One step ahead of the others

Made for walking: Kong Brothers’ 21,600 sq ft showroom displays over 30,000 different shoe designs.

A COMFORTABLE pair of shoes would add a spring to your step instead of leaving you wincing in pain.

And some shoemakers have done a fair job of putting on the right sole to stave off the pain of a changing business environment.

Malaysia was once regarded as the second largest shoe producer in the world after Italy prior to the 2000s. That is no longer the case as it is believed that over 70% of Malaysian shoe manufacturers are considering to move or have already moved their production abroad; largely due to high operating cost.

For local shoe manufacturers continuing their trade here, new business strategies and tactics have been deployed to keep their brands afloat.

Home-grown Kong Brothers Enterprise Sdn Bhd is one of such manufacturers that have been around since the 1970s and has weathered many market changes.

Its founder Kong Kwai Meng says the Serdang area, where he conducts his business, was known to be one of the largest producers of men’s shoes back in the 1970s owing to the concentration of shoe brands setting up manufacturing facilities there.

Kong started his journey in the trade during the 1960s as an apprentice shoemaker.

Stepping ahead: Kong, seen here with his daughters Ice and Yuki (right), is still very much in the driver’s seat of the company.
Stepping ahead: Kong, seen here with his daughters Ice and Yuki (right), is still very much in the driver’s seat of the company.

As the fortunes of local shoe manufacturers changed over the years, Kong has tweaked his business model accordingly to ensure Kong Brothers continued flourishing.

Today, the decades-old business is cementing its presence in the competitive local wholesale and retail markets. Kong Brothers currently works with over 100 wholesale customers while manag­ing their own network of over 100 consignment counters across departmental stores in Malaysia.

Kong is focused on creating a clear division between his business models, namely, assigning select brands to either its wholesale or retail channels.

“By having wholesale specific brands such as Green Point Club and Speedy Rhino, it reduces the conflict of interest among our wholesale customers and us running our own retail consignment operations,” he reasons. They retail brands such as Knight, Noveni and Louis Cuppers.

“We are a late-comer to the retail business and do not enjoy much brand recognition as compared to other local shoe brands.”

Despite its late entry into the retail market, all’s not lost as departmental stores often replace and shuffle around poor performing shoe brands to make way for newcomers, which gives Kong’s brands a chance to shine.

“Our consignment sales have been encouraging and departmental store owners have been supportive of us by providing a better in-store space and access to high-turnover locations,” he says.

Currently, over 70% of the company’s total sales are made up of women’s shoes while men’s shoes make up the remaining percentage. Kong reasons that men do not purchase shoes as often compared to women.

However, he notes that men are giving their footwear more attention these days. Style-conscious men have more than one pair of shoes beyond their formal work shoes. Brighter colours and glossy-patent finish are often favoured by younger shoppers while muted and matte-finished shoes appeal to the older crowd, says Kong.

He also reveals that Penang and the Klang Valley are its top performing locations in terms of sales domestically.

When asked about their venture into e-commerce, Kong says they do work with online marketplaces such as Zalora. However, sales from online platforms remain fairly mediocre as consumers largely prefer to try on a pair of shoes prior to purchase.

Kong tries to ensure that products sold through e-commerce channels do not cannibalise its brick-and-mortar market by having an online specific collection.

Kong Brothers also exports its products to countries in South-East Asia, the Middle East and Africa. But overseas sales contribution to total turnover remains below the 10% mark.

At present, they are working closely with their departmental store partners that have retail stores in emerging markets such as Vietnam.

Reduced domestic output

There is no shortage of shoe designs at Kong Brothers.

In 2006, they moved to their current 50,400sq ft facility in Sri Kembangan which includes what is known to be the biggest shoe showroom in Malaysia. Spanning across 21,600sq ft, the showroom displays over 30,000 different shoe designs.

However, the company moved their R&D department from Malaysia to China recently due to the ease of access to raw materials there.

“Back then, we had to wait for weeks for new swatches to be couriered from China which delays the production process,” Kong explains.

It typically takes about six months to develop and produce one design. But with the R&D department closer to the source materials, it allows them to come up with new designs faster.

Kong says only a small selection of men’s shoes and sandals are still made locally while the bulk of its production has been outsourced to China.

Sales driver: Women’s shoes currently make up the bulk of its sales, contributing 70 to turnover.
Sales driver: Women’s shoes currently make up the bulk of its sales, contributing 70 to turnover.

This helped them reduce production cost as investments into manufacturing assets decreased.

“These days, all we need to do is place an order for a specific design and they will manufacture it according to our needs,” he says.

The material used in making shoes, too, have changed over time. Synthetic leather made from polyurethane is increasingly used to make shoes over genuine leather due to lower cost.

“As the cost of genuine leather increases, we have to make a decision to switch to alternatives as consumers are seeking affordable options.”

The use of canvas and fabric in shoes are mainly for casual designs.

Fresh ideas forward

One of the key drivers for the business is its investment into advertising and promotion (A&P). Kong says they would spend a minimum of RM100,000 per annum.

“Our A&P spending could go up to RM800,000 per annum during sluggish market conditions. When the times are bad and consumers do not see your brand, they will forget or assume you no longer exist and move on,” says Kong.

Much of their A&P spending is spent on in-store point-of-sales advertising such as merchandising display, shelf strips and shelf blades. Out-of-home marketing efforts include placing billboard advertisements.

He adds that not all wholesalers they work with are well-versed with managing their own retail spaces and would offer assistance to independent shoe retailers to help create impactful visual displays for merchandising with their branding. Such practice is often seen at standalone shoe shops in smaller towns across Malaysia.

The humble and laid-back Kong does not seem to be slowing down any time soon, but his successors have been in the business for over a decade.

All four of his children are currently with the family business. His eldest daughter Ice is the chief operations officer and each sibling has been assigned to different business units, which allows them to have a firm grip of the business as a whole.

Despite the rising prominence of fast fashion in Malaysia, Kong is adamant that the old adage of a pair of comfortable shoes will remain timeless.

“We cannot escape the fact that shoes are a fashion item and it is up to us to ensure our collections follow current trends.

“However, if a shoe is uncomfortable, the likelihood of the user to repurchase from that brand is much lower,” he says.

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Business , Kong Brothers , shoemaker , retail


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