September 4, 2004

Part dot-com, part old-fashioned, business rides iPod to success

Kyle Stock  /  Post and Courier

Jeff Grady is a dot-com warrior. Armed with little more than an entrepreneurial spirit and some programming skills, he plunged headlong into the New Economy. He battled for funding, made fast money and watched the companies he worked for die, time and again.

But Grady survived, managing to build a small but thriving company that he moved from Raleigh to Charleston last month. Score another one for the Lowcountry's quality of life. Score another one for the Lowcountry's growing and much-talked-about "knowledge-based" economy.

"We can do this anywhere. ... We just fell in love with the area," Grady said.

Grady's company is called Digital Lifestyle Outfitters. It produces and sells accessories and gadgets for Apple Computer Inc.'s iPod and other digital music players. Revenue comes from items sold through the company's Web site,, and wholesale deals with big-box retailers like CompUSA and Best Buy. I

t's part dot-com, part old-fashioned commerce. The company's headquarters is a nondescript office building on lower King Street, marked by a piece of notebook paper taped to the door with "Digital Lifestyle Outfitters" scrawled across it. The bookshelf in Grady's office features a stack of Wired magazines, a golden Buddha statue and a small collection of souvenir snow-globes. Definitely dot-com.

The office also has a stack of Wall Street Journals, a Jack Welch hardcover and a pair of putters in the corner, signs of good, solid business sense.The $15 million in revenue and hefty profit margins that Grady expects this year also show that Digital Lifestyle Outfitters is much more than a half-baked venture.

"These guys are the real thing," said Ernest Andrade, who heads the city's "Digital Corridor" initiative, an effort to lure knowledge-based companies. "They are true entrepreneurs." With Andrade's help, Grady had a new office and a home on the peninsula in a matter of days.

Grady's future was less certain a few years back. Like a lot of other techies, he was out of work in the fall of 2001, after bouncing from one Internet company to another and bailing out of a fairly successful but financially troubled plan to sell college apparel on the Web. His days consisted of looking for jobs, working out, taking stock of his situation and uploading his 400-some CDs to his computer. It was during that string of nondescript days that Grady saw a TV advertisement for the first iPod. "I jumped off the sofa and said, 'That's it!'" Grady explained.

It was the gadget of his dreams, perfect for his tech-centric lifestyle. Grady had a similar epiphany when his iPod – one of the first made – came in the mail. He loved it but was disappointed it had no carrying case, no runner's belt, no speakers and no way to connect to a car's sound system. Thus a business plan and a 150-piece product line was launched.

By the end of that year, after only two months of sales, 125,000 iPods were sold. The market was ripe. Digital Lifestyle started small. Grady had some neoprene cases made in Taiwan and sold a few thousand of them wholesale. The market was wide open and the company started creating more iPod gadgets.

In April 2002, CompUSA ordered $300,000 worth of Digital Lifestyle gear for its 250 or so U.S. stores. "We had never thought on such a grand scale, but of course we're going to figure out a way to do this come hell or high water," Grady said.

Grady put pressure on his supplier and kicked the business into a higher gear. He signed on two long-time friends, one to drum up similar wholesale deals and one to manage the books. Digital Lifestyle booked $2 million in revenue that year.

Grady hit paydirt again with one of the first FM transmitters and iPod docks that let music fans link digital players to car sound systems. This time Grady got an intellectual-property attorney and eventually won a patent.

Apple and Best Buy, who had steered clear of Digital Lifestyle to that point, signed on, and sales jumped to $4 million for the 2003 fiscal year. The market for digital music player accessories is now flooded. But Grady said he got in early enough and grew his business quickly enough to achieve the mass critical to success.

"You've got to compete with all these little companies that just make one little plastic case," Grady said. "But buyers to come to us and say, 'I don't want to deal with five different vendors. (Digital Lifestyle) makes me a more efficient company.'"

Grady promises that Digital Lifestyle will reach a whole new level thanks to its newest invention, a traditional boom box that an iPod plugs into. It is aptly named the iBoom and a patent is pending.

Several companies make speakers that the iPod can dock to, but Grady said no product matches the portability, durability and battery life of the iBoom."Our CompUSA buyer has never been so 'geeked out' on a product, which is saying a lot," he said.

About 8,000 iBooms will ship from Taiwan by 2005. CompUSA has committed to buy almost all of them. It plans to be ringing them up for $149.99 apiece in October. Next year, Grady expects to move 15,000 iBooms a month. "If I had 20,000 of these today, they'd be gone," he said.

Digital Lifestyle's warehouse is still in Raleigh and Grady has no plans to bring it to Charleston. But he is looking to hire some marketers and he expects his business to continue on its current pace. Apple has sold more than 3 million iPods since the first model that Grady saw advertised in 2001. "I never think like I made it. I never get relaxed like that," he said. "We're still down at the bottom of the growth curve."