A cool breeze keeps sales ticking over

World's financial woes have forced one swimwear maker to look closer to home for buyers

On a pleasant summer afternoon, dozens of middle-aged women sit in a sewing workshop toiling away through lunch break. Thousands of fluorescence orange, pink and other candy-colored swimsuits piled on white workbenches are almost finished.

Once packaged, the 50,000 bikini sets will be delivered and labeled Yamamay, a trademark of the Italian fashion retailer Inticom S.p.A Group, and shipped to Italy.

This production process is repeated year in and year out at Huludao Yifeng (Group) Sports Fashion Co Ltd. Spring is a particularly busy time as the company ramps up production for the coming summer.

Twelve years ago, in the winter of 2000, workers rushed through an order for a German grocery chain. The 200,000 swimsuits the company made became the swimsuit city's first foreign order from a Western country. Earlier it had made foreign forays, selling its swimwear in Russia.

The company is an offshoot of the city's oldest swimwear producer, Xingcheng Yuanhang Swimwear Factory, set up in 1990. Anyone wanting to know how business is faring in Huludao, a city of 2.9 million people 400 kilometers northeast of Beijing, could do worse than looking at Huludao Yifeng.

Not only has it been a pioneer in expanding into international markets, it is also a microcosm of the development of first-generation swimsuit family businesses located on the edge of the Bohai Sea.

"The wholesale price for men's swimming trunks was about $2 in 2000," says Liu Xueyan, the company president.

Before the German order, the company, like the many other swimsuit makers in the city, was selling its products to Russia through Yabaolu, a neighborhood in Beijing with a high population of Russian traders from Siberia.

Those sales, the result of the work of an agent from Beijing, were a harbinger for exports by Huludao's many swimsuit makers.

Since then, the company says, it has had orders from, among others, the US retailer Wal-mart, Sears and Kmart, Jaked of Italy, a part of the Inticom S.p.A. group that distributes the Yamamay brand, and the German swimsuit and bikini brand eleMar.

Last year the company's sales were worth 80 million yuan (10.3 million euros, $12.5 million), compared with little more than 10 million yuan in 2000, Liu says.

The increase can be attributed mainly to the growth in exports, she says. Nevertheless, while exports accounted for almost all of the company's income 10 years ago, last year they accounted for just half of that.

The company's growing sales figures are reflected in its swelling workforce. Once it had only a clutch of machines and just as few workers but now it has a workforce of 500 in a sprawling new factory covering 47,500 square meters, the size of seven soccer fields.

But if Huludao Yifeng has grown accustomed to slotting in sales goal after sales goal in recent years, at one point the goals became increasingly difficult to score.

"Exports grew at 30 percent every year between 2000 and 2008, but we had an all-time low in 2008 because of the economic crisis," Liu says, and sales fell 30 percent. That year sales just covered costs, she says.

By this time, Liu, after about 30 years in manufacturing, had grown tired of her company's products being labeled with the names of others, and she felt particularly vulnerable to an overseas market that was in a slump and looking decidedly unpredictable.

It was then that she decided to go on the offensive and try a new strategy: to increase sales in the domestic market.

"I thought it was high time for us to make something of the Chinese market. After all, going on holiday at the seaside was becoming more popular, so the life cycle of swimsuits was becoming shorter."

She began to develop her own brands, Kdilon and Jinxueer, sales of which have grown at between 5 percent and 10 percent every year since 2008, she says.

Aware of the benefits of spreading risk, Liu says she will secure both the company's domestic and international markets.

The prices of her products sold in China range from 200 yuan to 500 yuan, about the same as for some middle-priced foreign brands.

But she says it is very difficult for her swimsuits to get into high-end shopping malls in big cities because there is a lack of brand awareness, and people know more about Arena from the US and Speedo from Australia.

She has also pondered a brand for the overseas market but given the present economic woes has decided to bide her time and concentrate on the domestic market.

"In the fierce Western market we are competing with numerous mature brands. I know that you cannot build a brand in a day."

Liu, sporting a Chanel bracelet and a black sheepskin Chanel handbag, cites that brand and Louis Vuitton as examples. "It is an accumulation of time and culture."

A few years ago, when she was in Milan, she came across her swimsuits in a department store not far from the city's famed cathedral. As she looked at the swimwear, the pride she felt was accompanied by more than a tinge of sadness.

"Ultimately, although we had the skills and technology to produce all of this, we were completely unknown there."

She says she has been prepared to do the hard work in building her own brand in the domestic market, which, given that there are only a few well known local brands, is less competitive.

In China if the retail price of a swimsuit is 400 yuan, she says, her company gets just 72 yuan of that, but if a 400 yuan swimsuit carried a well known brand name the maker would get up to 180 yuan of that.

In the short term, Liu plans to market more high-end products priced at 800 yuan, and at the same time aims to raise the wholesale price by 10 percent.

"I have to fight for the (profit margins) to cover growing labor costs. Before 2000, labor accounted for 8 percent of our overheads, but now it's 25 percent."

The profit for export and domestic sale is almost the same.

"Although the profit on domestic sales is 20 percent, 10 percentage points higher than on overseas sales, the sales volume in China is a lot lower."

Domestically, design tastes are highly unpredictable, she says, whereas large orders from overseas include patterns, and making swim gear according to them is a lot easier and faster, so the orders are much easier to fulfill.

In addition, domestic sales attract high rates of tax, while exports attract tax rebates.

Liu, who joined the family business 20 years ago after quitting her job as a public servant at a forestry bureau, has not given up on the overseas market.

She says she will work with several big names to reduce the risks of an unstable global economy and fluctuating exchange rates.

"I cannot put all my eggs in one basket. If the basket is dropped, everything is gone."

yaojing@chinadaily.com.cn

(China Daily 07/20/2012 page18)