Why Stay Onshore?
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Hot towels were a hot commodity in Asia during the '90s. Eve Yen knew this all too well because she ran a successful hot towel business servicing the restaurant industry in Taiwan. It was common for restaurants in Asia to provide hot towels before and after meals. But when Yen moved to Los Angeles in 1994, nobody seemed to be using them.
With more than 3,000 Chinese restaurants just in the Los Angeles area--as well as the countless other Asian restaurants, Yen saw an opportunity. She reasoned she could set up a sustainable hot towel business in the United States just by servicing a targeted niche--restaurants.
So Yen tweaked her product from the hot linen towels used overseas to wet disposable wipes that seemed more culturally apt for the American market.
When banks refused to loan Yen the startup capital she needed, she borrowed from family and partnered with a hot towel manufacturing company she had utilized in Taiwan.
With her business partner, whom she ended up buying out a few years later, funding part of the venture and giving her an education in manufacturing, the obvious choice to many would be to have her overseas partner produce her wipes (especially since they already made a similar product). Instead, going against the offshore trend, Yen set up the manufacturing arm of her company, Diamond Wipes, at a 1,600-square-foot plant in Ontario, California.
Yen's decision to manufacture in America was based on one driving principle: freshness.
"It's important that you stay close to your end user. If I go to China and import it by the time it gets to the customer, the customer is using a three- to four-month-old product," Yen says. "If I'm producing a product I would not use, I don't want to sell it to customers."
FDA and GMP regulations would've also required considerable product testing on imported wipes. Yen didn't want to bother with that hassle, nor take risks with water sanitation or cleanliness issues. Even the cheaper labor costs couldn't entice her--not when she calculated the exorbitant fuel prices.
By setting up shop stateside, Yen's been able to dole out her made-to-order, biodegradable wipes in two weeks' time to distributors, who are then able to get the wipes to restaurants in one to two weeks. In total, Yen was able to reduce delivery time by two to three months by manufacturing her wipes in America, a speedy benefit that would prove pivotal to the success of her company.
Yen found marketing Diamond Wipes, a tricky maneuver given the novelty of her product and her paper-thin budget. So she resorted to marketing techniques many would consider "old school"--fliers and direct mailings. She also attended numerous trade shows.
"Because our [product] was so new, people needed to see it and feel it to know that it was a deluxe towel," says Yen. "Face-to-face demonstrations at trade shows were very important."
One of Yen's demonstrations attracted the executive chef of Tony Roma's. One year after that meeting, Yen received a call from the franchise chain, placing an order for her wipes. The restaurant ended up loving the wipes, but not as much as the customers. Patrons were actually using the comment cards to rave about the wipes.
Positive word-of-mouth for Diamond Wipes began to spread, and other restaurants soon became Yen's clients. Today, Diamond Wipes counts several franchises--T.G.I. Friday's, Applebee's, Pizzeria Uno, Outback Steakhouse--among its clients, in addition to numerous mom-and-pop eateries.
Not that success came easily. Yen knocked on the door of Sysco, the nation's largest restaurant supplier, for seven years in a row. And each year, Sysco turned her down--a blessing in disguise, says Yen.
While Sysco kept saying no, another opportunity opened up to Diamond Wipes, this time through the existing distribution channel. The same company that purveyed her wipes to restaurants also had distribution relationships in the hospitality industry. Yen began to think about what other products Diamond Wipes could create.
"Because I'm a woman, I use makeup," said Yen. "Everyone needs makeup remover wipes. So I started to study the formula."
Yen discovered an effective formula used to remove theatrical makeup. She altered the original formula to make it friendly for sensitive skin. Then she added aloe vera, vitamin E and other moisturizing nutrients. And voila! A whole new line of products was born. Yen created La Fresh, a subsidiary for her disposable makeup removers, which carries a variety of makeup remover wipes, from oil-free to ultra hydrating.
As the ideas poured forth, so did the dollars. In its first year, Diamond Wipes grossed $70,000. Then sales exploded, growing 94 percent and 300 percent in the company's second and third years. Even the current recession could do little to curb their growth. Projected 2009 revenues for Diamond Wipes are between $15 million and $16 million, up $1 million from last year.
One reason the recession has had little effect on Diamond Wipes is that Yen smartly diversified her product line, much like a savvy investor. So while the orders for restaurant wipes may have slowed, Yen's antibacterial wipes have completely sold out during flu season.
Such rapid expansion hasn't been without tremendous growing pains.
When Yen started out in a 1,600-square-foot space, she could easily pick up the phone, receive an order, turn around and yell to the machine operator, "Tony Roma's, ten cases!" But running multiple offices--a 100,000-square-foot plant in Ontario, California, and a 65,000-square-foot plant in Ohio--with 120 total machines and 100 employees meant ordering more sophisticated computer systems and streamlining her business. The speed and freshness of her products depended on it. Today, Diamond Wipes can produce up to 1.5 million restaurant wipes per day.
Further, it seemed that the more money the company made, the more money the company needed to keep things running.
"People take 45 days to pay you. So you need two to three months' of your capital. If you're running a $100,000-a-month [business], you need $300,000 of capital."
While hard work and a little bit of luck helped with overcoming obstacles and the success of Diamond Wipes, Yen says the decision to manufacture Diamond Wipes on U.S. soil is what moors the company in a sea of business uncertainty. Staying in America gave the company the benefit of a high-quality product and speedy service, a competitive advantage that has distinguished Diamond Wipes as the preeminent wipes distributor.
"By being in the United States, we are closer to [our] customers and their markets," Yen says. "Speedy service always makes the customer happy, and that helped us close the deal faster."