EXCLUSIVE | Devialet CEO: China Is Expected to Become the Second Largest Market

Founded in 2007, Devialet is considered to be a very young brand in Europe, but it has grown rapidly in recent years. Andy Rubin, the "Father of Android", is a huge fan of Devialet and believes that it is a game-changer in the audio industry.

Now Devialet has officially entered the Chinese market with the establishment of concept stores and flagship stores in Beijing and Shanghai.

Devialet CEO, Franck Lebouchard, and Luxe.CO had a long talk about the brand's past, present and future in China at its concept store in Beijing.

There is a bunch of big shots behind this young brand: Billionaire LVMH Chief, Bernard Arnault, electronics manufacturing giant; Foxconn, through its European investment arm, Ginko Ventures; giant automobile manufacturer, Renault; Andy Rubin's venture capital fund, Playground Global; successful music artist, Jay-Z; Qatar sovereign wealth fund, Future French Champions; CM-CIC Investissement; French government investment fund, BPI France, and the investment funds in which LINE's parent company, Naver, and its subsidiaries participate.

As of October 2018, Devialet had raised a total of 125 million euros.

Luxe.CO: Why do you think Devialet attracts so many famous investors?

Franck Lebouchard: The sound quality, because musicians are very particular about the quality of their sound equipment. Jay-Z, who is also an entrepreneur, was one of our first investors, who decided to invest in the brand after using our product in 2012, and Bernard Arnault, himself a music lover, also loves our products.

Investors like Foxconn, Qatar sovereign wealth fund, Future French Champions and BPI appreciate that the products we are making are about speakers and music ---- emotional goods that everyone can relate to. So far, I haven’t met anyone who doesn't like music. Everyone can talk about music. It's a potential market, and that's what they're looking for.

Luxe.CO: In terms of financing, are you interested in attracting Chinese investors in the future?

Franck Lebouchard: We've had Chinese investors come to us before. We may be open to them in the future.

Luxe.CO: We know you have a rich experience of the theater, cinema and manufacturing industry, so what made you choose Devialet?

Franck Lebouchard: These industries all have a similar feature ... the ability arouse people’s emotions. The cinema industry also arouses emotions -- in the cinema, people can cry, laugh, be afraid, and share a beautiful moment with friends. It is all about experience, emotions and sharing. Music is the same. When you enjoy your favorite music with a pure and perfect sound quality, you can hear the emotion behind it. I have been delivering these strong emotions all my life.

"We Focus on Sound, and Only on Sound."

Devialet created the world's first sound system that combines analog and digital technology, and has created several audio products based on this technology. So far, Devialet has been awarded more than 160 patents and has racked up 76 international awards for sound and design. 

The brand currently owns two factories in France, and all the hardware and software of the products are independently designed and developed by the internal team there. According to Franck Lebouchard, there are currently 500 people in Devialet's team, 100 of whom are engineers.

Although Devialet's core business is currently audio, the company has formed a partnership with its investors, Renault and Foxconn, to use Devialet's acoustic technology in Renault cars and Sharp televisions. Devialet's technology is also likely to appear in mobile devices, as well as more software-based services for music, and Jay-Z's company, the music streaming service Tidal, has a deal with Phantom in streaming media. 

In addition to its hardware capabilities, Devialet has taken pains to create its brand image by opening outlets worldwide in addition to the traditional wholesale and multi-brand channels such as Apple Store and Harrods Department Store. The brand sets up a special listening space in the store for consumers to experience it in person; at the same time, the store uses high standards of design to form the complete customer experience with the products.

Luxe.CO: What was Devialet’s differentiation strategy for the global market and the Chinese Market in the face of well-known competitive brands in the audio industry, such as BOSE and B&O? 

Franck Lebouchard:  I believe that we are different from the whole industry because we focus on audio and only on audio. We're not trying to go too fast, and we're not going to open 1,000 stores in China. We’re also careful in choosing our partners, and we focus on pure voices instead of many partners.

Luxe.CO: What are your priorities right now as CEO of Devialet?

Franck Lebouchard: The Chinese market, and the next generation of new products. We have audio, but no headphones or car audio. I’m really looking forward to launching new products.

Luxe.CO: In terms of innovation, will Devialet introduce more entry-level products in future?

Franck Lebouchard: Of course! We are developing new products, but I can't reveal the specific content. We want to offer more affordable products to consumers in every step we take, and there will be more affordable products in the future.

Luxe.Co: What is your opinion of the future trend of the global audio industry? 

Franck Lebouchard: One trend will be smart audio. Many of today's products are smart enough to support voice recognition, and Devialet’s future products will be even smarter.

Another trend is that consumers will demand better music quality as they have the chance to listen to more music. We can already see that the demand for good music quality has increased in every segment of the music industry. Devialet has unique acoustic technologies that we hope to apply to more fields and scenarios, such as cars, smart speakers, wireless routers, etc.

China Is expected to become the Second Largest Market

According to a July report by Global Industry Analysts, the global wireless audio market is expected to grow to $17.6 billion, and the wireless audio market in China is expected to grow at a compound annual growth rate of 12.8% over the next few years, with an estimated market size of $4.2 billion.

According to the ‘Wireless Audio Devices Market 2019 Global Analysis, Growth, Trends and Opportunities Research Report Forecasting 2025’, the global wireless audio market is expected to grow at a compound annual growth rate of 18.36% from 2018 to 2025. Geographically, the APAC region leads the world, driven by the growing middle class in China, India and other Asian countries.

Franck Lebouchard says France is still the brand's biggest market, with the United States in second place, but China is expected to overtake the US as the second largest market for Devialet next year, given its rapid growth.

Devialet first entered the Asian market in 2017, and opened its first retail store in IFC in Hong Kong, China. The brand opened two stores in mainland China this year and will open 18 more. However, Franck Lebouchard acknowledged that the rapid growth of the Chinese market poses challenges for both the branding team and its supply chain.

Luxe.CO: Why did you decide to enter the Chinese market at this time?

Franck Lebouchard: We entered Singapore, Hong Kong and Taiwan three years ago and Japan one year ago. After that, we spent a year preparing the factory, supply chain, publicity team, etc., and decided that now was the right time to enter the market in mainland China. Another reason is that the Asian market is important. Two of the brand's major shareholders are from Asia: Foxconn in Shenzhen and Naver in South Korea.

Luxe.CO: We have learned that Drivepro is Devialet's distributor in China. How did the brand initially establish contact with Drivepro and the market in mainland China?

Franck Lebouchard: Drivepro is not our only distributor in mainland China. We also have Purist Audio. Devialet's first contact with Drivepro was in the Hong Kong market, where they are one of the distributors of the brand, and they suggested that we enter the mainland Chinese market. Having officially entered this market now after a year of preparation, we are finding that there are still many challenges.

Luxe.CO: How does the brand's operation in China compare with the US and Europe?

Franck Lebouchard: Speed. It usually took us 8~12 months to open a store in France, Europe and the United States, but it only took 2 months in Beijing and Shanghai, and in terms of store size, the stores in France, Europe and the United States are 30 to 40 square meters, only a third of the size in China. We had to recreate something for China.

In terms of channels, there is no difference in multi-brand store channels, so the biggest difference is still the speed. In other countries, we open 1 to 3 stores with our partners first, and then, after six months, we open 10 stores with good progress. If they are successful, we open 20 stores, but in China, we’ll start with 20 stores, and then we will discuss it. It's exciting to grow at this rate, but it's also a challenge for us.

Luxe.CO: Will the rapid change in the Chinese market have an impact on the brand's supply chain?

Franck Lebouchard: In fact, it already has! I contacted my partner this morning and we hope that the new product can be put on the shelves in mid-October. This is a revolution for our factory in Paris. Arguably, the Chinese market is changing Devialet.

Luxe.CO: What are the other challenges the brand is facing in the Chinese market?

Franck Lebouchard: How to communicate with young consumers. Our customers in other markets are older, but our customers in China are younger. We need to adjust our marketing strategy and the design of the whole store. The team used to prepare a store in a few months, but now it is preparing one in a few weeks.