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Who Wants to be the Next Dell?
cybercomm writes "Tom's Hardware has a very interesting column regarding the future of beige-box manufacturers, such as Dell, gateway, Compaq, et all. I found this article really thought provoking, since the author has raised some really interesting issues, especially concerning the fact that the writer of the column compares reviewers to the lowest ring of the ladder, and asks one simple question: Instead of whining, why not do it? Why should you learn all the specs on the latest processor and slam the competition just because you may happen to own a P4? Why not start the same way that the Dell, Apple, Gateway, and other founders took by forming your own store, getting in touch with Asian suppliers who "are more than willing" to give you discounts, just so that they can get their foot in the lucrative N. American and European markets. Very interesting reading, that raises another what-if scenario (what if you succed and your business is based on Chinas' dragon CPU, XGI card, open-source OS...)."
You sold me there on that story. Obviously I'm passing this on to all of those Berkeley, MIT, Carnegie, Harvard, Yale grad CTO's and marketers who work at places like Alienware, Sager, Toshiba, and other smaller comp makers who spend the big bucks. This guy is definitely on to something, and I'm glad Slashdot didn't waste my time posting garbage. Oh yea, that guy's good.
MoFscker
The thing that this jounalist is writing about (very well, I might add) occurs in every industry/walk of life. There are the whiners, and there are the doers. What he doesn't realize is that doers just do it, and ignore these whiners. He ends the article well... "get a grip". Personally, I don't give people like this even that much attention.
Now, you'd better sit down for this one.... but price is NOT the only competitive advantage! In fact any successful businessperson will tell you, it's the WORST way to run a business, because somebody will always be cheaper. Not everybody is looking for cheaper and cheaper. Simple example: MS Windows vs. Linux. Linux is a LOT cheaper, but people still aren't interested. Whatever the reason is, it's very obvious that price is NOT the issue here.
and I've got plenty of advice for those who might want to try it.
1. Don't take on any partners. My company had 3 owners. If it had had one owner and 2 employee's I'd still be in business. Multiple owners means that profit is divided. While you're getting started, you have to live off of whatever miniscule profit you generate. If you have to divide those profits three ways, you're going to have to learn to love Top Ramen.
2. Dealing with local distributors is a great way to get parts quickly, but their prices are awful. Get contacts overseas, and import your own parts, or work with national distributors such as Tech Data or Merisel. Just be aware that their prices will be awful too until your volume comes up.
3. If you're selling computers via mail, etc, be careful with credit cards. Chargebacks come right out of your bank account. Visa/Mastercard/etc. do a great job of protecting the customer because they can steal from the merchants. If you're hit with a chargeback, it doesn't matter that you've been victimized, too. We once had three high-end PCs (marked for signature delivery) "stolen" from a customer's doorstep. Then, when the customer decided he didn't want us to ship replacements and hit us with the chargeback, we were out nearly $10,000. I still believe the customer saw an opening and stole those PCs, but I'll never know for sure.
4. Control support costs. Many small "white-box" PC makers provide top-notch support, but customers will eat you alive if you let them. I realized that when I went over to a good customer's house to help them with a PC problem and ended up looking at a laptop we didn't even sell them. A corollary to this is that if you're going to be providing "personal touch" service, make sure that your pricing reflects it. You can't visit people's houses if you're selling a $500 PC @ 5% margins.
5. Watch inventory. Keep as low a supply on hand as possible, because when component prices drop, customers expect assembled PC prices to drop accordingly, and immediately. Your competitors watch their inventory, too.
6. If you're planning to offer services and support in addition to hardware, consider becoming a VAR instead of a system builder. You can benefit from the marketing opportunities that the Compaqs/IBMs/etc offer, and you don't have to deal with warranty support of your own boxes. If you have a service department, the companies you deal with will pay you to do warranty work.
All in all, I can't say I recommend starting a PC company. Because you're selling what is essentially a commodity, your margins are constantly being squeezed. And that sucks! But, if you have access to Asian manufacturing and can control your costs, you just might prove me wrong. Good luck to all the future captains of industry out there!
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Buy low, sell high.
It really doesn't get much more complicated than that when dealing with commodity goods. The rest is just fluff for the VCs and investment bankers.
But when doing something like this take the article's advice. Don't involve the VCs and investment bankers. Do it from the garage or basement. Scrape up whatever funds you can from your own signature, friends and family.
Buy some stuff. Sell it. Roll over the profits into more stuff. Sell some. Rinse and repeat.
Sleep on one of the folding tables you build systems on and eat Ramen noodles for a few years. It's a good experience and gives you stories to annoy the hell out of your grandchildren with. Earn your way up instead of borrowing it.
It really is as simple as just doing it. My last brick and mortar was three months from conception to opening day, starting with nothing in my pocket but a few hundred bucks and credit card with a $1000 limit.
I didn't write a business plan and have it bound in leather, or spend the next 5 years shopping the plan about. I Just did it.
You can too.
KFG
Consider this: Design a Linux-based home PC targeted at Wal-Mart customers and their kids. The "no nonsense, no excuses" PC for America.