Tablewhere in Quotes; a Discussion with Mr. K.M.Lam Of Kennex (Hong Kong) Ltd.
Kennex (Hong Kong ) Ltd were founded in 1993 and are still in business today thus their history as a trader and marketing company of tableware (ceramics mostly but also glass and enamelware) cover a similar period of history as the article. We spoke to K.M.Lam about the company development and how it adapted to the changing industry.
‘We started business in 1993 and there was just four of us including myself though I had experience when younger of working in frit manufacture in Taiwan and a vitreous enamel plant in Nigeria. It was not unusual at all in the beginning for us to be doing the ware inspection, kneeling on the floor doing quality control. We now have about 300 employees in several countries.
At the start we were a simple Hong Kong trading company but as foreign companies had no experience dealing with China and we had language skills, contacts and cultural awareness, plus some ceramics experience we had a great advantage.
China factories expanded production or new factories were built every year leading to over production and lower prices. Mostly the tableware was porcelain and stoneware; nowhere else had such big capacity available, but Kennex also had to coordinate the purchasing of decorative materials, decals and the application and firing.
It became a more complex business and more of our time was spent on design and presentation – it was more challenging to satisfy customers. So we brought in technicians from Japan to help with shapes, from England for decoration, a specialist in decals… others for packaging and design – like Italian designers to help with decorations suitable for that market. At first we concentrated on the European business and maybe we were the first Hong Kong company to employ our own local agents in Europe, we paid a generous commission too – to encourage them and build up a loyal network. The quota system was in operation then and it was a lottery if you applied and ‘won’ part of the quota. So some companies would create lots of companies just to apply for quota and then consolidate any wins – more tickets more chance to win. If you have more volume you can get a good turnover and it helps with being a reliable supplier. In 2002 Kennex acquired Harvergrange Plc in UK – who had quota for the UK so with our already established network this helped us grow in Europe and the UK. The growth in Europe helped us to fund expansion into the USA and to do that we had to recruit people in the market and build connections there. America is a different market and as we were entering there was the change..the increase in more ‘ compliance issues’. For example food contact, anti terrorist, ethics compliance and so on. Many smaller companies just cannot survive as they cannot provide that degree of compliance, it was difficult for us too at the beginning but we soon learnt and having US staff helped. Nowadays if a store in the USA has a product returned, or a question from a customer about the ceramic ware – the query or claim will be sent to Kennex so we are responding to individual customers not just corporations we sell to. In those respects the US market is more demanding. Customers can also find out which factory supplies the goods – if they are prepared to check the customer’s web sites, the CCIB [Chinese Import / Export Bureau] and do the research. 88 มกราคม - เมษายน 2559 Kennex had highest sales, a turnover of about US$50 million in 2007, just before the financial crisis. Since then there has been a dip of course and the trend is changes in the product mix. Before the orders would be for 16, 20, 45 piece sets. Now there are more 2, 3 pieces sets and products for smaller families, smaller sittings and designs for festivals or fashion – like Halloween or Christmas. So the individual price might be lower but customers collectively pay more for the same number of pieces. It’s easier to buy a gift at 9.98 than have to make a decision at 27.99.
Going back to the EU business the quota system ended in 2005. The market became ‘disordered’ as more people became involved and individuals and new companies claimed to be traders and offering cheaper prices. Now with the EU the orders are comparatively smaller compared to the USA so companies are more likely to take a risk. USA customers place larger orders but are more demanding – so they are reluctant to change suppliers as there would be a lot of disciplines to change that might go wrong.
The Chinese too were visiting Europe and seeing the prices of tableware in the shops – they would see EUR 3.50 on an item in the shop and know they had sold it for EUR 1.00 and supposed they could make that EUR 2.50 for themselves. But they did not understand the cost of the supply chain; freight, warehousing, advertising etc. But of course the fact they were offering discount put pressure on established suppliers who in their prices were covering all of these things as well as independent product testing by SGS, BV or such. Needless to say some people in Europe and China got their fingers burned when they made mistakes and realized things were not so straight forward.
We have to remember that Kennex opened our own factory in Dongguan China – to handle some new shapes and designs, to be a facility where we could undertake confidential work on customer specific designs. We also invested in a 30,000 sq/ft showroom to show designs and effects to customers. So we offer a comprehensive service – we supply what the customers want to buy rather than what we want to sell.
China now is developing, there are more labour laws and environmental protection ordinance, social compliance; hundreds of thousands of companies [across all industries] will close as they cannot afford these costs. Yet still export customers still want ‘Cheap Chinese’ – it is a conflict. So you start to see the domestic market increasing and some companies rejecting export orders. The domestic market for restaurants and hotels has increased as has the giftware market which is a young people thing too.
But Kennex are still investing – more into research and development, 3D printing, mould making, automatic machinery, equipment that is appropriate for what we make. This is because for the export volumes it is very difficult to move this capacity overseas and it is easy to buy the wrong types of equipment – you must keep in mind what your customers want to buy and spend your dollars accordingly. This is also why it is now a difficult market to enter – it is very demanding and companies need to understand all the aspects of the supply chain and the infrastructure needed to satisfy it.
I think now our customers in USA and Europe understand that 5 or 10% higher price is good insurance and it is better to deal with a reputable trader who will be responsible.’
‘We started business in 1993 and there was just four of us including myself though I had experience when younger of working in frit manufacture in Taiwan and a vitreous enamel plant in Nigeria. It was not unusual at all in the beginning for us to be doing the ware inspection, kneeling on the floor doing quality control. We now have about 300 employees in several countries.
At the start we were a simple Hong Kong trading company but as foreign companies had no experience dealing with China and we had language skills, contacts and cultural awareness, plus some ceramics experience we had a great advantage.
China factories expanded production or new factories were built every year leading to over production and lower prices. Mostly the tableware was porcelain and stoneware; nowhere else had such big capacity available, but Kennex also had to coordinate the purchasing of decorative materials, decals and the application and firing.
It became a more complex business and more of our time was spent on design and presentation – it was more challenging to satisfy customers. So we brought in technicians from Japan to help with shapes, from England for decoration, a specialist in decals… others for packaging and design – like Italian designers to help with decorations suitable for that market. At first we concentrated on the European business and maybe we were the first Hong Kong company to employ our own local agents in Europe, we paid a generous commission too – to encourage them and build up a loyal network. The quota system was in operation then and it was a lottery if you applied and ‘won’ part of the quota. So some companies would create lots of companies just to apply for quota and then consolidate any wins – more tickets more chance to win. If you have more volume you can get a good turnover and it helps with being a reliable supplier. In 2002 Kennex acquired Harvergrange Plc in UK – who had quota for the UK so with our already established network this helped us grow in Europe and the UK. The growth in Europe helped us to fund expansion into the USA and to do that we had to recruit people in the market and build connections there. America is a different market and as we were entering there was the change..the increase in more ‘ compliance issues’. For example food contact, anti terrorist, ethics compliance and so on. Many smaller companies just cannot survive as they cannot provide that degree of compliance, it was difficult for us too at the beginning but we soon learnt and having US staff helped. Nowadays if a store in the USA has a product returned, or a question from a customer about the ceramic ware – the query or claim will be sent to Kennex so we are responding to individual customers not just corporations we sell to. In those respects the US market is more demanding. Customers can also find out which factory supplies the goods – if they are prepared to check the customer’s web sites, the CCIB [Chinese Import / Export Bureau] and do the research. 88 มกราคม - เมษายน 2559 Kennex had highest sales, a turnover of about US$50 million in 2007, just before the financial crisis. Since then there has been a dip of course and the trend is changes in the product mix. Before the orders would be for 16, 20, 45 piece sets. Now there are more 2, 3 pieces sets and products for smaller families, smaller sittings and designs for festivals or fashion – like Halloween or Christmas. So the individual price might be lower but customers collectively pay more for the same number of pieces. It’s easier to buy a gift at 9.98 than have to make a decision at 27.99.
Going back to the EU business the quota system ended in 2005. The market became ‘disordered’ as more people became involved and individuals and new companies claimed to be traders and offering cheaper prices. Now with the EU the orders are comparatively smaller compared to the USA so companies are more likely to take a risk. USA customers place larger orders but are more demanding – so they are reluctant to change suppliers as there would be a lot of disciplines to change that might go wrong.
The Chinese too were visiting Europe and seeing the prices of tableware in the shops – they would see EUR 3.50 on an item in the shop and know they had sold it for EUR 1.00 and supposed they could make that EUR 2.50 for themselves. But they did not understand the cost of the supply chain; freight, warehousing, advertising etc. But of course the fact they were offering discount put pressure on established suppliers who in their prices were covering all of these things as well as independent product testing by SGS, BV or such. Needless to say some people in Europe and China got their fingers burned when they made mistakes and realized things were not so straight forward.
We have to remember that Kennex opened our own factory in Dongguan China – to handle some new shapes and designs, to be a facility where we could undertake confidential work on customer specific designs. We also invested in a 30,000 sq/ft showroom to show designs and effects to customers. So we offer a comprehensive service – we supply what the customers want to buy rather than what we want to sell.
China now is developing, there are more labour laws and environmental protection ordinance, social compliance; hundreds of thousands of companies [across all industries] will close as they cannot afford these costs. Yet still export customers still want ‘Cheap Chinese’ – it is a conflict. So you start to see the domestic market increasing and some companies rejecting export orders. The domestic market for restaurants and hotels has increased as has the giftware market which is a young people thing too.
But Kennex are still investing – more into research and development, 3D printing, mould making, automatic machinery, equipment that is appropriate for what we make. This is because for the export volumes it is very difficult to move this capacity overseas and it is easy to buy the wrong types of equipment – you must keep in mind what your customers want to buy and spend your dollars accordingly. This is also why it is now a difficult market to enter – it is very demanding and companies need to understand all the aspects of the supply chain and the infrastructure needed to satisfy it.
I think now our customers in USA and Europe understand that 5 or 10% higher price is good insurance and it is better to deal with a reputable trader who will be responsible.’
