Running a family business, especially in Hong Kong’s cut-throat textile industry, is a tough act to follow. But the second-generation boss of Milo’s Knitwear International, Willy Lin, is trying to stitch it all together. His company, which supplies knitwear to high-end European labels, plans to move all production to China. With escalating costs, can he weave together a strategy that will last for generations?
Q: You joined the family business in 1981. How did you end up making knitwear?
A: Well, it's a family business. So after I graduated from the States, I flew back to Hong Kong and my parents said, “This is your job”. Of course, I started from very low, from a messenger and worked all the way up to what I am today after 30-odd years.
During those years, we didn’t only (produce) sweaters. We also did woven garments… T-shirts, sweatshirts and other products. But sweaters are probably our main business.
Q: During the global financial crisis, Milo’s suffered from a slowdown in orders at a time when the cost of production in China was going up. What did you do internally to mitigate these headwinds?
A: During the crisis, more brands actually came to us and asked if we could do this, if we could do that. Luckily, we had strong finances. We were able to buy our raw materials without asking our customers, “Can you pay for me first?”
A lot of smaller companies during the crisis… didn’t have the money to buy raw material. So they had to ask the customers to pay for the raw material. If they were financially suffering, they wouldn’t have excess cash to pay for raw material. So there was a shift of buyers moving around. So we are quite lucky that we managed to find some new customers.
Q: Despite rising costs, you're planning to shift all your production to China this year. Does it still make sense to do that? Why put all your eggs in one basket? Why take that risk?
A: Yeah, that’s not too bad, because logistics is expensive also. If I have to move my production back and forth from Hong Kong everyday, logistic cost will also be very high. I’ll need three more days on the road, I’d have lost three days. But if everything is already inside China, we'll be able to manage our production much more efficiently. So we try to be more efficient versus (just looking at) country risk. So the close proximity of the market is more important for us.
Q: You know you have a huge market China right at your doorstep. Why haven't you made use of that to sell into China?
A: Well, probably I'm too lazy. No, China is a huge market, you're most correct. But what are selling today are brands. All the Chinese consumers come to Hong Kong and to Southeast Asian countries to buy brands. They buy all the French, Italian big brands. But when it comes down to a non-brand, they are not interested at all.
China is a very diverse market. There is very high price, and very low price, in the middle, (it’s) very tough, especially in clothing. So yeah, we're looking at that but we're not in a rush.
Q: How about the opportunities as an SME? What do you see on the horizon?
A: Opportunity wise, it’s actually easier for SMEs. We can move and we're more nimble. On a big boat, when you want to make a turn, you need a big area to turn. As a little boat or a little yacht, you can turn faster. You can move your product range from a certain type to a certain type with one word. "Let's go, let's do it!"
So your decision-making is more (done on) impulse, so long your team of people is ready to follow you. And I think as an SME, we can go into new product range much faster than as a big group.
This interview is an excerpt from CNBC’s longest-running feature program Managing Asia. Catch CEO interviews with anchor Christine Tan every weekend on CNBC.