Share | |

Enter the Dragon

Some Hawaii companies have been doing business with China for decades

By Lori Anne Tomonari

China's cutthroat reputation often precedes it. Notions of shady operations and unreliable businessmen generally characterize the country, making it an all around difficult place to do business. However, small-business owners in Hawaii, who've dealt with the country for the past several decades, disagree.

It's Truly All About Relationships

"The dishonesty is no worse [in China] than anywhere else," says Tom Matthews, president of Trade West Inc., which owns Forever Flowers, Aloha Hawaii Lei and Nani Stuffs. Matthews has been importing Hawaiian-themed products and silk flower lei from China since 1978.

FLOWER POWER: Tom Matthews stands among the hundreds of imported flower lei and accessories in the Trade West showroom.

In 1976, Matthews sold imported baskets and silk floral arrangements, but later he discovered a more lucrative industry. When a thunderstorm hit Saipan in the '70s, Matthews and his wife were forced to spend the night in a silk flower factory. To pass the hours, the couple experimented with the stem material and eventually created the drinking-straw-silk-flower lei, a popular accessory in Waikiki. Although it was years before the market accepted the product, it now sells worldwide.

Tom Coyne's company, Hawaii Intercontinental (HIC) imports hats, dive gear, boogie boards and footwear from China. Although the initial contacts were set up by HIC's previous owners, the success of a business can be directly linked to the quality of continued relationships with Chinese vendors. Coyne says his frequent visits, about twice yearly, show his dedication to the local businessmen, earning their trust. Both Coyne and Matthews have sustained relationships with a handful of Chinese vendors for more than 25 years.

Sam Chong, owner of ABC Seating, a home decorating and furniture company, followed friends on a trip to China 27 years ago. Already established businessmen, his friends introduced him to key industry contacts. Chong imports 50 percent of all his goods from China – filling up to 10 40-foot-long shipping containers each month. "You live and learn," Chong says of the hardships encountered by entering trade with China early on. Although his factory closed and reopened twice, his business is still burgeoning. He plans to double his sales volume in 2006 by expanding to the Mainland.

While each came into the business by different means, Chong, Coyne and Matthews agree that relationships are the key to success in China.

"The vendors in China have a tremendous amount of loyalty to the people they work with," Coyne says. Although there are horror stories of the Chinese leaving Westerners high and dry, Chong contends, "If we keep up with our word, they keep up with theirs." This sustained relationship leads to successful businesses; what began as local distribution companies for Matthews and Coyne have grown to include worldwide markets. Both sell to local K-marts and Wal-marts, ABC stores and Hilo Hattie. Matthews has expanded his business to reach more than 15 countries, including Panama, Germany and Japan.

Communication is Essential

"A lot of Westerners go into Asia and expect Asia to act like the West," says Coyne. It is this type of businessman that does not succeed. "Eat the food, enjoy the people, read the books – you have to get to know the culture," says Coyne. A sincere understanding of the culture in China will open more doors for a newcomer and help him communicate with the local suppliers. Although the cutthroat element of Chinese business exists, "Those experiences you hear about happen with people who don't understand the country."

TIP OF THE HAT: Tom Coyne has been successful in importing sun hats and dive gear from China for years.

At the root of most problems is miscommunication, not treachery, says Matthews. Situations need to be approached in a manner very different from doing business in the West, Coyne adds. Often, suppliers will agree to certain terms, for the sake of being agreeable. Every detail needs to be clarified to avoid faulty shipments.

Success is Self-determined

The success or failure of a company hinges on the company itself. Initially, China is a difficult place to work, until you learn your way around and meet the right people, says Matthews. "Small businesses most likely succeed or fail based on the individual people they do business with," says Phil Bossert, of the Department of Business, Economic Development and Tourism (DBEDT). Trade shows are the best places to meet suppliers – finding the right suppliers, unfortunately, is a trial-and-error process, he says.

Alternatively, it is much easier for new companies to establish relationships through brokers. Although it costs about 8 percent to 10 percent more to use a broker, it eliminates most of the initial problems, Coyne says. It is easier to communicate after the relationship is set up, Coyne says. Nowadays, most factories and companies have at least a couple of employees who speak proficient English, making future deals much simpler.

With so many businesses and people in China, the options are abundant. "There is almost always someone, somewhere willing to do something for you for cheaper than you are paying now," says Bossert. Cheaper, however, doesn't always mean better. Western provinces, for example, will produce items at a lower cost than most areas, however, issues such as quality control or inadequate work environments may arise with this lower cost, Bossert says. Also, companies have to consider the cost of shipping from the western provinces. "In short, the extra savings offered from a factory or product source may be eaten up by extra costs somewhere else," Bossert says. The bottom line is to find the right people in the right place and to realize that "It's possible to create a lot of value in almost every area of business in China."

Matthews and Coyne have done exactly that. The value of their businesses can be measured by their growth over the years. "For the past 15 years we have averaged about 10-percent to 15-percent growth [in sales] per year,"" Matthews says. Trade West began with about five employees and its staff now exceeds 30. Coyne's HIC has also experienced steady growth, increasing its staff by about 5 percent to 10 percent each year. HIC had 25 employees when Coyne purchased the company nine years ago and has grown to 55 employees and sales that increased 15 percent from 2003 to 2004.

"Without China, I don't think I'd have any competitive edge," ABC Seating's Chong says. But businessmen cannot go to China and expect to have the same success as these companies that have been at their trades for decades. "It's not going to happen over night," Chong says. "You've got to hang onto your relationships, that's the biggest asset you have."

CHINA BUSINESS RESOURCES

• Business, Economic Development and Tourism (DBEDT) office in Beijing (861.0.6527.7530) offers assistance with introductions, referrals and provides answers to basic industry questions.

• DBEDT's Strategic Marketing and Support Division (587-2784) and its Foreign Trade Zone Division (521 Ala Moana, Pier 2, 586-2507) provide services and facilities to local companies engaged in international trade.

• The federal government's www.export.gov provides market research, world wide trade event information and counseling.

Hawaii Business magazine invites you to comment on our articles and the issues they raise. Comments are moderated for offensive language, commercial messages and off-topic posts and may be deleted. Some comments may be chosen for inclusion in the magazine on the Feedback page.

Add your comment:
Verification Question. (This is so we know you are a human and not a spam robot.)

What is 2 + 9 ?