Although research of his supply chain was extremely bad, it doesn't seem as though correcting it would have saved his first misdirected attempt at a product.
My own take is that the poor guy's fundamental error was that he jumped the gun on outsourcing. He should have built the first hundred prototypes by hand on his kitchen table, with parts scrounged from one hobby store or another, then sold them himself. It sounds like he basically ended up doing that anyway, but if he'd done so in the first place he'd have invested less up front, gotten feedback faster, and gotten an intuitive sense of his market and the sort of product they'd prefer. Premature optimization!
The other, even more fundamental error was going into the novelty business in the first place.
Often times a product that gets well received when you have a few samples made doesn't sell at all. Something you think kinda sucks and is just a 'filler' product in your line up turns out to be the most popular, and you run out of stock. Something sells well, you can get more made, so you order 500 more units, and then all of the sudden the product is not cool and nobody wants it anymore.
I'm saying that even under his best assumptions about the market, his product was not profitable. He ended up getting customers after all, but even under generous volume and gross margins, it couldn't cover overhead.