Thai camping equipment manufacturer gears up for exports
By Jon Fernquest |
Manufacturing goods for export is different in many ways from manufacturing for domestic consumption.
With the lowest cost goods coming out of China, competition based on low price alone is difficult.
Image is more important if a company wants consumers to pay a premium over cheap commodity goods for their products.
A variety of different products (product diversification) to suit different consumer needs is also important.
Today's Bangkok Post business section features an article on Outdoor Innovation, a small Thai company that is making the transition to production for export markets.
Here is the article in full:
TRAVEL
Camping gear chain changes strategy
CHADAMAS CHINMANEEVONGWednesday July 09, 2008
Outdoor Innovation, a distributor of camping gear, is moving towards more innovative products and product diversification after hurting its margins and image from entering into a price war over the past few years. The company plans to introduce waterproof and welded products such as jackets, backpacks, laptops, cameras and dry bags. They are now under development and expected to be launched in the last quarter of the year.
Outdoor Innovation owns three brands: Travel Gear, Karana and Equinox. It also supplies tents to the popular Farm Chokchai Boutique Camp in Nakhon Ratchasima. Its best-selling products are tents, sleeping bags, dry bags, mattresses and lifejackets.
Managing director Wasit Sirodom said in order to sustain growth in the long run, the company must focus on product quality instead of prices.
After entering into the price war, he said net profit margins were only 15% from 25% previously. Importantly, lowering prices also hurts its image.
"Being a top regional brand is our goal. So, we seriously aim to upgrade the brands and begin to expand our business abroad," he said.
To reach the goal, it plans to expand into other Southeast Asian markets within five years.
"If we achieve the target, the proportion of exports will increase to more than 50% of our total sales, from only 10% now," said Mr Wasit.
The company's sales were 120 million baht last year and the target for this year was 150 million baht. It has set aside 4.8 million baht for marketing.
Through a joint venture with a foreign partner, the company would open a shop in Malaysia, its first abroad, by the end of this year. It also plans to open one shop each in the Philippines and Singapore next year.
The company's research shows that 70% of customers who purchased camping products, especially tents, are families.
"The government has started to promote domestic camping travel after the number of inbound tourists has dropped this year. The trend bodes well for the camping market," he said.
The market for camping products is valued at around 300-400 million baht a year and grows by 20% annually, he estimated.
Outdoor Innovation has 44 counters at department stores and five stand-alone outlets nationwide. It may open a new flagship store with space of 1,000 square metres in the second half of the year if it can settle the deal with a department store.
(Source: Bangkok Post, business, CHADAMAS CHINMANEEVONG, 09-07-08, page B10, temp-link)
Vocabulary:
camping - leaving urban areas a family will travel to national parks or other nature areas to enjoy nature and the outdoors for a few days at a campsite (See Wikipedia)
camping gear - camping equipment such as tents, sleeping bags, cooking equipment, etc
gears up for Y - makes the necessary changes to do Y
pay a premium over X - pay an extra amount of money, in addition to the normal price X
commodity goods - goods with each unit of the good being the same
diversification - increasing the variety in a set of things (See glossary)
product diversification - increasing the variety of products offered by the company
suit different consumer needs - give groups of customers with different needs exactly what they want
transition - change
a distributor - a company that supplies goods to shops and other businesses
margins, a company's margins, a company's profit margins - the profit of a company expressed as a percentage of sales
image, the image of a company and its products - what people typically think about a company (what they think or imagine when they hear the company's name)
hurting its margins and image - reduced its profit
a price war - when companies in the same market compete with each other by large reductions in the price of their product (this reduces sales revenue, makes the companies less profitable, and associates the company with cheap products in the customer's mind)
weld - join two pieces together with strength (very difficult to pull apart)
sustain growth in the long run - when a company manages to keep growing over a long period of time
net profit - revenue - expenses, showing what the company has earned (or lost) in a given period of time (usually one year), also called net income or net earnings, the bottom line
net profit margins - net profit divided by revenues expressed as a percentage, an indication of how effective a company is at cost control, the higher the net profit margin is, the more effective the company is at converting revenue into actual profit. The net profit margin is a good way of comparing companies in the same industry, since such companies are generally subject to similar business conditions. However, the net profit margins are also a good way to to compare companies in different industries in order to gauge which industries are relatively more profitable. also called net margin (Source: investorwords.com)
upgrade - improve
upgrade the brands - improve the brands
X bodes well for Y - X means that the future is good for Y
stand-alone - by itself, not part of a larger retail center or mall
outlets - a shop that sells the goods of a manufacturer
stand-alone outlets - a shop that sells a manufacturer's goods, not part of a shopping center, mall, or department store
flagship - the most important in a group
the flagship store - the most important store
