Developing a brand name is hard work, and Marvin Wei (魏敏聰) knows how complicated and challenging it can be to take steps in this direction for the first time. “As an OEM [original equipment manufacturer], you focus on how to run a factory efficiently and learn all the things that can help reduce the cost of manufacturing,” says the president of AROPEC Sports Corp., which is based in Taichung City, central Taiwan. “But once you change course and have fully devoted yourself to branding, there’s a lot more to learn, such as organizing activities and interacting with agents, in order to market your products.”
After initially developing its line of branded water sports products, AROPEC set up a concept store in Taipei City in 2013 that displays the full array of the company’s offerings to promote AROPEC as a brand. “Through this store, I can better understand the problems confronting the retail points around the world that sell my name-brand products,” Wei says.
Paul Yang (楊惟超), who runs Continental Chemical Industries Co., has decided to take that same step. The company, which is also known as Conti, will open a concept store on the ground floor of the building housing its headquarters in Taipei later this year. For years, Conti has manufactured basketballs and various rubber sports balls for global vendors like Wilson Sporting Goods Co. in the United States. In recent years, however, the company has adopted a more serious attitude toward promoting Conti as a brand name.
For a long time, most Taiwanese sporting goods manufacturers have operated as OEMs, although there have been a few notable exceptions such as Giant Manufacturing Co. Ltd., one of the world’s biggest bicycle makers. The recent efforts of AROPEC and Conti underscore the ambitions of small and medium-sized companies hoping to make a greater mark at home and abroad with their own brands.
Wei’s and Yang’s enterprises trace their origins to the 1960s, when their fathers each started a small manufacturing business that later evolved into a corporate group taken over by their respective sons. Each enterprise had been thinking of developing its own brand since the 1980s, but progress remained slow until this century. “As an OEM, I saw the sales margins dwindling year after year due to fierce competition. And your business can suffer if buyers suddenly abandon you when they find OEMs that offer better deals,” Yang says of the increasing pressure to forge a new path for his company.
A foreign marathoner wearing AROPEC brand garments in a race across central Taiwan. Although mainly created for products used in water sports, the brand has expanded to land-based activities in recent years. (Photo courtesy of AROPEC Sports Corp.)
Like many Taiwanese companies, rising labor and land costs drove Conti to move its manufacturing to mainland China in the early 1990s, but the head office is still in Taiwan. Since then, the business has expanded in scale. Conti used to employ 100 workers on its production lines in Taiwan, but now has about 600 workers at its factory in Guangzhou, southern mainland China. When the company was founded in 1969, it produced 500 balls of various kinds every day, and that number is 20 times greater today. In the long term, however, Yang thinks the company’s growth will depend on the development of its own brand. Therefore, in 2007 he commissioned a consulting firm to teach Conti management about branding and began systematically promoting the brand in the domestic market.
Partly for personal reasons, Wei chose to maintain AROPEC’s manufacturing base in Taiwan, making products for diving and other water sports for top brands such as Aqua Lung. However, he has always wanted to take his business in a new direction despite the challenge of changing course and moving away from old business models. “My clients canceled orders when I was seen at international trade shows making contact with distributors. They figured we were trying to promote our own brand on those occasions, and felt threatened we would grab market share from them,” Wei says of the consequences of seeking greater independence for his company. AROPEC’s new approach put a severe dent in its revenue, but Wei knew that was the price to be paid on the road to change. However, his clients soon realized it would be difficult to completely replace this longtime partner and continued to place orders, though in smaller amounts. At the same time, the company was establishing more connections with distributors at trade shows and garnering orders for its own brand. Eventually, the tough times came to an end.
Conti kept its branding campaign focused on the relatively small Taiwan market, and its overseas clients had no cause to feel alarmed when it moved beyond its OEM business strategy. Yang learned that branding is a challenge for any business. “Returns on investments are predictable when you operate as an OEM. You get orders, prepare the corresponding materials and manufacture products according to the specifications of your buyers,” Yang says. “But branding is about marketing. It takes courage to do this. You put money into publicity campaigns but you don’t know how rewarding they’ll be.”
Conti’s branding tactics have ranged from advertising at major subway stations in Taipei to sponsoring activities organized by Taiwan’s soccer and basketball associations. A network of about 300 distributors pitches Yang’s products in schools throughout Taiwan, and founding the Conti volleyball team has further enhanced the brand’s visibility. Revenue generated by Conti brand products now accounts for more than 3 percent of the company’s total income. Yang admits that it took two years longer than expected for the company’s brand to break even, which happened in 2012. The much larger OEM business, however, helped absorb the financial drain of the branding effort.
Conti’s decades-long OEM experience, which still generates the vast majority of the enterprise’s revenue, provides a strong foundation for its branding efforts. (Photo courtesy of Continental Chemical Industries Co.)
“The company has long operated as an OEM, which has been a plus for developing its own brand. Conti’s manufacturing experience has given the company the quality control expertise it needs to ensure a good brand image. As a manufacturer, it can directly control the quality of the goods as well,” says Andy Chou (周文華), a sporting goods distributor with a retail store in Taipei. “Conti still lags behind big brands in name recognition, but I wouldn’t hesitate to recommend this Taiwanese brand to school authorities or individual buyers,” he adds, noting that Conti is the only sports ball brand to have originated in Taiwan.
In a similar fashion, Wei has broadened brand recognition through donations of AROPEC products and by sponsoring local professional athletes competing in domestic and international events. He also builds relationships with his distributors around the world by visiting them in person and by participating in major international trade shows every year. “The best performing distributor in a specific region gets the exclusive right to sell my products in that region,” the entrepreneur says of how he encourages distributors to promote his brand.
Phenomenal Growth
The phenomenal growth of AROPEC in recent years also owes much to marketing through e-commerce platforms such as Taiwan Trade, which is operated by the Republic of China (ROC) government-funded Taiwan External Trade Development Council, and Alibaba.com, the primary business of the mainland China-based Alibaba Group.
The entrepreneur says that he was thinking of promoting his brand via the Internet as early as 2000, but online services were still too rudimentary for his needs back then. With Taiwan’s broadband services improving yearly, the situation has gradually changed for the better. Meanwhile, Alibaba.com, the largest online trading platform in the world, started working with Taiwanese businesses six years ago. Wei really started to see rapid growth of his brand after becoming one of the portal’s clients.
Wei thinks online marketing is especially effective for enterprises targeting customers with special interests such as divers and surfers. Today, more than 70 percent of his company’s total income comes from products that carry the AROPEC brand, up from the 30 percent prior to his involvement in online marketing. People making purchases online now represent about 85 percent of the firm’s customer base. Wei says his company has been especially successful in the Middle East, where AROPEC wetsuits sell better than any other Asian brand. “Big names traditionally focus on comparatively thick suits and the heavy gear used in temperate and cold climates, but we’re good at producing lighter suits used in warmer regions like the Middle East,” he says about AROPEC’s success in the region.
AROPEC has boosted its image by sponsoring professional athletes such as those in this canoeing competition in central Taiwan. (Photo courtesy of AROPEC Sports Corp.)
Developing a wider range of AROPEC items is another strategy the firm uses to increase brand influence and boost sales. Water sports garments remain the company’s core business today, but it also sells life jackets, swimming goggles, GPS sports watches and other products that are not necessarily produced by the company. Moreover, the AROPEC catalogue has expanded during the last three years to include products for land-based sports like cycling and long-distance running.
Innovative product designs often improve the image of a brand. With this adage in mind, in 2008 Conti began selling a specially designed water polo ball for which the company holds the patent. The rubber ball has a surface texture that provides improved handling and gripping, which are important factors in water polo because a player can only touch or hold the wet ball with one hand at a time. Conti’s water polo ball has since been used in games at home and abroad, helping to spread international brand recognition for the company. In 2010, Conti was chosen by the International Canoe Federation’s Canoe Polo Technical Committee as the official ball supplier for the next four years, starting with the 2010 Canoe Polo World Championships, which saw 64 teams from 25 countries qualify for the final rounds of competition. The sponsorship was later extended for an additional four years.
“Taiwan’s textile sector is quite strong in designing and making functional fabrics. Many of my garments must use fabrics that can breathe well and hug the body perfectly—two functions that rarely exist simultaneously—and I can find local businesses that provide such materials,” Wei says.
AROPEC maintains its competitive edge by continually improving the function of its products. A recent innovation is a jogging outfit with an ergonomic design that reduces the risk of muscle injuries like pulls and spasms.
Much credit for the company’s innovation goes to Shiang Tzyy-yuang (相子元), who notes that previous research for sporting goods largely aimed to enhance efficiency on the production line and improve the properties of materials. Shiang is a professor in the Department of Athletic Performance at National Taiwan Normal University (NTNU) in Taipei. In 2006 he was commissioned by Nike Inc. to supervise a project to design shoes for martial arts athletes competing in the 2008 Beijing Olympics. The project inspired him to found the NTNU Sports Lab in 2008 to design and test sports products, and Wei approached the academic in 2012 for professional advice on garments for runners. Thereafter, Shiang, AROPEC and the Taiwan Textile Research Institute applied for a subsidy provided by the ROC government-funded Small Business Innovation Research Program. The application was approved and the funding has been used for the ergonomically enhanced jogging apparel project that began in April 2013 and is scheduled to conclude this month.
The Conti volleyball team emerged in 2009 as part of the strategy for increasing public recognition of the brand. (Photo courtesy of Continental Chemical Industries Co.)
Passion Pays
“Being innovative is crucial to branding, because it’s a mindset that makes you stand apart from competitors and highlight the uniqueness of your brand,” Shiang says. The academic is also the director of the Taiwan Sports Technology Association (TSTA). The nonprofit organization, which was founded in 2008, is a platform for enhancing interaction between businesses in the sector and academics specializing in ergonomics, biomedical engineering and physical therapy. “In earlier years businesses focused on manufacturing and didn’t think about branding. Later they started to design products according to certain requirements. But they’ve awakened to the need to create and market their own brands, partly because of the fierce competition from other manufacturers,” Shiang observes, noting that the founding of TSTA echoes the sector’s recent embrace of advances in sports technology as a means to strengthen branding.
AROPEC and Conti both believe branding is the best strategy for sustainable growth in the future. Yang and Wei have each invested time and money to further their ambitions. Last year Yang enrolled in National Taiwan University’s executive MBA program, which has allowed him the opportunity to exchange views on branding with other entrepreneurs in Taiwan. Wei, on the other hand, has continued to take classes in e-commerce to learn how to promote his products online.
For now, Conti is keeping its focus on the domestic market. It deems home the best place to hone its branding skills for future use in overseas markets, which are now dominated by top brands such as Spalding and Wilson. “It’s a big challenge to build a brand, but the growing percentage of revenues generated by products with my own brand is encouraging me to expect a future in this direction,” says Yang, who hopes his brand will provide 10 percent of the company’s total revenue in the foreseeable future.
“You need to have passion and a sense of mission to achieve success at branding,” Wei says. Transforming from an OEM to a brand name is a tempting but challenging goal, yet companies like AROPEC and Conti have proven the value of taking a chance on branding. The two firms serve as role models for other small and medium-sized businesses that still hesitate to begin building their own dreams.
Write to Oscar Chung at mhchung@mofa.gov.tw