in the United States at that time. In 2006, the loss-making TV maker finally won the marathon lawsuit, and retrieved $90 million as compensation, mostly from the transfer of the hardly valuable Apex brand.

After Changhong's huge losses were disclosed, the local government replaced the company CEO with a former high-ranking executive and also helped arrange loans to keep it afloat.

"If a private company like us had made such a mistake, who is there to bail us out?" said Feng.

(China Daily 01/05/2009 page12)