AudioXperts Folds, Cites Product Delays, Lack of Retail Support

After failing to meet product deliveries and sales goals, AudioXperts “ceased operations” Friday, President Eli Harary told Consumer Electronics Daily. CEDIA Expo last month was a last-ditch chance to generate enthusiasm for the company’s slow-to-market product line, said Harary, who repeated comments he made during a CEDIA Expo press event that AudioXperts provided a chair “with only one leg” that was “not enough for dealers to sit on.”

AudioXperts was financed by a loudspeaker ODM in Taiwan and was working under an “investment ceiling” based on an expectation of product delivery that didn’t materialize, Harary said. A full product portfolio -- including tabletop audio, audio for TV and home theater speakers -- “would have allowed us to generate enough sales and enough position in the market that we could sustain ourselves,” he said. But the lineup only offered one product for the first six months -- its AC2112 soundbar, which was lowered in price from $1,999 to $1,499 last summer. “Having one product to build a brand was not going to build much momentum,” Harary said. The follow-up model, with a wireless subwoofer, “had some issues” when it launched two months later, Harary said. Delivering more products two months later “put a strain on being able to reach our sales goals,” Harary said.

The products on AudioXperts’ list were “somewhat out of their wheelhouse,” Harary said of the higher end audio designs being produced by the parent company, which controlled manufacturing. Completing the design and engineering work “to the level of quality we expected I think was a challenge for them,” he said. That led to product delays that were beyond what either party expected, he said. AudioXperts designs were “unique,” but many manufacturers “have a difficult time doing something that’s different from what they did yesterday,” he said. He declined to name the parent company but called it a “sizable” loudspeaker manufacturer. Although it was the parent company’s internal production delays that held back product shipments, “they make their business decisions based on their goals,” Harary said, and AudioXperts revenue and cash flow were below expectations.

Going in, Harary’s strategy with the upscale AudioXperts brand was to offer a limited number of products for a variety of use cases. “The idea was to have something for every specialty channel,” he said, citing audio consoles for TVs, passive speakers and tabletop audio products. The strategy only works if “the products show up,” he said. “We simply didn’t have enough products.”

On the sales side, Harary cited what he saw as a change in specialty retailing. Harary, who owned a specialty audio store in the Los Angeles area in the 1980s before executive stints with Harman International and Boston Acoustics, expected a commitment on the sales floor that he said no longer exists today. His strategy was based on “specialized independent retailers still being able to woo customers to new and exciting products” and he found instead that “sales teams just don’t do that anymore.” He criticized sales people for taking “the absolute easiest way out” and selling “whatever the customer is familiar with” versus trying to educate customers about new products and brands. “Channels have lost their ability to launch new brands and product concepts,” he said. Having no known brand hurt the products at retail, Harary said. “A known brand” would have elicited a different customer reaction, he said.

Bjorn Dybdahl, owner of Bjorn’s Audio Video in San Antonio, agreed. “In the old days we built brands,” he said. “It’s tougher today and I don’t know why other than the fact that the hobbyists don’t exist anymore.” Dybdahl was enthusiastic about carrying the AudioXperts line after hearing product demos in May 2012, he told us. “The idea of the company was terrific,” Dybdahl said, but the manufacturer couldn’t get product out “in a timely manner to get the ball rolling,” he said. Now Dybdahl’s concern is warranty support for product it has sold and will sell. In the past when companies have gone under, Dybdahl had to “eat” any warranty issues, he said.

Harary, meanwhile, is trying to put into place warranty support for products that have been sold through distributors in Europe, China and the U.S. “I'm desperately trying to put some protection in place so that consumers don’t end up with any sort of bad taste in their mouths over the products,” he said.

The revenue target for AudioXperts in 2014 was $2.5 million to meet its financial goals, and AudioXperts was struggling to go from “zero to $1 million,” Harary said. The parent company had set an investment limit for the venture, and was unwilling to go beyond that amount when it was reached at the end of August, he said. “They had bigger fish to fry,” Harary said. Harary wouldn’t quantify the volume of outstanding inventory but said he’s trying to help dealers and distributors “cost average” inventory so they can “move it through their channel and get their money out of it.” AudioXperts, which employed a staff of seven, has 14 U.S. dealers and nine distributors outside of the U.S., Harary said.

Harary is under contract with the Taiwanese ODM until next summer and plans to be a consultant to speaker companies when he’s free to work with other brands and manufacturers. AudioXperts owns the product designs and tooling and there could be an opportunity “once the dust settles” for another brand to buy the tooling from the parent company, Harary said.