Why it is better for startups to produce a product in Ukraine, and not in China. Jollylook’s experience
In early 2017, we conducted a successful Kickstarter campaign and raised $377,000 for the production of our Jollylook camera. We had only a prototype, there was no production. We understood that we need to make 8,500 cameras for backers, and we even knew about how to start production thanks to the experience of one of the co-founders of the company, Oleg Khalip.
However, with time we faced many difficulties. They were so significant that we had to move production to another country. This is how we overcame them and what conclusions we made.
Start of production in China
We had only two options at the place of production – Ukraine and China. At first, we wanted to collect cameras here, but then we renounced this idea. We saw that in Ukraine there were simply no factories that could produce the elements we needed – lenses, plastic products, metal rollers, and so on. Therefore, we have made a choice in favor of China.
We started with looking for a partner who would represent our interests in China. This is an intermediary company that communicates directly with local factories and controls the timing of the work. We found such a company, signed a contract with them and flew to China in May 2017.
One of the tasks of our intermediary company was directly searching for factories. This company has selected several options according to our criteria, and we have personally chosen the most optimal one. According to the results of our first visit to China, we entered into a partnership with eight factories and launched the camera production.
Tip: if you are going to produce something in China, first find an intermediary company:
- This will help in finding factories. Finding a factory in China is very difficult since many of them simply do not have a website.
- The intermediary company communicates directly with the factories. This is useful because very few people in China speak English.
- Such a company can control production on site. In this case, entrepreneurs have only one alternative to go live in China and control everything independently. Since we cooperated with eight factories at once, we decided to use the services of an intermediary company.
Looking ahead, our Chinese partner turned out to be very good, so if you find a decent company, then there should be no problems.
Difficulties with Chinese factories
Our difficulties began almost immediately after the start of production. The first 500 devices turned out to be of good quality, and then the flaw appeared. We learned about it from the backers who received the cameras. The problem was with the factory that compiled the cameras. We found out that they used the wrong glue in production. Because of this, when the cameras reached the backers, they simply fell apart.
Then we began to learn about other problems in this factory. There was high staff turnover, the staff did not collect the cameras carefully, and this was important, as we assemble the cameras manually. Later it turned out that the person who was in charge of the production had left this factory. Another person came there and thereby the information was transmitted poorly (as a result, we flew to China four more times). In general, we could not have influenced some of the points, and the quality of the products suffered from it.
Cooperation with factories in China is something of a lottery. In our case, the conditions were even tougher. In China, there is no factory that has ever produced cardboard cameras. Our factory produces products from this material, and we had to teach them to assemble cameras. This influenced the product quality significantly.
Tip: if you produce products that have analogues, then in China you can find a good manufacturer. If you produce a unique product, then it will be difficult to start Chinese production from scratch. Moreover, if your products are assembled manually, production should be set up as close as possible to yourself in order to control everything.
We promised to make a replacement with new cameras to those backers who received defective ones. Now, in fact, we are doing this.
Transfer of manufacture to Ukraine
So, the first 500 of the cameras have been collected well. In the next batch of 1,000 cameras, many were defective. Then the factory collected 4,000 more devices for us, where 90% of copies were defective.
At that moment, we realized that it was impossible to produce our camera in China. Despite all the contracts and instructions, the factory has made us an almost completely defective batch. Then we had only two choices: to announce the failure and finish everything or transfer the manufacture to Ukraine. We chose the second path.
Our decision was also influenced by our relationship with the factory. In the end, it was frankly not interested in cooperating with us due to the fact that it was forced to spend money on redoing of our cameras.
As a result, manufacture in China turned out to be not only problematic for us, but also quite expensive since Oleg and I had to invest our own funds.
Therefore, we took all the cameras and spare parts, loaded them on the ship and sent them to Ukraine. In total, we ordered the production of 10,000 cameras in China. We were made 8,000 ones, of which almost 4,000 were fully assembled, the rest were partially assembled. For 2,000 devices we only had parts. We took all of it and transported it to Ukraine.
This process took about three months: in August 2018 the ship sailed from Hong Kong where we delivered the cargo, and in late October we received it and began the production. However, we did not waste this time in vain but thought about how to improve the camera. We made a lot of changes – in particular, we improved the design to simplify the assembly and make the camera more reliable.
Having received the goods in Ukraine, we started production. We decided to use all the spare parts to the maximum, so we dismantled 6,000 cameras and are now making new ones from them. We used cardboard which could no longer be used as firewood to heat the room in the winter – this is absolutely true 🙂
Tip: if you can deploy production in Ukraine, do this because:
- You will help develop our country.
- You will be able to quickly respond to all issues – and, believe me, they often happen in production. This will allow you to improve product quality.
- It is not more expensive to manufacture in Ukraine than in China, but the quality of products here is much higher.
If it is impossible to produce in Ukraine, then you need to go to China personally. It is important to debug the control system. One Ukrainian entrepreneur installed video fixation at a factory in China. Thus, he could clearly see the problem and understand whose fault it occurred. Conclusion: try as much as possible to control the production process, up to such methods.
Manufacture in Ukraine and future plans
We are now building Jollylook cameras in our own production. For it, we bought, for example, a laser machine to make parts from plywood ourselves. In addition, we found good suppliers here – the guys from Kharkiv make us excellent parts from cardboard.
This does not mean that we have completely abandoned China – now we are producing a number of parts there that we cannot obtain in Ukraine. In my opinion, such a scheme – the assembly and partial production in Ukraine and the purchase of some parts in China – is the most optimal for us at the moment.
In total, there are 27 of us in the company, 15 are engaged in assembly directly. All employees are located in Ukraine – in Zaporizhzhia, Kyiv, and Dnipro. We communicate through the Basecamp program, and it is very convenient, we also added logisticians, customs brokers and Chinese partners there.
Since November, we have already produced almost 4,000 cameras, and we will soon send the first batch of devices to backers. We will do so in order to save on delivery – we will send cameras to fulfillment centers in the USA, Europe, and Asia, and from there they will be sent to the addresses. Thus, we will reduce the cost of our delivery by almost two times.
In addition, we already sell some of our cameras just to survive. We need to pay salaries, cover rent, and other expenses. We notified the backers about this, and they accepted this information with understanding. We sell cameras through dealers and from the official site. Jollylook is bought all over the world, the main markets are the USA, European countries and East Asia. We have an ideal situation for a startup – when demand exceeds supply.
In any case, now our main goal is to deliver all the devices to the backers. We have already created two new camera models, and we plan to launch them on Kickstarter this year. But first we need to fulfill the obligations of the previous campaign.
We were also at CES this year. We got a lot of useful contacts, talked to distributors. Now we process contacts, communicate and send test samples. In addition, we met with representatives of Fujifilm in the United States and are now discussing possible collaborations with them.
Communication with backers
From the very beginning we described our entire journey in a blog on Kickstarter, we honestly shared all the news with backers to keep them informed. This helped us a lot since we managed to level the negative from the delay in deliveries and got a loyal audience.
Now we see a lot of positive feedback from the audience, despite the fact that we promised to deliver the product a year and a half ago. Some clients even asked us to write a book or make a documentary about this story, that’s how much it interested them.
Tip: be honest with the backers. Loyalty is the most valuable thing you can get on Kickstarter. These people support you now and will support you in the future when you release the following products, and this is very important.