By Eric Peterson | Dec 06, 2021
West Valley City, Utah / Guangdong, China
Product development, contract manufacturing, and fulfillment services
Klug launched his product development firm, Klugonyx, in 2014, but demand from customers led to Onyx360, a manufacturing arm in Guangdong, China. In 2021, the company moved into distribution and fulfillment with a third entity, OnyxMuv, and brought all three businesses under the umbrella of Grouponyx.
Klugonyx's eye-catching portfolio is consumer-focused, with many clients making baby toys, housewares, and outdoor products. The only hard and fast rules, says Klug, are no apparel and no medical devices. "Other than that, we're pretty open-minded on what projects we take on," says Klug.
Customers include PARKIT, Möbi Games, Malarkey Kids, and Wildhorn Outfitters. "We'll take clients' or businesses' concepts, help them go through research and design, potentialize the product on paper," says Klug. "We'll have our engineering team jump in once the concept is vetted out with the client."
The Klugonyx engineering team takes it from CAD file to prototype in-house at its 15-person office in Salt Lake or at its Guangdong facility, then Onyx360 can take it the next step by connecting the customer with a relevant contract manufacturer and getting feedback on manufacturability that can be incorporated into the design.
An Onyx360 project manager based in China then shepherds the product from sampling and onboarding into production and all the way through quality assurance. A team of 35 employees overseen by COO Nate Finlay vets possible partners for clients; the company works with "hundreds of factories" in China, says Klug. "We prevent the common issues," he notes. "Onboarding a factory is a whole other process that's equally if not more complex than developing the product."
He adds, "When we vet a factory, there's a lot of things we need to look at. One, who's the client, how big are they going to go, and what needs do they have? You could find small factories, medium factories, and massiva factories, but if you get a small client into a massive factory, you're not going to get the attention you need. If you get a large client in a small factory, you're going to tap out of that factory. They're not going to keep up with scale and cause supply chain issues."
Onyx360 emerged when Klug and his wife, Kelsey O'Callaghan, started their own houseware brand, Dorai Home, in 2018. "Dorai Home has emerged as our client and grown dramatically," says Klug. "It's our best case study because we're basically running everything through our systems and processes like it's a client, supporting the growth and adding products and continuing to grow it. It's put me in the position where I'm sitting on the other side of the table in a client's shoes."
A customer of Klugonyx and Onyx360, Busy Baby Mat "relies on us for her back-end supply chain," says Klug. "Then she just crushes it on her end, moving the product itself. She's able to really grow and scale her business."
New for 2021, OnyxMuv then handles warehousing and fulfillment for clients for an end-to-end service set. "We said, 'Why don't we help them ship to the end customer, especially if they're a direct-to-consumer brand?'" explains Klug. "We can be the whole back end of a consumer products business. That way, the client can focus on other aspects of the business, like the brand and the marketing, and we can be there to support them through and through."
The move to a turnkey model has been paying off. "We've literally been doubling every year since the beginning of Onyx360," says Klug. "We're continuing to reinvest to fuel more growth."
Challenges: Rebranding as Grouponyx. "We want to present ourselves as a holistic services company under one brand," says Klug. "That's definitely a challenge."
Freight and shipping costs present additional challenges. "Because of how many products we're importing with clients, we see the fluctuations in costs all over the place," he says.
Opportunities: "Direct-to-consumer brands have become exciting for us for a variety of reasons," says Klug. "Back in the day, [big boxes] would be the end-all, be all for consumer products. You get into Walmart -- success. Really, when you get into Walmart, you're getting pushed to the bottom on your margins, you continuously lower your price, and the quality gets hurt from that."
He adds, "With direct-to consumer brands, the brand is able to withstand and hold a higher quality standard for their products. That's exciting for us, because we'd rather build a high-quality product that's going to last a lifetime for a customer, versus something cheap that's used for a small period of time and ends up in a landfill."
Klug also sees an opportunity to expand Onyx360 into other manufacturing hubs with the same on-the-ground model the company employs in China. "We're going to test out a few Mexican manufacturers," he says. "We're looking in Malaysia for new factories. In Vietnam, we have some factories we do sampling with.
Needs: "Really, it's more clients and continuing to grow our client base," says Klug. "We're equipped to handle more, and that's our focus in 2022: client development."