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HOW I DID IT

How I Did It: Rick Alden, Skullcandy

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As told to Nitasha Tiku

Industry: Consumer Products & Services

Three-Year Growth: 24,077.4%

Rick Alden started out promoting snowboarding events. Then he sold bindings -- he dismantled his own boots and played with car-door latches to come up with the prototype. Next came Skullcandy, which sells stereo headphones and other audio products. The Park City, Utah, business hit $35.7 million in sales last year -- thanks in no small part to the community of boarders, surfers, and skaters that Alden has cultivated through sponsorships and other forms of grass-roots marketing. As Skullcandy goes mainstream, he says, his goal is to keep that customer base excited about the brand.

One of our first products was a set of headphones called Skullcrushers. Each set comes with a pair of Mylar cone speakers and a pair of subwoofers. They were designed to appeal to skateboarders and snowboarders who love a ton of bass. The sound rattles your head and bleeds through your eyes. It's a damage-your-hearing kind of bass.

I'd walk into snowboarding and skateboarding shops that I'd sold bindings to or that I'd known for 15 years, and say, "Hey, man, I think you ought to sell headphones." They'd look at me a little bit funny, like, "Gee, Rick, maybe you didn't realize we're a skateboard shop. We don't sell consumer electronics." So I'd say, "How many of your customers have iPods? Music is a lifestyle experience, and you are a lifestyle shop -- and we're selling a product that is relevant to your customer base." Still, convincing them to carry Skullcandy took a lot of work.

We made a lot of guarantees: If it doesn't sell, we'll buy it all back; we'll rotate to get the best product mix. Fortunately, we've never had to buy any product back.

We always wanted to build our technology into other gear -- to put audio into snowboard helmets, for example. So we met with Giro, one of the top producers of snowboard and ski helmets. They loved the idea of putting speakers into their ear pads and wiring not just music but also cell phones. They even agreed to print the tag line "Powered by Skullcandy" on the packaging. After that, the company really took off.

Then we would go into shops, saying, "Hey, we want you to sell our products." And they would tell me, "We don't sell headphones." And then I'd say, "You've actually been selling Skullcandy for a year or two now" and point to the Giro helmet on the wall.

I pitched Skullcandy to Best Buy (NYSE:BBY), Target (NYSE:TGT), and Circuit City (NYSE:CC) to be picked up for the fourth quarter of 2007. I didn't anticipate that all three would say yes and place orders for all their U.S. stores. Could we even build that much product? We went to China and figured out a way to increase our tooling cavities so that we could get more units out of a single production run. And we delivered on time to all three chains.

Our success in the mainstream market creates a real danger for us. Our core has expanded from skateboard and snowboard shops to include stores that sell sneakers, bikes, vinyl records, and electric guitars. Those account for only 10 percent of our revenue, but it's the most important 10 percent, and we have to protect it. So we sponsor boarders, surfers, and BMX bikers. One hundred percent of our marketing efforts focus on that segment.

I have a saying: Conservative guys buy core products, but core guys will never buy conservative. In other words, we've got to be edgy and keep our original consumer happy, because without him, we'll lose people like me -- old guys who want to buy cool young products, too. We're the guys who sit behind a desk more than we sit on a mountain bike, but we want to believe we still belong in that world. We all still want to be cool.

| Photograph by Ed Mcculloch

relying on his board>To launch his headphone company, Rick Alden turned to the skateboard and ski shops he knew best.

Last updated: Sep 1, 2008




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