The Conclusion: A 6 Figure Business That Fell Apart When I Was 16
sofamoolah.com
sofamoolah.com
It should be obvious to others who the "major business in the MP3 industry" was when you see the product he was re-selling: http://www.sofamoolah.com/wp-content/uploads/2011/07/1p.jpg
What's not clear to me is how you could (according to the final paragraph) "lose a lot of money" when you seem to have had minimal overheads and (according to part 1) you were making a profit of $40.75 per unit.
Naturally you had some unsaleable stock left over, but at $2100 shipped per lot of 500, did this really make much of a dent in your final profit from the venture?
affiliate sales generated $35.80 profit per unit by his numbers ($55 - $15 affiliate - $4.20 unit cost). I get the impression that affiliate sales were face-to-face and not the bulk of his business, although I might be wrong here.
I was purchasing these products for $4.20 each [including shipping and handling] so I could afford to undercut the competitors by a significant margin. A buy it now (BIN) price was put as $49.95 -- this would give me a $45.75 profit, minus the eBay fees which brought the profit down to around $40.75.
What percentage of his customers were thinking they were buying an iPod?
My nephew, one day, came to me excitedly telling me he was getting an iPhone and he showed me an ebay page with a "new in box" iPhone for $50. (he had $50 in birthday money to spend.) It was not an iPhone, but it looked like one. He's too young to understand, I think, the existence of knock off products.
Did your nephew's page mention "new in box iPhone"? You left the quote out of the iPhone so I'm wondering if it actually said iPhone in the ad. If it did that's a completely different situation. If it didn't then your nephew would've gotten what he paid for. A "new in box"....something that looks like an iPhone.
What's really interesting IMO, is it's such a common effect that there have been a wide range of court cases based around how generic a brand has become and how people exploit it. Thus your packaging really can be too similar to competitors even if everything else is fairly unique.
The police are not anyone's personal force, and what they enforce are mostly crimes, while a suit over this MP3 player would be a civil action. Nobody's going to show up and cuff you for patent or trademark infringement. The State is not involved in civil actions unless the party you harmed happens to be a government.
Note 1: Never underestimate the ability of the press and your fellow citizens to trash whatever you are doing. Because if you are providing value and making money, you are doing more than 99% of the people out there. They will punish you for this.
Note 2: Always expect a lawyer to call. The other 1% who are providing value have learned that the best way to keep making more and more money isn't to innovate; it's to use the political and legal system as a club to kill the little upstarts. Be ready for the club.
Note 3: People who end up making a lot of value usually don't think anybody would much want what they have. First sale comes as a nice surprise. People who have grandiose dreams of killing the market usually wander off into fantasyland and never produce anything anybody wants.
Note 4: It's all marketing and distribution. Know your customer and be able to get close to them. If you can do that, you can experiment with things until you find something that works. The market comes first, the product second.
Kind of ironic that you're accusing the Apple lawyers of trying to stifle innovation, when the kid was making his money from what was essentially a pirated product.
Yes, most of those did not look almost exactly like shuffles. TFAA was selling shuffle knockoffs: http://imgur.com/s2v8A
That's not the kind of "business models" which should be condoned.
So, I think you should re-write the first paragraph...
-----
FROM:
I really have to apologize for leaving you guys hanging on the first part of this story. I was undecided on whether or not to break the article up into 2’s and after some feedback on Twitter I decided to. Below are the middle and the ending. Again, I was undecided on whether or not to break this part up but I left it whole. Theirs 23 paragraphs, double the original. If you’re not sure what I’m talking about, this is the 2nd part on a story I posted yesterday. You can view the original here. By the way, this is the first time I’ve ever told this full story.
TO:
This is the second part of a 2 part series describing the rise and fall of my first business. Click here for part 1 where I describe how it all started.
-----
I look forward to hearing about your next business. Please consider posting about it as you go along.
[edit to add]
... come to think of it, I think you're in a position to emulate patio11 here (if that interests you).... creating a series of these kind of killer blog posts to help drive interest in your next business. I kind of imagine you spinning it as "Scrappy young person running a microbusiness".
Some post ideas that come immediately to mind:
- Go into detail about "I did research into growing markets and trends. I looked into manufacturing prices and retail prices"
- Finding suppliers
- Marketing research
- The mindset of "I want to convert this exposure to money"
There seems to me like there's a lot of potential meat there. Especially since very few (if any) people are posting about starting businesses around physical products. Everyone's talking about web-based SaaS or B2B or whatever... there's a juicy niche there if you want it.
And you can use the street cred the OP article gives you to get the initial velocity.
Actually, you might want to look at polishing up the story into a 10 or 20 min presentation and seeing if you can do a talk at a small business conference. That gives you additional exposure, and organizers often let you attend for free if you're part of the show.
[One last Edit]
So your next business is "to document our journey of making money online while also showcasing interviews with other successful entrepreneurs, display case studies that work and also give out material that our users will find helpful.". So it looks like my comment wasn't really necessary. I'll leave my comment as-is though. Good luck, and I hope it works out for you guys.
While he doesn't owe anyone an apology, I think it's nice that he's happy to give one anyway. Politeness is always admirable, especially on the internet, and politeness above and beyond the call of duty doubly so.
FWIW, I couldn't care less about 'cliffhangers,' provided they are not deployed in a cynical effort to garner underserved subscribers, which is clearly not the case here.
I find it very difficult to believe that they can feasibly force you to stop trading under the same name ...
was there any way you could have continued with different products?
What would you have done differently to make the business more successful/continue operating?
Man, this sort of abuse of the legal system ought to be treated as a criminal activity, with prison time as an option for the execs involved.
If you look at the pictures, they look very similar indeed to the Major Manufacturer's product. In their position I'd do the same thing.
IANAL, TINLA, and in particular I never got around to studying this area of law.
(I can't see the image of his player because it won't load for me)
It looks like a shuffle, with buttons replacing the wheel (nano would need a screen and be far more expensive)
> (I can't see the image of his player because it won't load for me)
They gave him a chance to stop before he had to spend any money on court. That's a good thing, not bad!
fixed that for you.
At this point I wouldn't mind just killing every single lawyer on the planet.
Well, you don't know that. The images of the mp3 players he was selling basically look like a cheap knock off of the iPod shuffle. Apple spends a lot of money on their design and branding and it's their right to protect that investment, wouldn't you say?
This isn't the same as patent trolling.
Say MP3 Factory A gets an order for 1000 units/day but has capacity to do 1400/day. The factory still runs the extra 400/day and sells them as no-names.
Note: this is probably not the case any more with most proprietary electronics because competition is fierce enough that a factory would not want to lose a client. It does however flood the market with cheaper equivalents for all sorts of other products: clothes, shoes, wallets, etc.