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From low-cost manufacturing to integrated services: Teo Garments

Mr Teo with his designer, Ms Evy Yu, at Teo Garments’ head office in Shaw Road. With the help of IE Singapore, Mr Teo’s company embarked on a joint venture with New York-based importer Mad Dog Concepts to gain immediate access to the US apparel m
Mr Teo with his designer, Ms Evy Yu, at Teo Garments’ head office in Shaw Road. With the help of IE Singapore, Mr Teo’s company embarked on a joint venture with New York-based importer Mad Dog Concepts to gain immediate access to the US apparel market. ST PHOTO: DESMOND WEE

With its strategic move up the value chain, Teo Garments is poised to enjoy bigger profit margins. Fiona Liaw finds out how the company embarked on a joint venture to beat the competition and break into the US market.

After years of weathering the storms in the intensely competitive garment manufacturing industry, Mr Wilson Teo, executive director of Teo Garments, grew weary of the constant downward pressure on prices. In an extremely price-sensitive industry where customers keep demanding cheaper products, business was becoming unsustainable. The best way forward, Mr Teo realised, would be to rise up the value chain and find new engines of growth.

Not only would this allow Teo Garments to capture better margins, but it would also help the firm attract and retain customers with better offerings than just endless discounts.

Given the company's years of experience - it was set up in 1979 with a focus on garment manufacturing, but later expanded to open facilities for knitting, dyeing, printing and embroidery - Mr Teo was confident the firm had the know-how to take the plunge.

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The firm began to go global as early as the 1980s, when it responded to cost competition by moving its manufacturing facilities to Malaysia. It also went on to build production facilities in Cambodia and China.

More recently, when buyers began moving out of the Singapore market, Teo Garments followed suit, setting up sales offices in Hong Kong and India.

These efforts have paid off. Today, Teo Garments focuses on the infant and child clothing market, serving big-name clients like adidas, Bonds, OshKosh B'gosh and Polo Ralph Lauren, both directly and through buyers. Besides manufacturing, the firm has also acquired competencies in product design and development.

Although together, these experiences would allow Teo Garments to provide value-added services, Mr Teo was troubled to find that customers saw the firm only as a reliable manufacturer.

This, he said, was a wake-up call. He explained: "It showed we had not been leveraging our strengths and adding value."

 
 
 

He wanted to expand the firm's services in the area of product design and development of children's apparel, including exploring the production of licensed apparel. Another goal was to speak directly to retailers and, in the long run, build a name for Teo Garments as an apparel solutions provider.

The company set its sights on the United States, which boasts one of the largest apparel markets. But starting an office there from scratch would be extremely time-consuming and, without a strong track record in the country, it would be difficult to obtain the licences to use copyrighted characters on clothing.

IE Singapore was crucial to helping the firm overcome these challenges, Mr Teo said. The agency encouraged Mr Teo to use a joint venture to gain immediate access to existing sales channels. With its strong global network, IE Singapore quickly identified suitable partners for the firm to consider.

One recommendation stood out: a New York-based importer called Mad Dog Concepts. With expertise in licensing, product design and development, as well as access to retailers like JCPenney, Kohls and Walmart, Mad Dog Concepts could help Teo Garments bypass barriers to licensing and deepen its presence in the US market.

Most importantly, like Teo Garments, Mad Dog Concepts shared a similar focus on children's products. Mr Teo jumped at the opportunity.

With IE Singapore's assistance and the IE Global Company Partnership Grant in hand, Teo Garments engaged lawyers and consultants and embarked on the process of a joint venture. Within just six months, it successfully acquired a 35 per cent stake in Mad Dog Concepts.

Today, Mr Teo's team supports Mad Dog Concepts with technical research and development, and manufacturing and financing, while simultaneously upgrading its skills in product design and licensing. Results are promising and, by the end of the year, this new venture is predicted to generate 10 to 15 per cent growth for Teo Garments.

"It is important for companies to step out of their comfort zone and explore new opportunities. Be adventurous - there are many valuable resources to ride on," Mr Teo advised.

Such valuable resources include IE Singapore - whose pro-activeness, strong global connections and genuine understanding of a firm's needs have helped his company move smoothly up the value chain, he added.


Find out more about other companies that have transformed their business overseas and how IE can help – http://www.iesingapore.gov.sg/Assistance

A version of this article appeared in the print edition of The Straits Times on May 11, 2016, with the headline 'From low-cost manufacturing to integrated services'. Print Edition | Subscribe