Big profits from the baby business

Little could he have known that his formula was about to go global.

He said there was never a timetable for international growth, but he did always think there was a huge market out there, ready to be tapped.

Goodbaby had started hitting notable sales and revenue milestones, when a random visit to his factory from a German businessman accelerated its overseas ambitions.

Song said he was strict with his employees. He required them to wash their hands three times a day, for instance, to take off their shoes before entering, and everything was managed to "international standards".

Yet after a tour of his pristine factory, the friendly, but seasoned German manufacturer, left with just one piece of advice: "You simply don't make baby strollers that way".

He was told he needed to take his operation onto the next level, on everything, not just the finer detail.

On workmanship, on aesthetics, on every aspect of his operation, he said, if he wanted to be anything more than just a Chinese company.

In 1993, Goodbaby had become the top domestic supplier two years running.

"It's hard to make products that are never going to become obsolete, so we had to innovate.

"We were China's No 1, but we knew we had the ability to become the world's No 1," said Song emphatically, almost jumping out of his own seat.

China was full of ambitious, thriving businesses at that time - but many were becoming increasingly prone to the demands and flavors of foreign customers. And from foreign competition.

It was time to springboard to that next level.

Before Chinese outward tourism became the norm it is today, he boarded a flight for Tokyo.

He skipped the sightseeing and electronics shopping in favor of malls selling trendy baby strollers. He was also looking for a business partner.

He hired a retired Japanese automobile engineer and persuaded him to move to his little town, with all his technology and machinery.

"It was a typical early phase joint venture, with equity exchanged for technology," he said.

He even bought a townhouse for the engineer and his family.

Thanks to that initial investment, today, Goodbaby has 100 engineers, designers and market researchers toiling away to produce new models of high-end strollers for brands such as Silver Cross, Quinny and Maxi-Cosi in Boston, Amsterdam and Tokyo.

Also, at its factory complex and headquarters in Kunshan, there's a 20,000-square-meter R&D center in operation with another 200 researchers.

With the arrival of automated mass production, he took his designs to the massive US market, targeting customers at all levels of price and quality.

Song said what has set Goodbaby apart from so many other infant and child product manufacturers in China is the infusion of foreign exposure and connections.

Song has formed partnerships to bounce ideas off, and drastically expanded his networks.

He appointed a Chinese Harvard graduate to guide the company's US branch.

Goodbaby has managed to ink deals with 11 major sales channels in the US, including the world's largest retail chain, the giant Wal-Mart.

"For international expansion, you need international talent who can connect locally and brainstorm," Song said.

Continuous innovation and building networks overseas is coupled with well-trained marketing skills that Song and his team developed at home.

For instance, during an industry show in the US in 1996, Goodbaby launched 48 new products, instead of following the standard routine of presenting 10 "new arrivals" the organizer had recommended.

"That sort of scale, and innovation, impressed our clients and partners," he said with obvious pride.

Goodbaby's explosive development is also in part thanks to a meeting at his factory in 1999 with Rachel Chiang, a private equity specialist on the prowl for investments.

"I saw a video of how they deliver strollers," she once told Forbes magazine.

"They were on the back of a donkey in the snow, somewhere in China. It showed the entrepreneurial spirit. I felt Goodbaby and Mr Song had what it would take to become a truly global company."

With the help of the capital market, Goodbaby International Holdings Ltd, a subsidiary of Goodbaby Group, went public on the Hong Kong Stock Exchange in November 2010 to gain an even bigger slice of the international market.

Linking product innovation to safety, especially when it comes to the ongoing development of children's car safety seats is a proven formula for higher gross margins, said a recent report on the company by Guosen Securities (Hong Kong) Financial Holdings Co Ltd.

But in spite of its dominance, Song said Goodbaby still faces the fact that its brand recognition, notably in Western markets, remains limited.

It makes more than 10,000 strollers a day under 15 different labels for mostly overseas brands.

But Song said contract manufacturing is not the end to his aspirations. The company has been selling its own brand in Japan since 2006.

But "in the US and Europe, we have to take things slowly, because it's risky to irritate competitors just to gain a slice off our long-time partners, who have been helping us tap into those markets", Song said.

For instance, cooperating with the UK's Mothercare, Goodbaby can leverage its already proven business pattern to gain retail market share.

"This international cake is still very big, so we are entering carefully," he said.

"Maintaining a win-win situation with your foreign partners is most critical when you are running an overseas business."

hewei@chinadaily.com.cn

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