Case Study Update: Outside the Big Box

When we wrote about Lance Fried in April 2005, the CEO of San Diego-based Freestyle Audio was thinking about turning down a tempting offer from several big-box chains that wanted to sell his waterproof MP3 players.

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The Problem Fried knew a deal with just a single big chain could dramatically increase sales. But he had always planned to sell his waterproof MP3 players at surf shops and other specialty retailers. Making a jump to big-box stores would mean crafting an entirely new business strategy and hurriedly ramping up production. Fried also worried about competing side by side with MP3 players made by corporate giants. He decided to stick with the smaller retailers.

What the Experts Said David Stewart, a marketing professor at the University of Southern California, said that Fried would gain added visibility by selling his MP3 players through big-box stores. Rochelle Ballard, a professional surfer, maintained that people go to surf shops for sunscreen clothes and equipment--not MP3 players.

What's Happened Since The number of specialty shops selling Freestyle Audio MP3 players has increased fivefold, to more than 200. Fried has forged a co-branding relationship with Liquid Force, a leading manufacturer of wakeboards, which now sells Freestyle's players under the brand Liquid Tunes. Fried has handed out dozens of free MP3 players to professional surfers and wakeboarders to boost brand awareness. "This gave us a lot of buzz and credibility," he says. Still, Fried did not meet his $10 million sales goal for 2005.

What's Next Fried feels certain he made the right move. He hopes to establish more relationships with co-branding partners and retailers this year and is thinking about expanding into South America. Despite Apple's dominance in the MP3 player market, Fried thinks there is still plenty of opportunity for his waterproof version. "We want it to be your product of choice if you're going to sweat or get wet," he says.