
The Conclusion: A 6 Figure Business That Fell Apart When I Was 16 - MatCarpenter
http://www.sofamoolah.com/personal/the-conclusion-a-6-figure-business-that-fell-apart-when-i-was-16/
======
robtoo
(A good read, thanks!)

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?

~~~
dools
I just posted the exact same question as a comment on the blog :)

~~~
ma2rten
Also why did he have to stop selling the usb drives?

~~~
robtoo
I guess he was taking seriously the demand that he "couldn’t even trade under
the same name", and the USB drives do feature his brand rather prominently.

~~~
grannyg00se
I don't see why trading under the same name would be an issue. Not that I'm
educated in the area. But just because some lawyer told him he couldn't,
doesn't mean it is fact. I think he should have kept going with the usb
drives. And even if he did feel he needed to change names, he could've
....changed names! And still kept up with the import and sale of the usb
drives. The article doesn't really explain why there was a complete halt to
the business.

~~~
eridius
I'm guessing this was a case of big company doesn't really want to sue a
16-year-old entrepreneur, they just want him to cease all operations. Sure, he
could have changed his company name and sold another product, but that product
couldn't have been the USB drive given the rather prominent branding on them.

------
sjs
Honestly, I would have liked to know at the beginning that he wasn't just
selling MP3 players but blatant copies of the iPod shuffle. I was wondering
who would pay $50 for some crappy Chinese MP3 player. Obviously kids will if
it looks like something cool and that's a pretty significant insight into why
he sold so many of them.

------
econgeeker
What I really wonder, reading this story, is how he would have done if he'd
gotten a product that didn't look like an iPod.

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.

~~~
grannyg00se
Why would you think it was an iPod unless it said iPod in the description?

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.

~~~
grannyg00se
Not sure why I'm being downvoted here. Is it normal to assume that a two blade
razor is a Gillette two blade razor simply because they look the same? Unless
it says "Gillette" somewhere you shouldn't assume it is such. I'm legitimately
curious to know whether this person was selling phones under a false name. And
moreso, whether the OP was selling his mp3 players under a false name.

~~~
onemoreact
Never forget, even smart people make stupid mistakes and it just gets worse
from there. People often use brand names to fill in for categories. Ex:
Kleenex for tissue, coke for soda etc. What's really odd is people will
sometimes buy something like a box of tissues and think "Kleenex" even if it's
not on the box. People reversing the category name with the brand name is a
basic issue, but there are plenty of ways to encourage the effect.

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.

~~~
eridius
The brand identity inherent in a product's packaging is called "Trade Dress",
and it's a protected form of intellectual property just like trademarks.

------
thestranger
Question for the OP: Did anyone complain to you that he thought he was getting
an ipod, but instead got a knock-off? I think that if nobody thought he was
buying an ipod, it would be perfectly reasonable for you to sell your mp3
players. In my experience however, some sellers deliberately mislead customers
on sites like ebay to buy cheap knock-off products.

~~~
MatCarpenter
Not once.

------
somecoolguy
What were you calling them in your ebay listings? Were you just calling them
"mp3 players", or were you actually mentioning "ipod shuffle"? I find it hard
to believe that enough people search ebay for "mp3 players" to get that many
sales. People searching for an mp3 player would usually just search for an
ipod.

~~~
MatCarpenter
2GB MP3 Player - Color - Fast Postage

------
jdvolz
Am I the only one who is bothered by the comparison here of "I could be sued
for" and "it's illegal for me to"? Just because someone can sue you for it
doesn't mean it's illegal. In fact, if someone is suing you, it's likely that
it's entirely legal for you to be doing it, otherwise, they would have just
called the cops and saved on lawyers.

~~~
dangrossman
That just doesn't make sense. Maybe you don't know the difference between
criminal and civil law?

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.

~~~
jdvolz
That was exactly my point. Just because the Terms of Service of some place
says something doesn't make doing that action illegal. The cops won't come to
enforce someone's terms of service.

------
DanielBMarkham
Notes to people wanting to hustle and form a company/startup.

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.

~~~
jaysonelliot
Did you look at the product he was selling? It was a ripoff copy of the iPod
Shuffle.

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.

~~~
bh42222
Is it any more of a ripoff then any of the other MP3 players which were
manufactured specifically to compete with Apple? Except those companies were
big and had lawyers of their own.

~~~
masklinn
> Is it any more of a ripoff then any of the other MP3 players which were
> manufactured specifically to compete with Apple?

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.

------
Sukotto
You don't owe _anyone_ an apology. You accomplished something _great_ and
you're doing us a favor by giving us this case study. Thank you.

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.

~~~
JonnieCache
I think that's just in response to the various complaints about unnecessary
cliffhangers here and elsewhere.

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.

------
nwmcsween
The weird thing about this is most ports inspect goods and anything that isn't
'sanctioned' (most companies have regional distributors) gets put on hold, the
company gets called and if it is a knock off the merchandise is destroyed and
the receiver usually gets a visit by local police.

------
paulnelligan
Nice story, I enjoyed reading this ...

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?

------
jarrettcoggin
I think one of the biggest questions I have is:

What would you have done differently to make the business more
successful/continue operating?

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scythe
>I came to the conclusion that I wasn’t going to give up that easy and I went
to see a lawyer. I figured I had enough money to present a decent battle – how
wrong I was. I told the lawyer my story and what the situation was and the
consensus was not good. Give up. I was told I could not win. Regardless of if
I had a case or not, fighting a company this size was not worth it. Nowadays I
can agree with what the guy was saying but being told to give up hit me hard.

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.

~~~
somecoolguy
Dude, it technically is illegal to sell replica mp3 players. So the company
had every right to shut him down. He's lucky he didn't get sued anyway.

~~~
scythe
You could be right, 'cuz I don't know the legality of "selling an mp3 player
that looks like that mp3 player some other guy sells" and certainly not in
Australia. However, I mean the use of the legal system as intimidation instead
of arbitration, which is what happened here.

~~~
jacques_chester
You can be sued if your product looks too much like another product that has,
in part, been trademarked or otherwise protected. You can also be sued for
"passing off" under some trade practices laws.

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.

~~~
mckoss
You have to have a design patent to protect the "shape" of a product. They
look a little like iPod nanos, but can Apple really protect ANY small
rectangular metal music player?

~~~
nl
If it could reasonably be mistaken for an iPod nano, then yes, a design patent
covers it.

(I can't see the image of his player because it won't load for me)

~~~
masklinn
> If it could reasonably be mistaken for an iPod nano

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)

<http://imgur.com/s2v8A>

------
klbarry
I was in the same business in High School actually, selling bootleg mp3
players. I called them Dopples - an article of mine still ranks for the phrase
"chipods".

------
heyimfromreddit
tl;dr: Apple.

~~~
a3camero
tl;dr: An Australian teenager imported knock-off iPod shuffle and made some $
until Apple said stop. He did.

------
tomjen3
Spoiler: Another Entrepreneurial person shot down by a law suit that he didn't
deserve but had no chance of winning.

At this point I wouldn't mind just killing every single lawyer on the planet.

~~~
dools
_"that he didn't deserve"_

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.

~~~
gravitronic
In some cases with Asian factories the no-name product isn't even a "cheap
knock-off", it's from the same factory with the same design.

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.

~~~
JonnieCache
Oh it definitely still goes on. Try buying some high-end headphones from ebay.

~~~
khafra
Is there a canonical list anywhere of products, or at least product
categories, for which good label arbitrage opportunities exist on Ebay and
elsewhere? I'll pay $0.99 for filet mignon in a McDonald's wrapper any day.

