Local focus works for 2wink

AT a time when many local companies are taking their manufacturing base offshore to cut costs, Perth-based underwear brand 2wink Australia has done just the opposite.

Producing about 80,000 pairs of underwear each year, 2wink Australia is an online business that delivers to more than 30 countries, including the UK, Singapore, US, Germany, Italy, France and Japan.

Founders Carl McNeill and Mark Turner recently made the strategic decision to transfer the business’s manufacturing from China to Malaga after competitor Pacific Brands moved the other way, last year sacking 3,000 workers and closing 10 Australian factories.

The owners of 2wink saw Pacific Brands’ subsequent bad press as an opportunity to forge a unique identity and point of difference by remaining Australian-made and designed, with Damian Greco, who joined the business in October 2006, responsible for the product’s look.

“The main reason we can do it is because we’re an internet-based business,” Mr McNeill said.

“We don’t have the massive overheads of retail stores and the manufacturing of the product is outsourced, so we don’t have the staff wages, superannuation for employees and all that.

“That’s how we managed to keep the costs down and why it’s feasible.”

While Pacific Brands expects earnings growth to return in 2010-11 as a result of the China move, 2wink’s profitability has been hit significantly with a 70 per cent increase in production costs as a result of manufacturing in Malaga.

But Mr Turner said the market acknowledges Australian-made products as quality-made and that the company had a flexible manufacturing arrangement, which reduced storage costs. He said staying local would ensure 2wink survived in the long term.

“The cost factor for storage impacts on the cost of production,” Mr Turner said.

According to Mr McNeill, being Australian made meant 2wink didn’t have to produce massive volumes to be profitable.

“We can work locally in Malaga and release just 5,000 pairs if needed of a particular range, then get a new range and release 5,000 of them,” he said.

“That way, we can bring out more designs more regularly and we don’t have the storage and holding costs.”