Michael Chiu, director of I Jang Industrial Co., says he will never forget a time about five years ago when his company lost a major contract for wire household goods to a lower-bidding mainland Chinese rival. The shock was keenly felt, since I Jang had already lopped 30% off what it had already believed were rock-bottom prices.

The lesson Chiu learned from this experience is that buyers are always looking for a bargain, especially in lean times. "After that we decided to roll out our own-brand products to stabilize our business," says Chiu, a former venture capitalist.

The going has not been easy. The company's monthly revenue has dropped by half from NT$80 million (US$2.4 million at US$1:NT$33) around four or five years ago as price-undercutting competitors whittle down margins.

Still, Chiu expects revenue to rebound by 50% to around NT$400 million (US$12 million) this year based on its first-half growth rate of some 20%. Own-brand products now account for around 10% of the company's total sales; OEM/ODM (original equipment/design manufacturer) items continue to represent the bulk of the firm's output.

"In the first month of our own-brand operation, our revenue from own-brand products was only NT$200,000 [US$6,100]. But now, we earn NT$1.5 million [US$45,000] a month, on average, from this segment," Chiu notes.

To promote its own-brand products, I Jang has established a marketing subsidiary staffed with five marketing specialists.

The rest of the I Jang family includes a wire-processing subsidiary Xiang Mao Industrial Co. and surface-treatment subsidiary Hsiang Lian Industry Corp. The company also has an R&D team of 18 specialists.

In the beginning, I Jang sold its "Ogee" branded products through four stores operated by Taiwan Sugar. Today the number of local retail outlets carrying its models stands at 50, including various outlets at Taipei's massive Breeze Center shopping complex.



Looking Abroad


I Jang long restricted its brand business to the domestic market to avoid competing head-to-head with overseas buyers. Recently, however, it has been sounding out interest from overseas retailers. It has secured a pledge from Japanese retailer Erecta to sell NT$25 million (US$760,000) worth of I Jang's products in the first six months of cooperation beginning this June. Erecta, Japan's No.1 supplier of wire household articles, has contracted I Jang to supply it OEM and ODM products for 10 years.

According to Chiu, Metro of the United States invented wire shelves around 30 or 40 years ago and had control of all of the related patents until it first licensed Erecta. Until Erecta came to I Jang to outsource production, I Jang had been a manufacturer of bicycle baskets for nearly seven years. "Erecta visited many Taiwanese manufacturers and finally chose us because we never overstated our manufacturing capability and we were serious about our work," he says. Chiu confesses that making wire shelves was much more complicated than making bicycle baskets, despite the fact that both use metal wires. "We spent a whole year trying various processing techniques and metal wires to find the right ones for the shelves," he notes.

According to Chiu, Erecta has been happy to sell I Jang's own-brand products because his company has promised not to sell products that compete with the Japanese partner. I Jang's products, he adds, can also help Erecta expand its customer base. Last year alone, his company delivered NT$150 million (US$4.5 million) worth of OEM-based and ODM-based products to the Japanese retailer.

Southeast Asian nations are I Jang's first overseas targets for its brand-name products. Last year, the company shipped NT$4 million (US$120,000) worth of "Ogee" wares to Thailand. "Thailand," Chiu says, "is a potential market because metal furniture there is costly. The market heavily depends on imported metal materials and the manufacturing quality for metal products there lags Taiwan."

I Jang has not ruled out the possibility of shooting for a share of the mainland Chinese market. One strategy Chiu is considering is to first open retail outlets there and then evaluate the feasibility of opening a factory. "We have no immediate plans to move production there, even though steel costs on the island have nearly doubled in the recent past. This is largely because such a move would likely necessitate the layoff of all of our 200 or so employees and deeply impact their families," Chiu states.



Benefits of Branding


Although tapping brand markets is a long and costly endeavor, success brings several benefits. In addition to supporting profit margins, brand production gives companies an incentive to keep quality high. Anxious to associate its brand with a high quality image, I Jang uses the best steel from China Steel Corp. and processes wire ends with chamfering, chrome electroplating, transparent coating and box encasing. The company's products are pricier, to be sure, but they are also more durable than rival products, Chiu says.

Higher quality has also reaped rewards for the company, including ISO-9001, SGS, and NSF International certifications. "These certifications underscore the top quality of our products," Chiu says. I Jang has also won contracts from Swedish furniture supplier Ikea, which has recognized I Jang as a Sister Industry Program (SIP) supplier in Taiwan.

Consumers are not only convinced by I Jang's quality but also its service. The company accepts product returns with no questions asked. "As a brand-name supplier, you have to let consumers buy your products without worry," Chiu stresses.

Product design is another selling point of the company. Since moving into the brand-name market, the company has registered over 50 patents on new products, attesting to its R&D successes.

I Jang also designs products to allow for flexible configurations through add-on parts. "This really appeals to our customers because it lets them arrange their living space exactly the way they want," Chiu notes. Configurable products and add-on parts now account for 40% of the company's total output.

The company recently introduced a new "EZ Hand" brand for light-duty wire articles, which has enabled it to segment this market from its heavy-duty products, such as kitchen carts made of a mixture of metal wire, wood, and other composite materials.

Another popular line of heavy-duty items sold by I Jang is sliding storage racks for use in libraries, offices and other applications. "The main selling point of this item is ease of assembly," Chiu explains.

Recently, the company has diversified into other high-end wire products such as hospital ward beds, massage chairs and system furniture. In many of these products a mixture of materials is used. When asked if the company has lost its focus as its product line expands, Chiu adamantly denies any such thing. "All of our products are made with metal wire. That is our specialization."