Hard times call for innovative entrepreneurship

Having discovered that the majority of the profit would go to brand owners, Wu registered his first trademark in 1995. But that was just a label for products based on the specifications and styles of an order placed by a Hong Kong merchant, and was doomed to failure.

After he shipped the jeans of his "brand" to the United States, he was dismayed to learn that they ended up not in shops, but in warehouses, because his specifications and styles were not for the US market, but for the European market.

"This taught me a great lesson," Wu said, recalling that experience somberly.

It dawned on him that knowing local markets was the key - no matter how many of them there are. So he set about looking for and working with local designers, in the US and Italy.

In order to get them interested in working for him, an obscure maker of jeans from China, he had come up with generous terms - by offering international designers royalty payments from sales.

"The more jeans are sold, the more money they earn," Wu said. "They are not working for me. They work for themselves." And it doesn't mean contracting just two or three of them.

The US, he said, "is like a United Nations", where styles change from region to region, and he has hired local designers across the nation.

The turning point came in 2007, when Wu's brand, Vigoss, successfully moved up from the just so-so level to the "mid- and high-end". It is now displayed at upscale department stores such as Bloomingdales in New York and sells for as much as $500.

Despite Wu's breakthrough designs, he is still cautious about setting foot in distribution and retail, saying that, as a foreigner, he is still at a disadvantage compared to local distributors.

This way he concedes, as he himself said, the majority of his revenue to designers and distributors, keeping his own profit margin almost as low as his old OEM business.

"I could have increased the margin," he said. But after financial crisis broke out in 2008, "I didn't dare to raise the price for distributors as they all faced a grim situation".

Wu said he did not raise the price of his products until things began to get better in 2010, only to be followed by the rapid increase in material prices and labor costs in China. The newly increased profit from abroad was quickly eaten up by rising costs from home, he added.

But he said he still believes he made the right move. "We used to take orders or be dismissed by others. Now it is us who give orders or dismiss others," such as outsourcing some of the production operations to some brand-less companies. "Now I feel I am really developing a career for myself," he said. "A career that has a future."

Joint R&D

Unlike other successfully transformed former OEM companies, Suzhou Victory Precision Manufacture Co Ltd does not own a brand. Nor does it plan to have one.

You do not see its logo or name on the frame, or the base, of LCD television sets, but it makes parts for many major television brands, such as Philips, TPV, Sharp, LG, Haier and Hisense.