Chinese Models

Do it yourself

Suzhou manufacturing tycoon explains how he ‘mowed-down’ his rivals

Gao Zhendong w

For readers who are not into gardening and home improvement, you may not have heard of the brand WORX, a maker of power tools. But in the world of DIY craftsmen, WORX is a pretty big deal.

What’s even less known is its parent company Positec. Founded in 1994 in Suzhou as a contract manufacturer for Black & Decker and Bosch, tycoon Gao Zhendong has turned the firm into a global powerhouse for home improvement tools as well as lawn mowers. The transformation has made Gao a billionaire, with the Forbes magazine ranking him the 718th richest person in China with a fortune of Rmb3.2 billion ($480 million) in 2014.

Positec’s start

Growing up in Suzhou’s countryside, Gao first displayed a knack for entrepreneurship at school when he designed a shoe polish that could be applied directly without any brushing. It was so simple to use that it caught the attention of a teacher at Nanjing University who gave Gao Rmb20,000, a large amount of money at the time, to mass-produce the product.

The polish was initially a big hit. But angry shoppers soon came back complaining that after using the polish, the leather on the shoes started to crack.

With that business dream getting the boot, Gao left school and found a job at a state-owned machinery firm in 1987. But he didn’t last there long. Watching the country’s economy bloom, Gao felt bored and itched to start his own business again. So along with three friends from work, they left to start Positec in 1994.

Bumpy road to success

Initially, Positec was the middleman for domestic power tool companies that were eager to export overseas. That business, however, was barely profitable. So Gao changed tack, moving the company into contract manufacturing.

But Gao didn’t want to be another low-cost producer for the big brands. To differentiate itself from other contract manufacturers, Gao wanted Positec to focus on quality instead of cost. So while its competitors were marketing their products based on price, Positec was steadfast in its strategy to charge more for better quality. But in doing so the company suffered consecutive losses in its first three years, says China Entrepreneur.

The future started to look more promising when Black & Decker came knocking. In 1997, the US firm came to China looking for a contract manufacturer that could make hand tools and other home improvement products cheaply. Even though most of Positec’s rivals were prepared to undercut it on price, ultimately it won over Black & Decker with its superior quality and engineering skills.

After Black & Decker came Bosch. The German drill maker was also impressed with Positec’s excellent manufacturing and chose the firm to be its first OEM in China.

“In China’s power tool industry, we were the ‘first’ in a lot of things: we were the first Chinese contract manufacturer for Black & Decker; the first for Bosch. By 1998, we were doing very well. Many of the most well-known brands wanted to work with us,” Gao told Chutian Metropolis Daily.

But the good times didn’t last long. Two years after working with Positec, Black & Decker decided to open its own factory in China – in Suzhou, no less – and thus cut out the middleman.

Overnight, Gao lost his biggest client.

“It taught me that the contract manufacturer business couldn’t fully reflect the value of Positec. We would always face the risk of profits being eroded,” Gao told the Economic Observer.

Plan B?

The only way to compete, Gao believed, was to double-down on its innovation and manufacturing capability to build its own brand. He was adamant, too, that he wanted to develop a high-end brand so as not to compromise on quality. But internally there was a lot of resistance, with many of his executives expressing worries that Positec would end up alienating its existing overseas clients.

“Once you start, all the old clients will become your competitors. Overnight, all your suppliers and partners become the enemy,” Gao wrote in a commentary for the Global Times. “Contract manufacturers’ core competence is low cost. But even if you have the lowest cost today, tomorrow your neighbour may be able to produce even cheaper. These continuous price cuts will only lead to a decrease in quality and along with it, the company’s reputation.”

Gao didn’t act hastily, though. He told the Economic Observer that he spent a total of six years planning his transition to designing and manufacturing his own products under the brand WORX (launched in 2004).

He also set up offices in Italy and Australia to conduct extensive market research.

And the challenges…

In 2004, Gao met Tom Duncan, who had acquired the rights to use the Rockwell name for power tools a year earlier. The two decided to join forces and Gao put Duncan in charge of the American division, Positec USA, to sell Rockwell Tools, a long established brand that targets construction professionals – plus sell the WORX line that caters largely to do-it-yourself customers.

Needless to say, Positec’s existing clients weren’t so thrilled. But Gao was unfazed. “After the clients saw that Positec was developing our own brand they threatened to cancel their orders. I’d say, ‘If you want to cancel, go ahead!’”

But that was only one of the challenges. Initially, Positec couldn’t find shops that would carry its products. Retailers like Lowe’s and Home Depot were worried that they would offend the big brands like Black & Decker. In addition, some of Positec’s rivals filed lawsuits against the Chinese firm for patent infringement.

So instead, Positec tried another approach. It developed high-quality infomercials to sell its line of WORX products directly to consumers. One infomercial – inspired by a memorable scene in the film Mr and Mrs Smith – showed a couple finishing a series of tasks around the home with the WORX electric screwdriver in a tightly choreographed dance.

The ad proved to be a success and sales jumped 10 times almost overnight, says China Entrepreneur. The growing popularity of the WORX brand soon convinced major retailers including Walmart and Costco to give it shelf space.

While Duncan pursued the distribution channels, Gao focused on product development. To stand out from other established brands, the Chinese tycoon understood the importance of visual appeal and hired Italian designer Paolo Andriolo to spruce up the products so as to make them more ergonomic, easy-to-use and visually appealing, says Industry Week. He also chose a fluorescent orange colour for his power tools that looks young and trendy, and appeals to women in a market traditionally dominated by men.

Mowing down the competition

To stay ahead of its rivals, the company invested heavily in research and development. The Economic Observer reckons that just on product development, Positec has spent over Rmb800 million over the past few years. It owns about 4,200 patents worldwide.

It has also grown from its humble roots of just 40 employees to now having 4,000 staff around the world (including designers in Italy and lawn specialists, where else, but in the UK).

Positec has developed a reputation for innovation. Recently the Wall Street Journal raved about its wireless robot lawn mower, the Landroid M (which costs $1,000), saying that the WORX machine outperformed its competitors not only because the device was simple to set up – “all we had to do was punch a few keys and the machine was off and running” – it also comes with a built-in rain sensor that will stop it mowing in stormy weather.

The product’s marketing slogan is amusing too: WORX says its Landroid has been “re-engineered for maximum laziness” (that is, on your part).

Meanwhile, in an interview with the New York Times, Duncan said of his boss: “Too often, Americans have a negative perception of Chinese companies, but I have a unique perspective. I was impressed with Mr Gao’s operation, which was entrepreneurial and driven by innovation.” Gao’s firm remains unlisted, which is probably why he is less well known globally than his success probably merits.

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