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And Then? These little piggybackers went aftermarket . . . and reaped the benefits of a built-in consumer base.

By Geoff Williams

Opinions expressed by Entrepreneur contributors are their own.

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

All right, maybe thousands, or even millions, of entrepreneursand employees around the world would be affected. But let'stalk about Schoenfeld, a businessman whose store, AutoFun Inc.,doesn't sell cars; it sells car accessories. If you go intoSchoenfeld's store, located in the heart of Coon Rapids, asuburb of Minneapolis, you won't find a Plymouth or a Probe,but you will see car stereos and car stickers, CD decks and fuzzydice. AutoFun even sells 8-tracks if you want them. You'll see32-inch subwoofers and satellite navigation systems. Or Schoenfeldmay lead you to a curling iron, a blender or a coffee maker thatplugs in to your cigarette lighter. He has child safety seats andfloor mats, too, all of which would be completely useless on anostrich. Except, maybe, for the fuzzy dice. You could tie themaround the animal's neck. Where there's a will, there'sa 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 withautomobiles. We know that after a car wreck, we can buy aftermarketauto products to fix the thing good as new, and that no matterwhat, in a few weeks, we'll have forgotten about the incidentand be driving like a maniac again.

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

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

An aftermarket is a business thatcan't exist without another particular business. Thatparticular business can completely exist without theaftermarket.

Aftermarket refers to the process ofputting away your Cheese Whiz and pickle relish after a trip to thegrocery store.

I hate quizzes, and I think yourjournalist is on drugs.

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

Getting Started

Brian Dunham, 33, of San Francisco, has always liked shootingpeople-with a camera, fortunately. His fondness for film helpedinspire him to create eframes.com, a Web site that does pictureframing for digital camera owners. Consumers go to the eframes Website, select a wood or metal frame for about 17 to 30 bucks andthen send their digital pictures to Dunham's staff. Usuallywithin 48 hours, the aforementioned consumers have framed photosand memories-sniff, sniff-to last a lifetime.

According to IDC, there are approximately 5 million digitalcameras worldwide. By 2003, there should be 22 million. But whenDunham came up with his idea for eframes several years ago, he knewthat if he started his company right away, it would be finishedjust as quickly. There just weren't enough digital cameras. Soit wasn't until 1999 that Dunham launched his site, feelingcomfortable enough to ease into the dotcom waters and let therising tide of digital cameras take him out to a sereneentrepreneurial sea. The obvious downside is, the aftermarkethe's created is completely dependent on the digital cameramarket. But about that upside . . .

"What's easier about starting an aftermarket is thatyou don't have to create a buzz around what you're doingbecause, to a large extent, it's happening already, and you canpiggyback on that pretty easily," says Dunham, who has alreadymanaged to get some impressive publicity in media outlets likeTime and The Wall Street Journal. Especially if theU.S. economy heads into its expected downturn, markets supported byproven products will be the best places for new businesses tobe.

And, like all good aftermarkets, Dunham's service enhancesthe main market. After all, sending digital photos to family andfriends around the globe is fun, but it's still nice to putpictures on walls and shelves. "One of the reasons I went intothis is that there's a huge global demand," says Dunham,advising aftermarket entrepreneur wanna-bes to "look forbusinesses to start that will let you make [consumers' liveseasier]."

The Rules
  1. Have a cultlike, underground following for the marketproduct.
  2. Even better, the market product should be universal, somethingthat everybody uses.

    The market should have lots of uses. AutoFun, for instance,carries 70 different categories of products that can go in cars.But if there's a Toothpick World out there, we're talking asmaller store.

  3. Those uses should generate some serious sales. Car accessories,such as child seats, can be expensive. A toothpick holder? Maybenot so expensive. The little colorful plastic paper stuck ontoothpicks? Also probably not a cash cow.
  4. Once you're a success, have an escape plan, especially ifyour market isn't tried and tested. You can branch out andcreate numerous aftermarket products or services, in case one ofyour markets fizzles out.

Jumping the Hurdles

Ashwin Kochiyil Philips, 32, co-founder with 30-year-old RahulShah of Boston-based Lydstrom Inc., invented SongBank, a machinethat may ultimately make CD players useless. Their market? Themusic industry. You hook SongBank up to your stereo and pop yourCDs in or download music from the Internet. The 10G version storesup to 7,000 songs (350 hours of music), allowing you to then throwyour CDs away, put them in the attic or give them to a friend. Justuse SongBank's remote control to access and play back yourmusic, says Philips, "and it can play three songs at one timein 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 hearrock.'"

Although Philips and Shah are now attempting to licenseSong-Bank to stereo equipment manufacturers, what has come beforegives 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 aretalking about. But when we say this is a really cool CD player,they grasp that [concept] quickly. And from there, we can expandupon it."

Not to mention that being an aftermarket makes manufacturing somuch easier. "Obviously, you can utilize components that havealready been built and use them as subcomponents," explainsPhilips.

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

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

Neither are Beanie Babies-or so it seems. Mary Beth Sobolewskiis the editor in chief of Mary Beth's Bean Bag WorldMonthly, a publication that will tell you everything you needto know about Beanie Babies. Selling for $5.95, the magazinemaintains a circulation of 200,000.

But just because it's here today is no guarantee itwon't be gone tomorrow. Sobolewski knows most toy fads aredestined to fade. A magazine about Beanie Babies needs BeanieBabies to survive, so when Ty Inc. temporarily stopped producingthe toys in October 1999, that could have been the end. Luckily forSobolewski, the company introduced its Beanie Kids line in January2000 and released seven new Beanie Babies this past January.

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

Keeping Things Going

Jeff Musa used to lie awake at night, worried that his Dallasbusiness, CuttingEdge Software Inc., would eventually go the way of the dodo,the passenger pigeon and the Rubik's Cube. His company'ssuccess was based on just one product, Quickoffice, an office-styleproductivity suite that turns handheld organizers into somethinglike extensions of computers.

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

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

At the same time, Musa was building and refining hisproduct-one that at first only enhanced the Palm organizingexperience-at a time when he didn't know whetherPalm's success would continue. "I spent many, many nightslying awake," Musa repeats, "and not just because of allthe caffeinated coffee I drank."

Things are different these days. Musa's firm has fivefull-time employees and a revenue of "better than a couplemillion-for competitive reasons, I can't say anymore," and his company should double that figure thisyear.

But not every enterprise will sit idly by and allow anentrepreneur to enhance its products. Ty contacted Sobolewski morethan two years ago and told her she would have to have officialconsent from the toy-makers to put out a magazine promoting theirBeanie Babies, which meant she had to pay them a big fee to doso.

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

It sounds like the aftermarket arena can be somewhatnerve-racking, but Musa doesn't think so. "There are ahuge number of advantages to being an aftermarket, especially as anentrepreneurial company. It's difficult, time-consuming andjust all-in-all risky to try to build something completely new andunique and make it work.

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

Brainstorming

MarketAftermarket
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 Entrepreneurand a reporter for The Cincinnati Post.

Geoff Williams has written for numerous publications, including Entrepreneur, Consumer Reports, LIFE and Entertainment Weekly. He also is the author of Living Well with Bad Credit.

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