11 Aug 2004
Building A Foothold(HKTDC Fashion - Footwear, Vol 02,2004)
Vol 2, 2004
Putting The Customer First
Building A Foothold
Hau Tai Int'l (Far East) Co
Hau Tai Int'l (Far East) Co's best sellers are its basketball, running and hiking shoes
The ability to move adroitly from machine embroidery to manufacturing shoes has helped make Hau Tai Int'l (Far East) Co one of many successful Hong Kong businesses created by immigrants from the Chinese mainland.
"I came to Hong Kong in 1982 and worked as a machine embroidery worker," recalls director Gary Lee. "After four years, I saved enough money and bought a second-hand machine and started my own embroidery business."
Six years later Lee ventured back to his native Fujian Province to build his embroidery kingdom - which was a near monopoly as the technology was almost unknown on the mainland then.
There, Lee was prompted by a new possibility: "I was making embroidery for Polo shoes and one day my client asked me, 'Why don't you open a shoe factory?'" So he did, just one year after he opened the embroidery plant.
Things went well until 1995, when the machine embroidery business dwindled as competition increased. Lee lost all his Hong Kong clients and had to sell his business and start from scratch.
Using his contacts with mainland factories, he started making shoe samples and spent the next two years travelling the world attending Hong Kong Trade Development Council trade fairs in search of overseas clients.
By 1998, his innovative, quality-conscious approach had seen him rebound and build a new shoe factory in Fujian with a friend. "I insist on good quality. I use EVA to make the shoe soles - it's a lot lighter and more elastic, and the fabrics I use breathe better," he insists. "Our clients understand that I use good materials, so they don't worry about paying a bit more to buy from me."
Hau Tai's best sellers are its basketball shoes, running shoes and hiking shoes. Rocky is its own brand, which Lee sells normally to small markets, but about 98% of its shoes are sold under his clients' own brand names.
Every six months, Lee will come up with a whole range of new designs. "Shoes are not durable nowadays, they are more like accessories," he maintains. "Give them two months, they become old-fashioned."
The US and Europe have traditionally been his major markets, but in recent years Asian markets and "markets in poorer countries" have seen the quickest growth.
In order to tap these markets more efficiently, Lee has appointed established shoe chains as his sole agents in countries like Malaysia, Indonesia, the Philippines and Venezuela.
He has also devised a business strategy characterised by a dual approach that involves gaining customers' loyalty while simultaneously controlling costs.
For example, Lee has started allowing delayed payments of up to two months by clients who have an occasional cash flow problem and also accepts payment via telegraphic transfer.
Hau Tai accepts orders for as little as 540 pairs per style but requires production within three months of order confirmation; a policy that has attracted abundant small clients who provide better profit margins, as they always pay the extra 3-5% to put their own brand names on the finished products.
"The combination of these strategies has worked so well that we saw a 200% increase in business in the second quarter of this year," Lee confides.
His profit line has been further boosted by a cost-control policy that sees Hau Tai operate one factory and outsource most of its production to 83 factories that specialise in every aspect of shoe making.
New clients need to pay a 30% deposit for delivery of a TEU containing 3,500 pairs of shoes within 35 days and 45 days for an FEU that holds 8,000 pairs.
Little wonder, then, that Lee has not been to a trade fair for five years, but is planning to further boost his business by attending this year's shoe fair in Las Vegas.
WRITTEN BY CAM CHEUNG
Hau Tai Int'l (Far East) Co
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