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When Alex Rodriguez made his first foray into business ownership, it was as a part time seller of Android tablets on Amazon – just a way for him to generate a little extra income. Several years later, Alex transitioned that company, Miami-based Azulle, from part time seller to full time manufacturer, making low cost mini PC’s. Little did Alex know when Azulle sold its first PC stick that his former side business would someday take on some of the biggest names in computing devices… and win.
A Classic David vs Goliath Story
Alex envisioned Azulle as a solver of problems with their affordable, versatile mini PC’s – innovating practical solutions for home and business. He didn’t consider that he’d have much competition with giants like Dell, Lenovo, or Intel, because they were more focused on creating the infrastructure for an increasingly cloud-based world. Plus, the mini PC operated under fairly tight margins (20-30%), which wasn’t sustainable for supersized companies, but which Azulle could function profitably with as long as they kept their sales numbers up. Azulle had little to no competition. And then the giants turned their gaze on the mini PC market.
It started with HP releasing a unit that was in direct competition with Azulle’s Quantum Byte mini PC. HP had better brand recognition, and that cut into Azulle’s revenue; however, they stuck it out and slowly watched HP remove themselves from the mini PC space, unwilling to continue supporting a product with such small margins. Dell entered the market and quickly left for the same reasons that HP did. Then Lenovo released their version of a PC stick competitively priced against Azulle’s Quantum Access, and a price war began that could’ve been disastrous for Alex’s small company. According to Alex, sales dropped overnight with Lenovo’s release. Instead of crying defeat, Alex and his company put their dukes up.
A Fight to the Death – Sort of
First Alex tried price matching Lenovo’s product. That didn’t work. Lenovo had too much brand recognition. So they lowered the price of their PC stick. Sales went up. Lenovo countered. Sales went down. Azulle lowered their price again. Lenovo countered again. This went on until the Quantum Access was selling for $87.99 though their initial retail price was $130. Lenovo couldn’t match that price, and so the price war ended. Alex took the profit loss in stride.
“Our sales went back to what they were prior, obviously with a lot less profit, but it gave us the withstanding power for other companies to know that we were able to do it. And we didn’t change the quality of the product. So we used [the Quantum Access] as a loss leader to introduce companies to our other products where we did have the margin that we had prior.”
Lenovo eventually dropped out of the market, and Azulle was able to return to its original pricing. From then on Azulle has had very little competition in the PC stick market. They took on not one, but several Goliaths, and won. Azulle established themselves as a reliable brand, and positioned themselves for their next challenge: getting their eggs out of one basket.
A Necessary Parting
Alex and I met last year at a masterclass for entrepreneurs. He had set the ambitious goal for Azulle to grow from a $6 million company into a $20 million company as quickly as possible, and was looking for input from his entrepreneur peers on how he might get there. We quickly zeroed in on a big weakness for Azulle, one that Alex already had an eye on: Amazon was their sole online distributor.
In the beginning this wasn’t a bad thing. Alex describes Amazon as being instrumental for expanding Azulle’s reach from coast to coast, and for helping them establish their stellar reputation. That helped even with their direct B2B sales, allowing other companies to see their online reviews. Azulle grew from 0 to $5 million in just four years in large part because of their Amazon sales. But as Azulle evolved, so did Amazon, and some of their operational changes introduced major challenges for Azulle.
“Amazon is strictly run by algorithms. Those algorithms can in turn shut your account down and effectively disable it for 90 to 180 days without any human interaction. So it can literally shut down your business overnight if something that their algorithm deems is a threat or an issue comes up.”
Amazon was essentially holding the keys to their business – scary for Azulle, but also affecting the valuation of the company and, potentially, customer confidence. To change this, Alex and his team closely examined Azulle’s channel distribution options and are now expanding into new areas. The goal is to grow their sales through new channels without actually eliminating the platform that for the moment remains their biggest source of revenue.
A Path for Innovation
Building toward a $20 million company takes more than just finding new sales channels. It also takes continual innovation – something that Alex and his company are well ahead of the curve on. Looking at where current market trends and consumer desire are going, Alex has pinpointed the IoT market as Azulle’s best path for creating innovative solutions.
IoT (Internet of Things) refers to the connectivity of everyday products to the internet, allowing businesses and individuals to receive information from them and even monitor them remotely. Think smart appliances, receiving notification on your cell phone if your front door opens, or environmental tracking for trucking companies. The use cases are limitless, and Alex is positioning Azulle to be at the forefront of this bleeding edge market.
“We’re actually partnering with Microsoft. We’ve created relationships with Intel. We’re creating relationships with software developers out there to be part of innovating technology that hasn’t come out yet, so that the next time something launches, Azulle is a hardware manufacturer that has a solution.”
With Alex’s amazing blend of quality, innovation, and just plain scrappiness, I’ve no doubt that he and Azulle will meet their goal to become a $20 million company and an industry giant in the mini PC space. I’ll be following along with Alex’s progress, and remain full of admiration for what he and his company are building.
To listen to my full interview with Alex Rodriguez click here.
June 5, 2019 at 03:23PM
Forbes – Entrepreneurs