Quality not quantity: ‘Made in China’ label will emulate ‘Made in Italy’ 10 years from now, vows Hong Kong garment maker
Nick Chan’s company, Hale Textile Limited, is transforming its Dongguan factory’s former mass-production business model so 80 per cent of its clothing caters to high-end buyers
Nick Chan Ying-kit is the director of Hale Textile Limited, a Hong Kong-based garment maker founded by his father in a small factory space in Fo Tan in 1984.
Today it has 1,400 staff at its 240,000 square foot factory in Dongguan, 60 more employees at its Hong Kong headquarters, 400 at its Shanghai factory, and also runs a small design studio in Britain.
Chan, 39, tells Gloria Chan how his company has been transforming to survive and where he sees the “Made in China” clothing label in 10 years.
When and why did you decide the traditional manufacturing model needed changing?
We smelled trouble in 2008 and felt if we did not transform our business model we would not be able to survive for long. In the past, China opened up its doors and labour was cheap, so all factories came to the mainland and specialised in mass production, with orders calculated by the hundred of thousands.
At first we also did mass production, but the main problem was that costs on the mainland kept on rising – labour costs were going up and the Renminbi was becoming more expensive – yet our clients were demanding lower and lower prices. Export prices fell around 2 per cent every year, so from 2002 to 2008 it fell by 10 per cent in total.
When I first came back to help my father’s business in 2002, the average salary of a worker was 500 yuan (HK$592) to 600 yuan a month, then in 2008 it was 2,000 yuan. Now, it is 4,000 yuan.
We tried our best to improve our efficiency, but that is only useful when you are aiming to increase in bulk, but not that much use when you want to improve in quality and details.
Also a study by British-based product analysis company GSD [General Sewing Data, which helps to quantify manufacturing methods, times and costs] shows that our factory’s efficiency is already well above the Chinese average.
Another solution could be to move north to provinces like Jiangxi. But I know many friends and colleagues who did that and none of them was very successful – salaries in the north are not that different.
How has Hale been seeking a solution?
When we opened our first mainland factory in Dongguan in 1994, we were making plain T-shirts, which took only a few minutes to produce. Then in 1998 we expanded to doing sweaters and shirts, but designs were still simple and orders were in bulk. Around 2008 we started thinking that, since we could not compete with southeast Asian countries like Cambodia and Vietnam in terms of costs and prices, we should aim to produce more premium, high-end items that cannot be easily copied.
In the past, we sold clothes to retailers at US$10 per piece; now, with better quality and higher standards, our products sell at around US$30 per piece. The most expensive garment we’ve produced was a big cashmere scarf, knitted using a special method, which we sold to retailers at US$400.
Now each one of our garments takes an average of 50 minutes to make. With the same number of workers, we produce half the quantity we produced before, yet each item has become more expensive. There are many value-added elements; we are one of the first manufacturers in China to do digital printing on wool and cashmere clothing.
Yet I’m also aware that a factory as big as ours cannot solely rely on premium products. We still have mass-production orders from clients such as Marks & Spencer, so we are running on two legs. Now, 50 per cent of our products are still cheap mass-produced items, and the rest are premium ones. Eventually we are aiming to have 20 per cent of our garments mass-produced, and the rest all premium products. When we reach that stage, our transformation will be complete.
What are the major difficulties you encountered in changing the business model?
I always use this simile: we are trying to transform a van into a Porsche, yet we need to keep the vehicle running during the transformation. It cannot stop. You can’t say my factory is in the process of transformation so you stop production and switch all the employees.
It’s also hard to convince people around you to change: people don’t like change and bulk orders are always easier to do. It is difficult to change the mindset of people and if they don’t feel the urgency they don’t want to change. It is only now that everyone is realising the danger, but of course, if we only started changing now it would already be too late.
I think the most difficult part of my job as director of the company is that I have to juggle between planning and preparing for the future, while also handling all the things that are happening right now.
Where do you see the ‘Made in China’ label in 10 years?
I believe that 10 years from now “Made in China” will be perceived around the world like the “Made in Italy“ label is right now – products that are well designed and of high craftsmanship. People will look at “Made in China” and think, “Oh, this is something good”.
I can tell you, China is making the best wool sweaters in the world now. You cannot find enough workers in Italy who do tailoring anymore. Many top global brands are finding us to produce their garments. You walk into high-end shops and you will see fewer “Made in Italy” labels and increasingly more with ‘Made in China’. We just need to keep up the standard, then “Made in China” would mean high quality products.
The best chance of standing out is producing wool clothing, which requires more manpower and machinery and a good and complete production chain. China has all these – from raw materials to the technology needed. Other countries cannot compete with us on this. That’s how we stand out.
How can you ensure you continue to stand out by producing wool clothing?
The Knitwear Innovation & Design Society, of which I am an executive committee member, has been working on training new talents to enter the knitwear trade in Hong Kong in the past. Without new talents, how could you become the next Italy? We have put a lot of time and effort into this. Some designers who joined the society are actually working with me now.
What one piece of advice would you give to garment factory owners in Dongguan?
You cannot afford to sit down and think that the good old days will be back when our labour costs and other costs are actually still on the rise. Instead, find your strength and think of the reason why others will want to buy from you.