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How to Unchain Your Dragon

Dragon Crowd Garment Inc. relocated its headquarters three years ago from downtown Los Angeles to Costa Mesa to be closer to a bunch of OC-based customers, including Oakley Inc., Vans Inc., Quiksilver Inc. and Pacific Sunwear of California Inc.

A change in business strategy came with the move: Dragon Crowd is approaching the retailers and brands who rely on it for private-label production with original designs inspired by trends it sees in the marketplace as it churns out some 21 million garments each year.

“Far too often as manufacturers we sit back and wait for our customer to bring us an idea and say, ‘This is what we want you to manufacture for us,’ ” said Dragon Crowd President J Spencer. “We are getting input from so many different places about what’s happening and where the trend is going, so we wanted to be a more dynamic force in driving that conversation.”

The knitwear manufacturer, founded in 1998 by Chief Executive Edward Zhou, wrapped up 2014 with more than $120 million in sales to action-sports brands and retailers, including local stalwarts of the segment, as well as Nike Inc., Bloomingdale’s Inc., BCBG Max Azria Group Inc., Nordstrom Inc. and Macy’s Inc.

HQ, Workers

Dragon Crowd’s headquarters are in an industrial park near John Wayne Airport, where 32 workers spread over sales, marketing, design, customer service and product development teams tend to 40 accounts.

The company has more than 3,000 employees in China, where it owns and operates one mill for woven fabric and two knitting mills in NingBo, a center of some 2,000 garment manufacturers, according to NingBo Foreign Trade & Economic Cooperation Bureau.

Dragon Crowd’s newest garment factory just opened there at a cost of about $10 million. The newly built structure features state-of-the-art equipment, while its workforce, more than 800 employees, were drawn from two factories whose accounts were acquired by Dragon Crowd.

The company is staking a firm claim in China as some others are chasing cheaper labor and other breaks on overhead that can be found in less-developed markets such as Bangladesh or various countries in Africa.

“We see China as a tremendous growth opportunity whereas other people are running away because of increase in costs,” Spencer said.

A lot of factories in China are closing because their owners “were not looking to build a company” but to “create a large revenue streams for themselves,” Spencer said. “There’s nothing wrong with that—Dragon Crowd was started under the same guise—but what we are trying to do today is a little bit different; we want to create a great company” on par with established China-based manufacturers such as Youngor Group or NingBo Yinzhou, which makes goods for big brands such as Adidas, Nike and Fila.

Shift to OC

Dragon Crowd’s move to Orange County in late 2012 was a first step in that direction. For the better part of 2013, the team focused on rolling up several of Zhou’s business ventures under the Dragon Crowd umbrella. They included apparel brands such as Colorfast, 3rd & Army, Brigade, Social Republic, AtoZ Trends and Lovebird.

“We did an assessment of the organization and determined that we are a manufacturer, not brand builders,” Spencer said. “We use private brands to show the products that we can make, to be able to innovate, to do some things that the customer might not be seeing in the marketplace (that) we want to build samples around.”

Last year he and Zhou assessed Dragon Crowd’s operations, examining merchandising systems and processes for quality control. The review led a five-year strategic plan that sets out a goal of shipping 55 million garments for $500 million in annual revenue by 2020.

“We see that as feasible, not just [by gaining] new clients, but also through acquisition of other factories,” Spencer said. “We want to be able to control every facet of the manufacturing process.”

About 80% of Dragon Crowd’s production is done at its own fabric mills and garment factories. The rest comes from companies that Dragon Crowd either partially owns or has been doing business with for a long time.

Spencer said he anticipates acquisitions that will add “at least another 10%” of production capacity by 2016.

Savings, Quality

Manufacturing a garment at a company-owned facility rather than sending designs out for contract sewing generates on average 15% to 18% in savings, he said.

“You can also control the quality and the treatment of the personnel,” he said. “More than 3,000 families are affected by Dragon Crowd, and we have (a) responsibility to them to deliver a future and we take that very seriously.”

The company’s strategy for this year is all “about dollars—how we make dollars and how we spend dollars,” Spencer said.

Dragon Crowd, which competes locally with apparel manufacturers Mydyer Inc. in Long Beach and Culver City-based Topson Downs, recently invested in new promotional materials to stand out from the crowd. It hired creative staff from men’s magazine Hypebeast—a relative newcomer with digital roots and a young and artistic edge—to develop a couple of trend and fabric swatch books.

Customers can “see and feel fabric,” while the packaging by the Hypebeast vets provide “street cred,” said Marketing Director Jeff Marshall.

The team is using the new promotional materials this spring during meetings with clients in Europe, a market in which Dragon Crowd hopes to make a push this year.

Activewear

Dragon Crowd has also put a focus on activewear—garments that work for the gym and everyday wear. The category outpaced sales growth for the apparel market as a whole last year.

The move followed a recent acquisition that strengthened the company’s offerings in the category.

“To compete in that market, we bought a factory that was already building product like that for other customers,” Spencer said. “We now we own those (accounts).”

Dragon Crowd’s research and development team is using 30 dedicated knitting machines to develop new fabrics and designs. It also hired a freelance designer who has created activewear products for brands such as Reebok, Puma and Nike.

“She’s amazing,” he said, declining to disclose the designer’s name. “We’re designing entire lines for customers. All they have to say is, ‘I want this, this and this, in these colors,’ and ‘I’m done.’ ”

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