Name: Tim Scott Stuart
Company: Unit Bricks (Hong Kong)
Time exporting: 15 years
Export revenue: US$1.17mn (90% of gross sales)
GTR: What is Unit Bricks?
Stuart: Unit Bricks is an early childhood educational sourcing company. Primarily we design and manufacture early childhood building blocks which teach mathematics. We also do some outsourcing for some toy companies globally. We do quality control, design, testing and make sure they’re compliant for EU or American regulations. In the last few years there’s been a huge push to regulate the toy industry and make sure the toys are safe materially, mechanically and chemically.
GTR: Where are your main export markets?
Stuart: We sell all over the world. I primarily do just-in-time manufacturing for my customers in the US, Europe or Australia, or at least we used to do that. Now we have taken inventory and we can supply smaller amounts to SMEs globally – smaller toy companies rather than just the big boys. The newest markets are in Asia. Europe is kind of in the doldrums: their currency is devalued and with all the import costs, they’re a little bit price-shy right now.
So we primarily focus on the US and emerging markets in Asia. We do a little bit on mainland China but predominantly we’re selling to Asia Pacific: Australia, Singapore and a little bit in Thailand. Hong Kong is becoming a very active market with all of the educational institutions. Parents really focus on ensuring their children have high-quality educational tools.
GTR: You manufacture in Asia: how has that developed?
Stuart: Industry follows labour. A number of years ago we came over to East Asia, predominantly China, and set up our partnerships with the factories. Historically, the major push in manufacturing came close to Hong Kong, in Shenzhen. There were Hong Kong and Taiwanese companies and they created this entire outsourcing industry. Then, as the price started to rise and China industrialised, you could see the manufacturing move away from here up the coast to Xiamen and to Ningbo – now the big manufacturing area especially for toys, plastics and some fabrics.
As prices rise and China institutes new labour and social benefits to the workers, prices are going up. So we looked further afield: Shandong, for example, has a long history of wood manufacturing, so we moved up that way. We’re also fairly well established in Thailand and Vietnam. There are other emerging markets we’d consider but we haven’t really done too much to change our manufacturing.
GTR: Hong Kong is known for its SME culture. Is it an easy market to operate from?
Stuart: I think it’s fantastic. It’s very friendly for foreigners to come and set up a corporation here. There are many institutes and NGOs set up to walk you down the path. It’s a cottage industry of course – people are making profits off this. They set you up in offices, keep your books for you, and make sure you’re in compliance. So yes, I think Hong Kong is very friendly to SMEs. The cost of inventory is high: rent or general living costs in Hong Kong are high, but generally it’s fantastic.
GTR: How do you finance your business?
Stuart: Mine’s self-financed as far as possible. We have an investor who came on board recently. We are growing, but are predominantly self-financed. It’s like a self-licking ice cream cone. We have just-in-time production, so as long as we can float that production cost and receive
our payments we are golden.
GTR: Do you use bank finance to help with distribution, export or production?
Stuart: I have lines of credit with some American banks. I draw on my line of credit for early deposits on production or to make sure my factory is paid before I get paid. I’ve used it in the last year or two to purchase some infrastructure, such as moulds, so I can make new toys. That’s a pretty high cost of entry. And then to get into production you have to sometimes float it for 30 to 60 days to make sure your factories are paid – you have to make sure that relationship is stable.
China’s been in a very good position for a number of years and it’s basically a golden model: they manufacture, ship and get paid. I don’t know of any other business in the world that works like that. For us we have to float the money for 30 or 60 days depending on how deadbeat our customers are.
Banks do approach me quite frequently. We have a very good credit score and have been growing consistently. On paper and in reality, we’re a very strong company.