Caught on Tape: Rick Alden, CEO of Skullcandy

kristina

• October 24 2008
• 1,068 views
• 9 comments

In the summer of 2008, Skullcandy founder and CEO Rick Alden was named one of Ernst & Young’s regional Entrepreneurs Of The Year. Transworld Business took the opportunity to catch up with Alden and discuss the brand’s success, the current state of the economy, and what lies ahead.

Skullcandy is known primarily for its collaboration projects. Was this your strategy from the beginning, or was it just a good idea that kept snowballing?
Our first collaboration was in late 2003 with Giro helmets. We were the first company ever to put music and cell-phone connectivity in a snowboard helmet. When the Giro thing came up we thought “Wouldn’t it be cool if we sold them a component and they put our name on the helmet? This could be a cool pattern.” We just went with it from there. There’s really not a high margin on collaborations, but what you get out of it is a third-party endorsement of your brand.

How did you get your products into the core shops?
Music is a lifestyle product, and our collaboration products were already selling through in the core shops, so it just made sense for them to carry our headphones too. With headphones, it doesn’t matter how good the winter is, there’s no seasonality. I look at Nixon as a category leader. Ten years ago, the idea of buying a two-hundred-dollar piece of man jewelry at a skate shop was unheard of, but they introduced this new category of non-seasonal accessories. We had more of a challenge convincing headphone shops that they should carry a skate brand.

Now that Skullcandy has expanded its distribution to big-box stores like Best Buy and Circuit City, how do you continue to stay relevant in the core channel?
There’s a significant difference between the product sold in Jack’s versus what you can buy at Circuit City. It’s different, it’s better, the materials are finer, and we maintain that exclusivity to the core channel.

And how do the larger distributors respond to this?
We constantly battle them on this point, and it’s because we flaunt it. We make sure everyone knows where the exclusive products are, including them. The difference is that in specialty retail we have to keep things fresh, so select pieces of core product left over from 2007 will become available to the mainstream in 2008.

How is Skullcandy faring in the current economic condition?
We’re getting pounded everywhere. Our factories have had an eighteen-percent reduction in profit by no other market force than the currency exchange rate. The Chinese government enforced a twenty-percent wage increase to factory workers. Petroleum costs are going up. It’s the perfect storm of the rising cost of goods.

Do you have any plans to take Skullcandy public?
Heck no! Some companies I feel are very trade-able, and so much of their growth comes through acquisition. I don’t know that the public market would really get what we’re doing here. I also don’t need the SEC staring down my financials. I don’t want to be accountable to anyone outside this building.

Who do you consider to be your biggest competition in this category?
That’s kind of a tough question because we don’t really pay attention to what the Sonys and the Boses of the world are doing because what we do is so different. We’re looking mainly at brands that are already established in the action-sports category and moving into our space, and right now there are three main companies doing that. Burton is launching three pairs of headphones, WeSC is a legit company coming out with headphones, and Nixon is rolling out headphones. I can’t think of three better companies to compete against though, because they’re smart guys and it completely legitimizes headphones in action sports. I do expect that we’ll continue to dominate the category just because we have so much coming up in the way of new categories, new products, and new channels of distribution that we haven’t even scratched the surface of yet.