Oral History

Champion Industrial Co. Ltd. first opened a 2000-square feet factory in Tai Kok Tsui.  Lau rented the entire sixth floor of Lai Cheung Factory Building in Cheung Sha Wan in 1965, the total area of which was 12,000 square feet.  The owners of that building were Lau’s good friends, Kwok Tak-seng  and Lim Por-yen.  Kwok and Lam had once attempted to persuade Lau to invest in real estate, but Lau was not moved.  In 1966, Champion’s factory area in Tai Kok Tsui was expanded to 27,000 square feet.  After the riot in 1967, Champion bought the sixth floor with an amount of $990,000.  At that time, the company occupied two large sites, which made them more sizable in scale than the rest of their colleagues in the handbag-making industry.  In the first ten years of operation, Champion and Rainbow were similar in terms of products and mode of operation, although Champion was larger and had a wider client network.  Due to the limited size of the local market, the company mainly manufactured goods for export.  In the early years, they relied on Li & Fung and other foreign trading companies to obtain orders.  However, things changed significantly after Lau Tik Wah joined the company.

Lau Bin had four daughters and a son, and Lau Tik Wah was second in the order of birth. Born in the early 1950s, she attended primary and secondary school in Hong Kong.  She originally planned on going to the USA for further study, but her parents were not able to support her overseas education because they were still struggling to bring the new company on track.  Lau Tik Wah therefore took up a part-time tutoring job to support the family and waited until 1968 when she finally went to the USA.  As a student, she had to keep on working part-time to pay for her expensive tuition.  The situation for the Lau family improved when the company started to boom after 1968.  Taishan people commonly had a favour for male offspring, thus Lau Tik Wah originally only planned on being an assistant in the family business.

Lau Tik Wah, the successor to the founders of Champion Industrial Co. Ltd., entered the University of California in San Francisco.  During her years in the USA, she took an in-depth look into the American business world and gathered information about large retailers.  Her father believed that it was a successful investment to send her abroad.   Whenever her father passed by San Francisco on business trips, she would accompany him to business meetings and take care of him.  Eventually, she entered Champion in 1975.  Several years before that, the company was facing great challenges.  In 1971, Lau Bin and the founder of Nan Ya Plastics Corporation, Wang Yung-Ching, co-founded a handbag factory in Taipei.  Wang supplied the land slot for building the factory, while Champion sent over some of their core staff from Hong Kong to Taipei. 

By 1973, when Champion was in its heyday, Hutchison offered to buy the company off on a stock-for-stock basis, but Lau Bin rejected because he didn't want to give up what he had painstakingly built up over the years.  Soon after that, the Oil Crisis occurred, causing a rise in plastic material prices.  The effect on many Taiwanese factories was disastrous for they had to cut down their production.   Lau Bin suffered a great loss because his Taiwanese staff stole the company's money.  A lot of American importers were also out of business.  Several of them which had business connections with Champion had to merge and form into a new company.  To keep the supply chain alive, Champion offered to let those companies buy from his factory on credit.  In view of such harsh business situation, Lau Tik Wah returned from the USA and took over the company from her father.  She then rolled out a series of reforms to develop business and raise funds for the company.

1) During the early 1970s, direct sales or OEM were not a common practice among handbag factories.  The factories usually advertised on Yellow Pages to reach out to clients.  Local manufacturers would sell their products to American importers, or traders in Hong Kong and the USA, who then supplied those products to larger retailers such as K-Mart.  The manufactures had to pay them a high commission fee.  This was also how Champion conducted its businesses when it was first founded.  Lau Tik Wah thought that the client base was not wide enough and recommended her father to deal directly with the retailers.  However, her father believed this was not appropriate, fearing that this move could displease the importers.  At that time, K-Mart was interested in making direct deals with the factories and even set up a buying officer in Hong Kong in around 1975 and 1976.  Lau Tik Wah therefore approached K-Mart.  She took reference from popular products in the market, and designed a variety of product samples for K-Mart's selection.  From then on, Champion gained independence from the importers and traders, and began to see an improvement on its operating environment.  After K-Mart set up its office in Hong Kong, other large corporation like JC Penny followed suit.  The buying officers began to play a leading role in trade, and the factories would work hard to build a good rapport with them.  American retailers tended to order low-end goods in large quantities.  They might order up to 700,000 to 800,000 handbags each time.  A lot of manufactures made a fortune out of mass production.  The major handbag factories included ‘Yen Sheng’, ‘Wai Shi’, ‘Wai Hung’,  and ‘Lee & Man’.  These factories co-existed quite harmoniously in those days.  They frequently exchanged information and interacted with one another.

2) After Champion began selling directly to American corporations, its demand for cash increased sharply.  Lau Tik Wah advised her father to get loans from large banks in order to raise the capital needed.  She recalled with a sigh that the banks were like the master of the factories.  In those days, the clients did not commonly give any down payment, and therefore the bank loans were crucial to the factories’ survival. The banks did not simply loan out cash.  The factory owners needed to present the clients’ purchasing orders (PO) to the banks in order to obtain a Letter of Credit (LC) or Trust Receipt (TR), which allows them to buy from raw material providers or to settle other production expenses.  Since Lau Bin was honest and diligent in work, the banks were usually willing to provide financial assistance to help him settle his balance with his clients when he had the difficulty to do so.

In 1977, Lau Tik Wah travelled to New York to negotiate a deal with Avon Cosmetics.  She successfully became the first Hong Kong manufacturer to produce for Avon.  Since then, the company business had seen substantial development.  They were so busy to accommodate the orders that they had to rely on sub-contracting, hiring six to seven smaller factories to help.  Those smaller firms wanted advance payment for their service.  To meet their request, Lau Bin had to borrow from his friends.  It was a distressing process to try to get all the loans they needed, and Lau Tik Wah would act on behalf of her father in some cases.  Since becoming partner with Avon, however, the company’s financial strength increased substantially enough to return all the bank loans.

Since Lau Tik Wah joined Champion Industrial Co. Ltd. in 1975, the company’s business became sound again.  Establishing business relationship with the two American clients, Avon and K-Mart, was key. The company had some business done with American importers and German clients, although the number of orders was comparatively smaller.  1993 was another turning point because a French company approached and invited Champion to make promotion items for their brand.  Lau Tik Wah was satisfied with the price offered by the French.  The orders from the French were large and steady.  On the other hand, Avon did not always place orders regularly.  This failed to give a sense of security.  Lau therefore shifted the focus to the French and distanced from Avon.  Lau didn’t think it was easy to work with the Europeans because she had to re-accustom to their working culture.  For examples, the French company often requested to change the product samples and tended to involve a lot of people in the approval process.  It often took a year to go from the instance when the order was placed to the time when the products were retailed.  In American companies, authority was more centralized.

The partnership between Champion and the French was not without twists and turns.  The French company’s merchandising department connected Champion in the first place, but their marketing department was not willing to endorse the deal because they looked down on the educational level of the Chinese.  Lau Tik Wah was denied by the French company’s senior management when she first went to France.  But she persisted and waited patiently inside their office. This moved the marketing department head. When the head met with Lau, he was impressed by her broad knowledge base and changed his view on Chinese companies.  He found common ground between himself and Lau.  Once the two companies began to go steady with their partnership, the French requested Champion to make jewellery boxes and asked another more experienced box factory to assist. 

Lau Tik Wah asked her husband to help establish their own box factory, investing nearly two million dollars.  Lau’s husband originally managed a handbag factory.  After the box factory was set up, he reassigned some of his staff from his handbag factory.  Since working with the French in 1993, Champion had enlarged its design team, hiring a designer to keep a close eye on the market trends of popular products. The mouldmaker also spent efforts to innovate in order to more fully utilize the factory’s production capability. To ensure customer satisfaction of product quality, Champion strengthened the education of its workers and provided more stringent pre-employment training.  Champion used to produce authentic leather products but it did not carry on because of fluctuating leather price.  It has been 47 years since the company was started, and today, the third generation of the family have joined the company for a few years already.  Lau Tik Wah thought that the company is not only a valued family business and a safety net for a lot of staff, so she hoped the third generation can sustain the company.  It can generate income even if they rent the factory site out. Lau Tik Wah never actively asked her daughter to take over from her. But her daughter turned out to be interested in product design and asked to join the company herself.

In 1979, Lau Bin was planning to move Champion Industrial Co. Ltd. northward to China, so he brought his daughter and son with him to Guangzhou on a tour to visit his old classmates and friends.  Thanks to a friend’s assistance, he was able to set up a factory after nine months in cooperation with members of a People’s Commune in the City of Guangzhou.  The Commune was responsible for processing authentic leather purses with the help of the technicians and machinery that Champion provided.  The standard of quality expected by importers was high, but there were only 200 workers in the Guangzhou factory.  Hence Lau Bin was not all too satisfied. 

Considering that Shanghais workers could produce higher quality goods, he moved the factory to Shanghai and entrusted it in the care of Lau Tik Wah.  Champion worked with the Department of Animal Industry of the Shanghai Municipal Government in setting a processing factory.  Again, the government-owned factory carried out processing procedures with help of the technicians and machinery that Champion provided.  The factory raised the processing service charge many times over the years.  Despite Lau Tik Wah’s efforts in persuasion, she failed to change their mind.  The partnership fell apart in 1984, and the production was moved back to Huadu District, Guangzhou.  There were 800 workers at the Huadu site at its summit.  Coupled with the workers in the Dongguan factory of Lau’s husband established in 1989, Champion could mobilize a total workforce of 1400 in Mainland China.  Some of the other handbag-making firms employed up to 3000 to 4000 workers.  According to Lau Tik Wah, the process of moving to China was full of hardship.  There were inextricable regulations and rules, and everything was contingent on personal relationships and connections.

The Huadu factory was planned in 1984, and started to operate in 1985.  The Hong Kong production line was ended one and half years later, at which time there were only 80 workers left.  Due to high labour cost and slow delivery speed, Champion recorded a loss of three million dollars.  It was hard to find replacements because the workers in Hong Kong were aging.  In contrast, the wage of a mainland worker could be as low as 100 yuan.  Not yet fully confident in the Mainland factory, Lau Tik Wah did not close the Hong Kong site all at once.  She instead shifted the production on a step-by-step basis.  After the production was moved up to the Mainland, local sub-contracting also ceased.  As early as the early 1970s, Champion already contracted out a small fraction of its production.  After securing Avon as a client, the factory did not have enough production capacity to cope with the orders.  Co-incidentally, some local firms approached Champion to pitch their services.  Champion therefore outsourced some production to them and provided them with both raw materials and technology.  At the apex, Champion worked with up to 15 local sub-contractors.  Those sub-contractors handled American orders and the quality standard demanded of them was not very high.  Champion mainly considered the level of sewing quality when hiring the local firms.  Each firm only concentrated on one kind of product to avoid to potential error in handover during the production process.   When the orders were too overwhelming, Lau Tik Wah sometimes sought help from other factories with a similar size.  In general, sub-contracting was not common practice in the handbag-making industry.  Only companies with higher turnover would employ this model.

Lau Bin's main business in the early days was to manufacture handbag and wallets.  After Lau Tik Wah joined the company, she broadened the range of products and introduced handbags with different functions for different age groups.  The style became more and more youthful.  She introduced, for instance, attractive handbags for children.  After the company began receiving orders from Avon, they started to make fringe products such as lady's hats and silk handkerchiefs.  The company once planned on developing leather belts and hired a master worker to instruct in production, but the project was abandoned eventually because the skill training was not so effective.  The company also considered making straps for wrist watches, but again it was called off because the profit margin is too low.  When Lau Tik Wah entered the company in 1975, there was no design specialist.  She had to design products by herself until 1985 when the company hired the first designer.   When Lau Tik Wah took over, she had to ensure much hardship because she needed to overlook designing, order processing and general factory affairs.  In 1993, Champion began to cooperate with a European brand and launched their OEM business.  European clients, who required a high level of quality, urged the factory to make better products. From 1995, the factory received OEM orders from American firms. 

The OEM business of Champion came in two formats: 1) they manufactured products that were designed by clients; 2) they designed the product, sold its patent to clients, and then came back to make the products.  This was like the ODM model, but they never implemented the ODM model because Lau Bin thought that the required investment was too high.  The company once hired a consulting firm to advise on the cost of developing a private Champion brand.  However, the idea was never realized because the promotion cost would be too high.  Nowadays, OEM remains the company's main business and its account for 90% of its turnover.   Some brands that worked with Champion demand to keep their partnership confidential; only nine of them were willing to disclose it.