NEW YORK (AP) -- Selling a product in China may seem daunting for a small company. But Earl Kluft found it can be done -- with the help of someone to guide him through the unknowns of doing business in a foreign country.
Soon after Kluft started luxury mattress manufacturer E.S. Kluft & Co. in 2004, he thought about selling his bedding in China. He believed the U.S. offered plenty of opportunity for sales growth, even with mattresses priced as high as $15,000. But he says of his Kluft and Aireloom bedding, “we want to make it a worldwide brand.”
Kluft went to China in 2005 to look into the possibility of manufacturing there. That idea was dashed when he found that the foam, steel springs and other components made in the country weren't up to the standards he needed. However, the trip confirmed that the Chinese market was indeed a good sales opportunity because of the big demand for U.S.-made luxury items. A booming economy has made it possible for China's middle class to buy upscale goods from around the world.
“The Chinese consumer does not value Chinese goods like they do imports. They want Italian, French goods. They wanted American mattresses,” he says.
While in China, Kluft made a key connection. A mutual friend arranged a meeting between Kluft and Bill Zhou, who became his agent in China and helped Kluft navigate the country's business culture and laws. In 2007, Zhou brought Kluft together with a Chinese mattress maker, Eternal Sleep, and the following year, the two companies signed a deal for Eternal Sleep to make and sell Kluft's mattresses in Indonesia and Singapore.
Meanwhile, Kluft kept looking for an entrance into China. In late 2009, he thought he was on the verge of a deal. He met with a Chinese businessman who said he wanted to sell Kluft's mattresses. First, he needed a letter to get a lease to open stores in China. Kluft signed -- and then never heard from the man again.
Soon after, Kluft began negotiating with Eternal Sleep for a partnership to open three stores, one in Beijing and two in Shanghai, to sell Kluft and Aireloom mattresses. Zhou was again his guide. “He didn't let me do anything funny,” Kluft says.
But while they were doing the required government paperwork to open the stores, Kluft discovered that he had been scammed by the man who claimed he wanted to sell his mattresses. The man had used the letter to register one of Kluft's trademarks in his own name. That hasn't stopped Kluft from selling his mattresses, but it was still a hard lesson. He has hired lawyers to try to track down the man.
Other companies have found themselves in similar situations in China, and many have had to buy back their trademarks for thousands of dollars. Kluft says he learned from the experience, “you've got to go with proven partners. You can't just jump in with the first guy.”
Eternal Sleep had become that partner. The stores opened last September with U.S.-made mattresses that range from $3,500 to $50,000 (the most expensive mattresses feature 2,000 steel coils and 10 pounds of wool including cashmere and mohair).
Kluft is still learning about doing business in China. The stores have had a slow start. Many customers accustomed to putting mattresses on the floor or on beds with no box springs wanted something firmer than what was available in the three stores; the company estimates that about 25 percent of the mattress selection in the stores needed to be changed. So Kluft's factories in the U.S. have started producing mattresses tailored for the Chinese market. The new mattresses have only recently arrived in China, so Kluft is waiting to see how well they sell.
If the stores are successful, Kluft expects that he and Eternal Sleep will open more in China. For the time being, Kluft's factories in Rancho Cucamonga, Calif., and Denver, Pa., are expected to be able to handle its U.S. and Chinese business. The company's revenue has risen ten-fold in the past five years -- to $30 million from $3.5 million. Exports currently account for about $1 million in sales.