#DigitalSkeptic: CES Speaker Maker Soundfreaq Hits Its Target With Collaborative Manufacturing

LAS VEGAS (TheStreet) -- Matthew Paprocki is making a whole lot of noise in the music and consumer electronics biz with nothing more than a few little speakers.

"If you're willing to streamline how you design, make and sell a product so you handle all the parts of the process at the same time," said the co-founder and creative director for Soundfreaq, the Los Angeles audio peripheral and speaker design shop, "you can bring high-end features into products at good prices and still make a reasonable profit."

Paprocki has made the long trek here to dry, high-desert and the 2014 International Consumer Electronics Show to exhibit Soundfreaq's latest creations: a line of relatively small, elegantly designed portable and desktop speaker systems. These gizmos have so-hip names such as Double Spot, Sound Spot and Sound Rise (seen above). A least based on my listening here in crowded demos, they offer reasonable sound quality. And there is no arguing the value: Just $99 for the Sound Rise buys a high-quality, Bluetooth-enabled alarm clock that can double as a solid, freestanding sound system.

Soundfreaq would be just another of the oodles of speaker and headphone makers looking for media love here on the crowded CES show floor if it were not for one small, investor-critical fact: Soundfreaq has a traditional, direct-from-Web sales model -- hit their online store and buy a speaker right now, if you like -- but this tiny design firm has also cleverly reinvented how it makes its products so it simultaneously has a legitimate retail sales channel.

No kidding, six-person Soundfreaq commands enough cache in the brutal global consumer electronics supply chain to sell through some of the world's most demanding retailers -- including Target and Wal-Mart.

"Target is really our marquee retailer. And to be fair, that relationship does involve a series of partnerships we work with. We most definitely don't do it all ourselves," Paprocki said. "But still, basically most of the in-house electronics Target sells under its Capello brand, we design."

Not a zero sum global game
How Soundfreaq can do what zillions of other electronics firms can't is simple, Paprocki said. The secret is getting right with the today's new reality of designing and producing real product.

"There has been the American attitude that we do the design and marketing and all that happens is the factory then follow orders," he said. But Paprocki points out that global factories now are run by sophisticated second-generation -- or even third-generation -- owners, who more and more add real value to how products are made.

"Factories are learning the inner details of making high-quality product," Paprocki said. "The key is accepting that expertise and structuring your business so it takes advantage of that knowledge."

Paprocki's model essentially recasts 21st century product design and retailing, where prosperity comes at your partner's expense, to a more symbiotic relationship with factories and even retailers that play an active role. It works also for more complex products, such as the SFQ-01 sound platform with sophisticated network-enabled audio for a reasonable $199.

"If you accept that you really are partners with your factory and your sales channel, it opens up a new consumer tech design process that's fast, lean and creates unique products," he said.

Design, make and selling all at once
The investor wisdom packed into Paprocki's holistic worldview is obvious as he described how he and his firm dreamed up the Sound Rise. By staying in touch with his factories, Paprocki realized it would be cheaper and easier to stack speakers vertically into their units. That gave the unexpected bonus of raising the alarm clock off the desktop, perfect for sleepy morning eyes. Next, though he experimented with using touch-only controls a la the iPhone, his retail partner told him that was a mistake. Consumers have no interest in exploring the cutting edge of product interfaces first thing in the day -- it is good, old-fashioned, solid buttons they crave.

It all came together within a few weeks.

"We make really complex decisions on integrated product design what would take a larger company months," he said.

Not surprisingly, business has been solid for Soundfreaq. Revenues have effectively doubled year in and year out over the past four years, Paprocki said. He estimates his shop manages 25 unique products, with roughly 100 different colors and styles, including a line of rugged Bluetooth speakers.

"It's usually the basic, simple thing that defines a product," Paprocki said. "If you can get in touch with that and not lose it as you develop something, that's what sells ... it's not that hard once you figure it out."

This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.

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