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Epods to sell lean, mean Internet machine on TV

Epods is not the first company to market an Internet appliance to techno-novices, but it may be the first to use an infomercial to do it.

By Stephanie Miles
Staff Writer, CNET News.com

Published: March 20, 2000, 2:35 PM PST

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· Epods unveils device for Net newbies

Epods wants to make surfing the Web as easy as using a bread machine or cutting cans with a Ginsu knife.

Set to launch in May, the start-up company is targeting the increasingly crowded Internet appliance space with its Epods Web tablet and online service. But rather than compete in consumer electronics stores or through Web-based computer dealers, Epods will team up with telemarketing experts and launch its product with an infomercial. That will be followed by marketing in department and discount retail stores, instead of typical computer outlets.

Salton, the merchandising company behind such infomercial legends as the George Foreman Grilling Machine, the Breadman and the Juiceman, recently took a $2 million stake in Epods and will be launching the product with its own infomercial this summer. The Epods device will be offered for $199, plus a yet-to-be-determined monthly service fee.

Epods is stalking late adopters, people who have missed the Internet phenomenon and are too intimidated to venture into CompUSA or the Good Guys. These buyers, generally women and seniors, must be approached in locations they are comfortable in, Epods believes, which means traditional department stores such as Bloomingdale's and Macy's, and through television infomercials, a cornerstone of the direct sales model.

The company believes its strategy, which includes studying the habits of its customers with anthropologists to better understand their buying and usage patterns, will differentiate its service from similar efforts coming from traditional PC companies. In addition to its marketing and merchandising strategy, Epods has created an Internet service and device designed to be as simple as possible, with very little resemblance to a PC in look or feel.

"It's still an early market, which partially explains why we're seeing so many entrances into the area," said Bryan Ma, an analyst with International Data Corporation, pointing to the success of companies such as Netpliance, which recently raised $144 million in its IPO.

IDC predicts this market will be huge, which explains why newcomers as well as industry heavyweights are angling for their piece of the pie. Internet appliances, including TV set-top boxes, handheld computers and gaming consoles, are expected to grow from 11 million units shipped in 1999 to 89 million units in 2004. The market will grow from revenue of $2.4 billion last year to $17.8 billion in 2004.

"We won't have a dominant Wintel monopoly. At least, not yet," Ma said. "From that perspective, it allows a lot of players."

But in staking out new territory, the start-up firm is also facing challenges that don't exist in the PC world, analysts say. One of the biggest obstacles for Epods is their customer, Ma said.

"In pitching to the back end of the technology adoption curve, it entails more or less of a double sales job," Ma said. "They have to sell consumers on the device and also convince them why they would want the Internet in the first place. That's going to be a challenge."

The product may not appeal to more savvy users because it does not yet offer wireless Internet acces, and requires another Internet service account. "Why would you want to pay that money for a service on top of the PC?" Ma said.

For its part, Epods is completely focused on setting itself apart from the PC world, launching an ambitious advertising campaign using the same advertising agency that launched Saturn cars. When the service begins in May, the look and feel of the interface will be different from that of a typical PC desktop.

"People want the Internet, but they want to do it on their own terms," said Shae Hong, co-founder and CEO of Epods, referring to the market research the company gathered after hiring the anthropologists. "They want to feel connected. Even the tech savvy want it simple."

Rather than pull-down windows and menu bars, the Epods terminal will feature a few choices, based on the most popular online and offline activities, including shopping, email and a variety of content channels. All of the online services and features are to be bolstered by 24-hour customer service, which will provide general support, as well as specific questions regarding products for sale online.

These small touches will separate Epods from its PC industry competitors, Hong believes. "The (MSN) Web Companion--it's still Microsoft, it's still not that easy to use," he said.

Epods will announce tomorrow that its content partners will include Pets.com, Art.com, Proflowers.com, Sparks.com, a greeting card store, Screaming Media for news and information, StockPoint and Mapquest. Ma believes these partners, as well as distribution partners like Nordstrom's and Macy's, provide opportunities for cobranding and continuing revenue streams down the line.

In addition to providing help from customer service representatives, Epods is using technology from Vitessa.com that will allow users to shop a variety of sites using an online wallet. Epods' revenues are based on taking a cut of all transactions which take place on the service, along with advertising fees.

The hardware specifications reflect the target audience--this is not a Pentium III powerhouse for advanced gamers. Rather, the tablet runs on a RISC processor with 32MB of memory to run applications and surf the Web. The device is tethered to a docking station with a dial-up connection. Wireless access is planned for the next version of the machine, due out next fall.

Puget Sound Business Journal (Seattle) - January 27, 2003
http://seattle.bizjournals.com/seattle/stories/2003/01/27/story6.html

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Amana plan awry

Appliance firm unplugged by Maytag

Puget Sound Business Journal (Seattle) - January 24, 2003

by Steve Wilhelm

Staff Writer

A legal fight over use of the Amana trademark threatens to annihilate the business of a would-be Seattle importer of kitchen appliances.

U.S. Pacific Corp., which last month was poised to deliver a $1 million order of Amana-branded small appliances to retailer J.C. Penney Co. Inc., was stopped in its tracks by a Dec. 10 breach-of-contract lawsuit filed by appliance giant Maytag Corp.

Now the 14 ocean containers of Chinese-made appliances are being stored in China, while the two companies fight in U.S. District Court in Iowa.

Shae Hong, president of U.S. Pacific, which does business as Cela, said his company has invested nearly $3 million in developing the line of seven products including mixers, blenders and toasters, all with the Amana label. Now he's had to lay off nearly all of the company's 20-person staff, while he tries to recover the use of the Amana label.

"If Maytag's termination is allowed to take effect, U.S. Pacific will have little choice but to cease most of its operations," U.S. Pacific said in a Dec. 23 court filing. Hong's company has since filed a countersuit, asking for unspecified damages and seeking to regain use of the Amana name.

Hong said his company entered into a license agreement with the former Amana Corp. in March 2000 to import small appliances under the Amana name. Amana is best known as a manufacturer of large kitchen appliances, primarily refrigerators.

In July 2001 Maytag acquired Amana Corp. from Goodman Global Holdings Inc. For many months the agreement seemed intact, and U.S. Pacific found two manufacturers with factories in China to make the small appliances. Hong's company received an order for all seven small appliances that indicated total 2003 purchases would be $5 million to $10 million of Amana products, according to court documents.

It wasn't until the products were ready to ship that Maytag filed to terminate the license with U.S. Pacific.

Maytag spokesman Jim Powell, in Newton, Iowa, declined to discuss the dispute. He sent a statement contending Maytag terminated the contract because U.S. Pacific was late in delivering the products, and that the appliances were of substandard quality.

"After nearly three years, U.S. Pacific has not brought any Amana-brand consumer electronics or small appliances to market," the statement said. "Furthermore, the products they have proposed have failed to meet the quality, safety or performance standards established under the licensing agreement."

Hong denies both these points, contending that the products were being delivered on time to J.C. Penney and that his company had met Amana's original requirement for Underwriter's Laboratory certification and "Accelerated Life Testing."

His company also was negotiating with several other U.S. retailers, Hong said.

"Pretty much without any warning at all, they (Maytag) made this action toward us and wrongfully terminated the license, and filed this suit," Hong said.

Hong said he believes Maytag's real motivation was to get the Amana license back.

"The reason why this is so disheartening is there was a lot of bad intent involved," he said. "They did it at a perfect time, when it would put a hole in the ship pretty fast."

Powell declined to respond to any of these allegations, other than to say that Maytag this month launched one small appliance, an iron, under the Maytag label.

Hong, 26, has had prior experience with challenging business situations. In early 1999, at the age of 22, he founded Seattle-based ePods Inc., a company that tried to make tabletlike Web-browsing appliances.

But ePods foundered early in the Internet crash, and was taken over by appliance marketer Salton Inc., of Mount Prospect, Ill.

Reach Steve Wilhelm at                 206-447-8505         ext. 113 or swilhelm@bizjournals.com.