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Entrepreneur's Journal

Why Brooklyn Industries Manufactures in China

Entrepreneur: Lexy Funk, 39

Background: New York City native Funk met her partner, Turkish-born Vahap Avsar, at an artists-in-residence program in upstate New York. A year after moving to New York City in 1996 the pair launched Two Tsunami Productions to produce TV commercials and documentary films. But the spark for their current business didn't come till three years later, when Avsar made a messenger bag out of a vinyl billboard he found in a dumpster. Shortly thereafter the duo decided to switch gears and manufacture messenger bags out of recycled materials full time.

The Company: In 1996, Funk and Avsar (now married) rented an old factory building in Williamsburg, Brooklyn, and began manufacturing their bags and establishing their brand, Brooklyn Industries. By 2001 they had opened their first retail store near their factory and expanded their product line to include clothing for men, women, and children. Today the company has 12 stores in New York City, Chicago, and Portland.

Revenue: $12 million in 2008; more than $13 million estimated in 2009

Her Journal: I have a different approach and attitude to Made in China than many of our customers and perhaps many Americans might have these days. About a third of our clothing at Brooklyn Industries is made in China by four factories run by families whom we have done business with for more than half a decade.

I didn't, however, jump in. Before I decided to outsource our manufacturing, I did my homework on China. I read the reporting on labor disputes, exchange-rate inequities, and human rights abuses. But in the end what really formed my opinion was running my own factory in Brooklyn.

When we started, my husband and I had made a couple of prototypes of our bags. We took them to a trade show and ended up with more orders than we could make on our one sewing machine in our nice Chelsea office. So we left Manhattan and rented an old sheet-metal factory in Brooklyn to store and clean the billboards and then sew the bags. To make ends meet, we also gave up our Lower East Side apartment and lived above the factory in a single room that was unheated.

The challenge was not just the lack of heat, but how to find legal and competent sewers while running a production line that was efficient and economical. Our first sewers were Turkish. They were followed by many Tibetans, then Colombians, and finally a group of Ecuadorians. Each group had a different approach to work, efficiency, and business. Many workers came with fake green cards, no identification, and spoke very little English. It was hard to maintain quality.

My husband worked the line, fixed the sewing machines, and cut the fabric. I was the office clerk. I got the orders, called stores for payments, and did the marketing. We had a really hard time making ends meet. One week we had no money as we were waiting for a check to clear and we couldn't afford our next meal. However, we always made sure to make payroll.

In our third year of running the factory, external factors started hurting us. The government raided other factories in South Brooklyn to ensure that workers were legal. One factory owner we knew went out of business after paying enormous fines for hiring illegal workers. We were nervous. We knew we couldn't grow our business without being able to find good, legal sewers—a situation that was already proving to be difficult. Several of our suppliers went out of business—first our webbing supplier, then our fabric supplier. Plus, we still didn't have heat and couldn't afford to move out and get an apartment. Manufacturing was beginning to lose its appeal.

Simultaneously, our customers wanted bags that were more complicated and technical than we could manufacture in Brooklyn. We decided to place an order of 1,200 backpacks and messengers bags with a Chinese factory in order to continue to compete in our market. These first bags cost us more per piece than making them in Brooklyn but we were able to offer our customers more value without charging much more money.

In 2000 we had made enough money to move out of the factory and into our own apartment, just as I had my first child. At the same time we decided that our real passion was not in manufacturing but in retail. We made the bags, printed t-shirts, and sold them in the store. But we weren't particularly good at manufacturing, and besides, things had just gotten more difficult. In 2001 we closed the factory and switched primarily to retail.

In 2002 a Japanese company took Vahap to Hong Kong and Shanghai to visit factories and discuss manufacturing for us. In the beginning we made fewer than 100 of any garment or bag, so most factories spoke to us only as a favor to the Japanese company that introduced us. Vahap was impressed with the factories he had visited. He had pictures of factory floors that were very clean, where workers walked around in slippers, and rooms that were well-lit. The prices were fairly expensive, but the quality was good, and the factories were well-run. It was different than what we had read about in the press. My view of Chinese manufacturers began to change from antagonism and skepticism to partnership and learning.

I began going to China in 2007 when my youngest child was four. I wasn't sure if I could establish the same business relationships my husband had, partly due to my gender and my nationality as an American. I was concerned about culture clashes. But as our business grew and I took on the role of CEO and operator, it was my responsibility to go to China and carry on the relationship with our factories.

In preparation, I turned to a mentor, Charlie Sun, who helped me understand how the people running the factories think. When we first met as neighbors, he, too, was manufacturing, making plastic bags in Brooklyn. Eventually he closed his factory and began manufacturing in China, where he travels frequently. He taught me several important lessons. First, ask the factory owner how business is and what is happening in the local Chinese economy. Ask what new labor laws have been passed. This knowledge enables better communication and negotiating. Second, just because a factory is not perfect, there are still ways to try to improve them. I was taught it was important to express your concerns, keep giving them business, and work toward making changes.

On my first trip to the factories, I practiced Charlie's rules without understanding them. I sat at dinners and asked questions. That first year many of the factory owners seemed slightly skeptical. They were respectful but often complained about how small our orders were and about how we were too demanding. However, as our business has grown and the factory's other customers have shrunk or gone out of business, our relationship started to blossom. Together we have charted ways to improve quality and cut costs. We discuss what they are paying their employees, work hours, and benefits. We have also begun to discuss China's booming economy and the possibility that they might supply domestic retailers.

One evening in Dong gong Province this August, I sat having a delicious dinner at a restaurant with our bag manufacturer. The main owner was sick and stayed home. His wife, her two teenage daughters, her three-year-old son, and our "merchandiser" were our hosts. The television played a sitcom that everyone found amusing. We discussed schools, and babysitting, and how the factory was doing. The wife joked that I should be learning Chinese if she was learning English. Next summer, I will try to return with a smattering of Mandarin and my two sons in tow.

—Edited by Stacy Perman

More essays are available in our ongoing series.

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