Henri Heikkinen

Hopefully this message reaches as many of you as possible, because we’ve got quite a lot to explain.

2020 went really damn well. At the end of the year we launched the VMK20 headphones, and they were not only a critical success but also a sales success. Simply because they’re bloody good headphones.

Well, the party didn’t last long.

2021 was a business disaster (otherwise it’s been great, I had a child and he is absolutely wonderful), and I want to be open about what we’ve been through during this past year. When we founded this company with Jani (and of course Raimo), we decided that what sets Valco apart is that we’re human. Unfortunately, screwing up is human too.

First of all, from the beginning of the year the factory didn’t get the headphones to us on time because there was a shortage of components. When they finally arrived last spring, a whole lot of the pairs had a faulty chipset.

During 2020 and in the first quarter of 2021, the return rate for faulty VMK19 and VMK20 headphones was 1-3%. In the second and third quarters of this year, the share of faulty units rose to over 20%. Even though we’re a small little operation, that still means thousands of headphones being returned because “Bluetooth doesn’t work”.

Why did it go wrong?

This problem was impossible to identify in advance in quality control, because 99.9% of the headphones work fine at first. They just randomly freeze when something tries to save to a corrupted memory location, and that causes Bluetooth to stop working.

At first we tried just quickly replacing the headphones with new ones to keep customers happy, but that didn’t work. We sent out hundreds and hundreds of replacement headphones, but because we didn’t know the real cause of the issue, many of those were faulty too.

Instead of making customers happy by sending replacements, we just made them (you) angry when the warranty replacement turned out to be a second or even third pair of broken headphones. That would have pissed me off too.

Of course, this had the lovely side effect of draining our warehouse right before our eyes as we kept sending new headphones straight out of stock.

Eventually we figured out the problem and managed to fix it, and the current models are reliable again. If your new pair has an issue now, you’re genuinely unlucky.

Customer service got jammed up

Improving the reliability of the headphones still didn’t solve the problem we have now. Hundreds of angry customers are still waiting for their headphones back from service and for new ones from stock.

Our customer service, which can normally handle dozens of people a day personally and with love, suddenly started getting hundreds of emails a day, and it’s still getting them. Now fewer all the time, of course, and as I write this the backlog should be pretty much under control.

On top of the staffing problems, the tech started pissing itself too. Our simple email-based customer service system started marking some emails as spam, and a lot of people didn’t get replies to their very justified problems.

On top of that, we’ve had constant logistics problems because of COVID-19. The shipping costs for getting headphones from the factory to us, and from us to you, have gone up by hundreds of percent, and reliability is close to zero.

In money terms, this means that instead of making profit on sales, we have actually been losing money all year by selling headphones. We probably should have just thrown in the towel and gone on a long summer holiday.

This is how you end up in a death spiral.

First you get a pile of faulty products and accidentally pass them on to customers. Then customer service gets clogged up and deliveries are delayed because of corona.

You can’t even fix the old ones because there are no components. Your customers start digging up virtual torches and pitchforks and burn your company alive on social media. In the end, you go bankrupt because nobody buys your now-infamous products.

This kind of death spiral can very easily lead to a company going bankrupt. That’s the spiral we were heading into, and we’ve decided to get out of it with the following measures:

1. Every single faulty pair of headphones will be repaired (right now as we speak) - Our factory pushed the warranty issue onto the chipset subcontractor, who refused to give us replacement headphones or money. Instead, we got, or are getting, replacement chipsets to repair the broken ones. Well, it’s better than nothing. Right now we have people working for us and subcontractors soldering headphones back into shape. Hundreds have already been repaired and sent back to customers.

2. Upgrading customer service - I’ve been looking for a new customer service platform where we can receive all our messages from email, Facebook and Instagram into one place, and the system makes sure not a single customer gets left hanging. Tomorrow we’re testing one promising option, but feel free to tip us off if you know any good ones. We’ve hired more people into customer service, and our existing employees are working as hard as is humanly possible, without killing themselves. We love our minions and don’t want them to suffer.

3. Improving communication - We were not prepared for a situation where everything is constantly late. Because of this, and because customer service was jammed, people haven’t been getting enough information about where their order or repair stands. We’ve already taken some steps so our customers would know better what’s going on. Orders should start getting reminders from tomorrow onward, and our repair service will also start sending reminders and updates in the future, so you know we are working on it.

Luckily we had some Death Star money saved up and we still have a good relationship with the bank, so financially the company is on solid ground. Now we’re working around the clock to get rid of the backlog and get headphones to everyone.

The fire should now be out and we can start repairing the damage. In the meantime, all I can do is hope that you, our customers, will be patient with us. The headphones should now be durable and customer service should be in order.