Brainstorm Tech 2010

Where the Fortune 500 and the innovators meet to shape the future of business. (July 22-24, 2010)

Q&A with Skullcandy

June 21, 2010: 11:05 AM ET

(Photo: mbtrama, Flickr.com)

By Mary Jo A. Pham, contributor

With everything from Skittle-like earbuds to funky over-ears, Skullcandy banks on the appeal of super-chic headphones over niche marketing for audiosnobs. And it's working.

The company has been enjoying tremendous growth in recent years, despite the recession. In 2009 alone, Skullcandy banked $125 million in sales, up from $85 million reported in 2008. The company will launch its Aviator headphones today, developed in partnership with Roc Nation and hip-hop mogul Shawn "Jay-Z" Carter.

Thirsty to nab more market shares and invest in better product control, the company is branching out globally -- it opened an office based in Shenzhen, China last December.

Skullcandy CEO Rick Alden is coming to Fortune Brainstorm Tech this year, so Fortune checked in with Dan Levine, Skullcandy Chief Merchandising Officer, and President Jeremy Andrus to discuss wearable electronics, managing costs in China, and how pop culture-driven gear can hang with true audiophiles. Edited excerpts are below:

Fortune: Who's your ideal customer?

Levine: Our culture was born on the mountains.  We were a group that thrived off of snow, surf, good music, and hip hop music, so that's the true culture we designed for. The target age is 14 to 24, and it's people who are very passionate about their music and very passionate about their lifestyle.

Fortune: You're the No. 2 manufacturer of audio gear in the U.S. Do you need to target new consumers to get to No. 1?

Andrus: No. We're pretty focused on the customer that we've been servicing. Our product development efforts have really turned towards a higher-end quality experience.

Levine: At the same time, they're coming from our creative point of view, which is what separates our brand in the audience space.

Fortune: What's your marketing secret?

Levine: All of our athletes, advocates, musicians, and DJs that we partner with are truly friends of the brand. The best way to experience our brand is to come and visit us in Park City, Utah or visit our office in San Clemente, California and see a collection of individuals—extremely talented individuals—that are doing what they say and are living this. When a brand is honest about its lifestyle, you have a powerful brand—that's what we have.

Fortune: Do you ever cut corners for fashion? Some people have been critical of the audio quality in Skullcandy products.

Levine: We really love critiques like that. We read all of our criticism and look inwardly at our performance and how we can improve the overall quality of the product. That being said, I would put our product up against any competitors in any of the price ranges we're in. And the new products, there's no doubt, they're premium audio performance.

Fortune: Even in your lower priced earbuds from the ones that cost $14.95 to the $20-$30 range?

Andrus: They're so good. For $20, I think you'd be hard pressed to find any earbuds under $50 that sound as good outside of the Skullcandy brand.

Fortune: How are you going to keep up with production and manufacturing labor costs in China if the price of labor eventually rises?

Andrus: We are beginning to face the same challenge that our competitors are facing in China—rising labor costs and capacity issues. We really believe that if we're good partners to our suppliers and if we effectively manage the production and the product development process, we can't beat the macrotrends, but we can certainly be better than our competitors.

Fortune: Anything new that you're going to unveil at the Fortune Brainstorm Tech conference in July?

Levine: We launched a new beanie speaker system. It's a product that you can listen to music with while wearing a beanie on your head. We're doing whatever we can to integrate music and electronics—what people call "wearable electronics."

Fortune: What's the coolest thing you have on the market?

Levine: Well, the Roc Nation Aviator has earphone cups made from a clear polycarbonate that's a sunglass-grade polycarbonate. Theoretically you can pop those off and use them as sunglasses. That was a particularly innovative material.

--An earlier version of this article incorrectly attributed a number of answers to Dan Levine instead of Jeremy Andrus.  The answers from Andrus have been correctly noted.

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Shelley DuBois
Shelley DuBois
Writer - Reporter, Fortune

Shelley DuBois writes on management issues for Fortune.com. Before joining Fortune, she was a producer for National Public Radio's Science Friday and worked for Wired. Shelley has a graduate degree in science, health and environmental reporting from New York University. She lives in Brooklyn.

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