And Then?

These little piggybackers went aftermarket . . . and reaped the benefits of a built-in consumer base.
Magazine Contributor
10 min read

This story appears in the April 2001 issue of Entrepreneurs Start-Ups magazine. Subscribe »

What if, tomorrow, we decided not to own cars? The whole world, all at once, just gave them up? What if, say, instead, we decided to ride ostriches to work and school? That would mean two things: The Twilight Zone isn't just black-and-white reruns-it's real life, and we've just entered it-and Lee Schoenfeld would no longer have a business.

All right, maybe thousands, or even millions, of entrepreneurs and employees around the world would be affected. But let's talk about Schoenfeld, a businessman whose store, AutoFun Inc., doesn't sell cars; it sells car accessories. If you go into Schoenfeld's store, located in the heart of Coon Rapids, a suburb of Minneapolis, you won't find a Plymouth or a Probe, but you will see car stereos and car stickers, CD decks and fuzzy dice. AutoFun even sells 8-tracks if you want them. You'll see 32-inch subwoofers and satellite navigation systems. Or Schoenfeld may lead you to a curling iron, a blender or a coffee maker that plugs in to your cigarette lighter. He has child safety seats and floor mats, too, all of which would be completely useless on an ostrich. Except, maybe, for the fuzzy dice. You could tie them around the animal's neck. Where there's a will, there's a way, right?

AutoFun is a store that specializes in aftermarket products. Cars are the market; accessories are the aftermarket.

Many of us have heard of the aftermarkets associated with automobiles. We know that after a car wreck, we can buy aftermarket auto products to fix the thing good as new, and that no matter what, in a few weeks, we'll have forgotten about the incident and be driving like a maniac again.

Er-yes . . . anyway, not so many people are aware that after-markets extend well beyond cars. For instance, cheese is a market, and the screwy inventor who came up with the cheeseball holder created a new aftermarket. Train or airplane travel is a market; the travel agency is the aftermarket. The original Beanie Babies were a market-the Beanie Baby magazines, books and collector cases were all part of the aftermarket.

Get it? Before we go on, let's make sure. Check the correct box:

An aftermarket is a business that can't exist without another particular business. That particular business can completely exist without the aftermarket.

Aftermarket refers to the process of putting away your Cheese Whiz and pickle relish after a trip to the grocery store.

I hate quizzes, and I think your journalist is on drugs.

Hey . . . who put that last one in there?

Getting Started

Brian Dunham, 33, of San Francisco, has always liked shooting people-with a camera, fortunately. His fondness for film helped inspire him to create, a Web site that does picture framing for digital camera owners. Consumers go to the eframes Web site, select a wood or metal frame for about 17 to 30 bucks and then send their digital pictures to Dunham's staff. Usually within 48 hours, the aforementioned consumers have framed photos and memories-sniff, sniff-to last a lifetime.

According to IDC, there are approximately 5 million digital cameras worldwide. By 2003, there should be 22 million. But when Dunham came up with his idea for eframes several years ago, he knew that if he started his company right away, it would be finished just as quickly. There just weren't enough digital cameras. So it wasn't until 1999 that Dunham launched his site, feeling comfortable enough to ease into the dotcom waters and let the rising tide of digital cameras take him out to a serene entrepreneurial sea. The obvious downside is, the aftermarket he's created is completely dependent on the digital camera market. But about that upside . . .

"What's easier about starting an aftermarket is that you don't have to create a buzz around what you're doing because, to a large extent, it's happening already, and you can piggyback on that pretty easily," says Dunham, who has already managed to get some impressive publicity in media outlets like Time and The Wall Street Journal. Especially if the U.S. economy heads into its expected downturn, markets supported by proven products will be the best places for new businesses to be.

And, like all good aftermarkets, Dunham's service enhances the main market. After all, sending digital photos to family and friends around the globe is fun, but it's still nice to put pictures on walls and shelves. "One of the reasons I went into this is that there's a huge global demand," says Dunham, advising aftermarket entrepreneur wanna-bes to "look for businesses to start that will let you make [consumers' lives easier]."

Jumping the Hurdles

Ashwin Kochiyil Philips, 32, co-founder with 30-year-old Rahul Shah of Boston-based Lydstrom Inc., invented SongBank, a machine that may ultimately make CD players useless. Their market? The music industry. You hook SongBank up to your stereo and pop your CDs in or download music from the Internet. The 10G version stores up to 7,000 songs (350 hours of music), allowing you to then throw your CDs away, put them in the attic or give them to a friend. Just use SongBank's remote control to access and play back your music, says Philips, "and it can play three songs at one time in different parts of the house. You can walk around and say, 'I'm in the kitchen, and I want to hear jazz' or 'I'm in the living room, and I want to hear blues' or 'I'm in the bedroom, and I want to hear rock.'"

Although Philips and Shah are now attempting to license Song-Bank to stereo equipment manufacturers, what has come before gives them an advantage. "If we were to go out and say, 'This is a new box that downloads music from the Internet,' nobody would buy it," muses Philips. "Well, not nobody, but the general population wouldn't understand what we are talking about. But when we say this is a really cool CD player, they grasp that [concept] quickly. And from there, we can expand upon it."

Not to mention that being an aftermarket makes manufacturing so much easier. "Obviously, you can utilize components that have already been built and use them as subcomponents," explains Philips.

Also, Philips says finding venture capitalists is easier for an aftermarket. "They tend to grasp things that have already been done with different twists. If you can show [investors] how [your product or service] resembles something that's been done, they associate it with something that's proven." With $5.5 million in funding, somebody besides Philips and Shah believes in their invention.

Does Philips see a downside to being an aftermarket? Not really. Things would get bad, of course, if everybody stopped listening to music, but music isn't going anywhere.

Neither are Beanie Babies-or so it seems. Mary Beth Sobolewski is the editor in chief of Mary Beth's Bean Bag World Monthly, a publication that will tell you everything you need to know about Beanie Babies. Selling for $5.95, the magazine maintains a circulation of 200,000.

But just because it's here today is no guarantee it won't be gone tomorrow. Sobolewski knows most toy fads are destined to fade. A magazine about Beanie Babies needs Beanie Babies to survive, so when Ty Inc. temporarily stopped producing the toys in October 1999, that could have been the end. Luckily for Sobolewski, the company introduced its Beanie Kids line in January 2000 and released seven new Beanie Babies this past January.

But the finicky nature of the market doesn't scare Sobolewski, who also published a guide to Pokémon for a while. It just makes her advice that much more important: "The thing that made Beanie Babies and Pokémon a sure thing is that there was something to collect. Beanie Babies are more than toys. There's got to be something else you can do with them. Like with Pokémon-you can collect; you can play the card game; you can play with all the toys. There's got to be more than one thing, but the big key is the collectibility." (See "The Rules")

Keeping Things Going

Jeff Musa used to lie awake at night, worried that his Dallas business, Cutting Edge Software Inc., would eventually go the way of the dodo, the passenger pigeon and the Rubik's Cube. His company's success was based on just one product, Quickoffice, an office-style productivity suite that turns handheld organizers into something like extensions of computers.

What are Musa's markets? The Palm organizer, the Visor, Microsoft Word and Excel. These are large, specific markets, and any of them, at any time, could have decided to create software for handheld organizers. In 1996, when Musa had his epiphany, he would "call 3Com [the owner of the Palm Pilot organizers] every quarter and ask, 'Are you doing that spreadsheet yet? Are you doing that spreadsheet yet?'"

They weren't, and they didn't discourage Musa, 34, from creating one. But if they had, Cutting Edge Software might still be just a computer software computing firm, and it's possible Musa would still be earning $22,000 per year.

At the same time, Musa was building and refining his product-one that at first only enhanced the Palm organizing experience-at a time when he didn't know whether Palm's success would continue. "I spent many, many nights lying awake," Musa repeats, "and not just because of all the caffeinated coffee I drank."

Things are different these days. Musa's firm has five full-time employees and a revenue of "better than a couple million-for competitive reasons, I can't say any more," and his company should double that figure this year.

But not every enterprise will sit idly by and allow an entrepreneur to enhance its products. Ty contacted Sobolewski more than two years ago and told her she would have to have official consent from the toy-makers to put out a magazine promoting their Beanie Babies, which meant she had to pay them a big fee to do so.

And what would happen if Microsoft or 3Com started their own Web sites with spreadsheets that would work with hand-held devices? "Well," Musa says, "since we're the category leaders [with] the best product out there and thousands of hours invested in it, and we're a brand name that people know and have heard of-hopefully they would entertain an offer to purchase us rather than go and do it on their own."

It sounds like the aftermarket arena can be somewhat nerve-racking, but Musa doesn't think so. "There are a huge number of advantages to being an aftermarket, especially as an entrepreneurial company. It's difficult, time-consuming and just all-in-all risky to try to build something completely new and unique and make it work.

"The aftermarket is interesting," continues Musa, "because you have a product that you're aligned with, and yet you can be successful in your own right."


PetsPet Products
ComputersComputer Software or Repair
TelephonesTelephone Headsets
KeysKey Chains
False TeethDenture Cream
JewelryJewelry Cleaner
Packaged Hot TamalesAntacid

Geoff Williams is a frequent writer for Entrepreneur and a reporter for The Cincinnati Post.

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