HK’s new face mask market: from outdoor furniture manufacturers to filmmakers, here’s how companies adapted

01-Dec-2020 Intellasia | South China Morning Post | 6:02 AM Print This Post

Hong Kong-based outdoor furniture maker 3i Corporation saw its exports to the US and Europe start to stagnate at the beginning of the year as the first reverberations of an economically disastrous global pandemic were felt.

To weather the downturn that was to come, the family firm with the unlikely name decided to do what dozens of others were doing: make protective face masks.

It started out with two machines in a factory in San Po Kong in April. Today it boasts six, capable of producing hundreds of thousands of masks a day, sold not only online but via three shops.

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June was a landmark month for the company, as it first broke through HK$1 million in monthly sales. A month after that, it had blown past the HK$5 million mark, and it has now ridden that wave to just under HK$10 million today.

“It’s been a crazy rabbit hole that we’ve gone down” said Albert Chen, a son in the family business and CEO of its face mask spin-off, Masklab.

Prior to the outbreak of the coronavirus, there were few if any companies in Hong Kong making face masks, according to several industry executives interviewed by the South China Morning Post.

Today, some estimate that number has ballooned to upwards of 150, and was as high as 200 at its peak. Hong Kong government offices contacted by the Post said they did not keep track of the number of mask factories in the city.

The rise of Hong Kong’s mask industry has traced the story of the pandemic: chaotic during the early months but gradually morphing into the new normal, as supply chains matured, knowledge and expertise became diffuse, and competition soared.

Companies like 3i had some advantages outdoor furniture used non-woven fabric, also a critical material for some masks but not everyone who jumped in had a business background.

One group of filmmakers, moved by images of long lines forming outside shops for expensive but low-quality masks in February, launched one of the city’s first factories, and was already churning out tens of thousands of masks in a matter of weeks.

Selling them at HK$1 a piece, a bargain at the time, they only expected to bring in HK$5 million in revenue in the first month. They ended up trouncing their own target, raking in a whopping HK$80 million, including for a subscription service that locked in some customers for a few months or even a year.

“We started to panic,” recalled Kenneth Yeung, managing director and co-founder of the company, Mask Factory. “How would we deliver all of these products to the consumer?”

It expanded to 16 machines and pulled in vast amounts of customer data, but the honeymoon did not last long. Masks could soon be found in ample quantities across Hong Kong, delivered to customers in a flash.

“It was a totally different story by then,” said Yeung.

Beyond their subscribers, Mask Factory’s sales proved inconsistent from month to month, with large declines in July and August. Despite the hot start, total sales so far have amounted to just HK$150 million.

Across the industry, companies started altering their strategies. Those that didn’t regretted it, and are either closed down or frantically cutting costs today.

Masks started coming in smaller quantities, decked out in different colours and unique designs as the industry adapted to what was quickly becoming a fashion statement.

“If you are still only selling ordinary medical masks, like those used in the hospital, you cannot survive in Hong Kong,” said Yeung.

His company even expanded beyond masks, launching a spin-off in July called MF Living that sells health lifestyle products such as air purifiers.

The other major shift came in the transition to physical stores, which opened up a whole new customer base of people who rarely shop online. Today, the stores can be spotted across the city, but the trend first started in June.

In-person sales had never seemed a realistic prospect for Masklab, until they saw the foot traffic some had drawn in, and started checking rental prices for shop premises.

Hong Kong’s economic slowdown, and especially the sharp decline in tourism revenue, drove storefront rents down considerably, sometimes to a 10th of the original price, said Masklab’s Chen.

By mid-September, Masklab too had opened its first store, in the city’s Jordan district, bringing in as much revenue in its first month as total the online store.

“What we didn’t expect was how crazy it would get,” recalls Chen, who would quickly open a second store in Mong Kok a month later, followed by a third in Causeway Bay.

Mask Factory also had a store by October, which stood out for its model “clean room.” After booking an appointment, and then donning the appropriate protective gear, customers can make their own custom masks while passers-by watch through a large window on the pavement.

Based on the first month of sales, the store is breaking even, said Yeung. He said low rent certainly helps though it still takes up a significant chunk of the store’s costs.

The response has been positive enough that two more shops are to come, both competing with Masklab in Mong Kok and Causeway Bay.

Despite a vaccine now appearing to be on the horizon, most companies still expect demand to last for at least six months, and are currently buckling down for the battle to tap it.

The biggest question on Yeung’s mind is whether the industry, and more importantly for him his company, will prove able to make yet another dramatic shift, so that it will be around even when masks are no longer necessary.

“We didn’t do this business to make a huge profit. But we do want to survive the pandemic,” said Yeung, pointing to MF Living as their hedge for now.

“If one day, another disease comes, we want there still to be local, Hong Kong mask brands that can supply masks to Hong Kong people.”


Category: Hong Kong

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