Hw13

Hw 13

Big-Box or Specialty Shop?

Lance Fried is an electrical engineer who loves to design

new products. He and a buddy were watching surfers and

scenery at the beach near his home in Del Mar, California,

when the buddy dropped his 20 Gig iPod into a cooler full

of water and ice. The trashed iPod gave Fried an idea—to

make an MP3 player that would work underwater.

Fried spent months tinkering with his invention, a waterproof MP3 player designed specifically for athletes who

need tunes while surfing, swimming, waterskiing, or snowboarding. Like most all entrepreneurs, Fried had invested his

personal savings but he had also somehow convinced half a

dozen friends to work for him for free (pretty smooth).

By August 2004, Fried finished a working prototype.

It was lightweight (40 grams), with a 40-hour battery and

lots of memory (for 2004). The headphones wrap tightly

around ears, and all of it is waterproofed using a proprietary technology. He projected to sell the units for $180.

It was then that Fried brought Greg Houlgate into

the story. Houlgate was a friend who served on Freestyle’s board and had worked as a sales strategist for a

number of large sporting goods companies, including

Callaway Golf. Houlgate showed the player to some of

his contacts in the big-box retail world. “I’ve never had

such a quick and positive response on any consumer

electronics,” he says.

Lance was amazed when Houlgate told him that

major retailers—including Best Buy and Bass Pro Sporting

Goods—wanted to put his gadget on their shelves sideby-side with players by giants like Apple and Sony. Fried

knew that such a deal with just a single big chain could be

worth an instant million dollars in revenue.

But the idea also scared him. Distribution via mass retailers had never been part of the San Diego start-up’s plan.

Instead, the idea always had been to start small, selling

through specialty shops. A big-box strategy meant a whole

new...