Who Wants to be the Next Dell? 345
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...)."
beige boxes? (Score:5, Funny)
Any color you want... (Score:2, Interesting)
Dell's white box program [solutionpr...direct.com]
Re:beige boxes? (Score:5, Funny)
Chip H.
it could work (Score:4, Insightful)
Re:it could work (Score:5, Insightful)
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
Re:it could work (Score:5, Interesting)
Re:it could work (Score:4, Funny)
I grow some really, really nice veggies.
As a result it seems as if every gopher within a 20 mile radius has heard of me and decided my yard is the place to live. It became a real problem.
But then I had a realization:
I'm growing the plants for me to eat. I don't get to eat my plants because the gophers are eating them instead. Well, that means that, in essence, the gophers are my plants.
Problem solved. Would you like extra crispy or regular recipe?
KFG
Re:it could work (Score:3, Insightful)
A G4 iBook starts at $999 (student discount price) and is the best student laptop on the market hands-down. How are you going to compete with Apple? For even bigger cheapskates there are the $699 deals on Dell laptops. You just can't touch that if you're a startup and intend to make a profit (you know, that thing that helps pay for you to eat and sleep in a warm comfortable home at night?).
Store? (Score:5, Insightful)
Wrong thinking... (Score:5, Informative)
It's just that they didn't have brick and mortar storefronts until very recently- and these don't keep inventory, they're solely there to show off the wares so people can see what they're buying.
Re:Wrong thinking... (Score:5, Insightful)
Obviously there has to be some parts inventory always in their pipeline, so they can deliver in a timely manner, but by the time you get to their size, you KNOW you're going to use, say, 10,000 of a particular video card every day.
Dell really doesn't have inventory (Score:4, Informative)
Re:Dell really doesn't have inventory (Score:3, Interesting)
Re:Dell really doesn't have inventory (Score:3, Informative)
That's the same strategy used by a lot of JIT companies. I do believe that Toyota functions that way, at least in their Japanese factories, and I know that Nokia works like that.
With Nokia, the idea is that that they can push on both quality and price, because if you, Mr. Supplier, can't meet what they need, someone else will, and they can also upgrade parts immediately if necessary. (At least that's how one parts supplier explained it to me.)
Re:Dell really doesn't have inventory (Score:3, Interesting)
Re:Dell really doesn't have inventory (Score:4, Informative)
Dell gets order from the customer first.
Dell gets confirmation that customer's money is good from Card Company. +$$$
Dell then gets the parts from their suppliers.
Dell sticks em together and ships the stuff to customer.
Dell pays the suppliers sometime later. -$$
-
whereas for the other companies with stores and stock, the -$$ comes way before the +$$$.
Given that computer parts tend to go down in price as time goes by and you'd see why that makes an even bigger difference.
Re:Dell really doesn't have inventory (Score:2)
But it looks good to say you have XXX orders.
Re:Dell really doesn't have inventory (Score:3, Insightful)
Re:Dell really doesn't have inventory (Score:4, Interesting)
More like... (Score:4, Informative)
In a purely JIT shop, everything would be obtained as it is needed (purely pull, no forecasts, no stock in principle). The primary downside is lag - you can't deliver until the slowest part has arrived/been produced and assembled.
The point is to use JIT where it's needed, on parts that drop fast in value / become obsolete very quick.. I'm sure they have lots of stock in Dell casings, ATA cables and Dell stickers (or companies which are basicly Dell inventory holders, if not), and very little of *the* fastest CPU/GFX card at any given moment.
JIT isn't a wonder cure, it needs to be applied with some sense. Computer assembly is a something of a star example though - well defined interfaces (PCI, AGP, CPU sockets) and modularity. It's no doubt it's the most important factor in Dell's success.
Kjella
That's funny (Score:2)
"Store" is a figure of speech... (Score:2)
Re:Store? (Score:5, Interesting)
The big weakness of such companies is their size and thin margins. These companies cannot take a sales hit for any reason without bleeding red ink all over the place. Lets face it, cheap Packard Bells killed Leading Edge,
Many of these companies helped in their own demise. After a while they found they had to support the cheap c**p they sold and that is expensive, very expensive. When you are growing rapidly and most your computers out there are right out of the box, it seems manageable. But when sales start peeking and machines start aging it becomes a real problem, an expensive problem. (Why do you think Dell has moved it's customer support to India?) These companies' heydays rarely last more than 2-3 years.
And selling White Boxes? Well, we can sell twice the machine a similarly priced Dell sells for - so Tom is right. And we can save people's data if the HD starts going bad - something the Dell's won't even try. But frankly, most people can't see value when it is staring them in the face. So everytime a new Dell comes along, sales slump and then steadily grow as people become disenchanted. Then another Dell comes along and it starts all over again. Few people ever learn. Even people who have bought our computers will buy a Dell, eventually admit their mistake and buy another of our computers. But they bought the hype and the Dell anyway. They can't tell the difference until after the sale. And they'll do it again, you can bet on it.
So, if you want to be big, at least for a couple years, put a fast processor in the cheapest (slowest) box you can find and pay the pc magazines to rave about your box and company. Stuff your money in a foreign bank account and close the company as soon as repairs exceed profits.
But I have a question for you all. People don't believe a small store can match or beat the big boys for value even though they can easily do it. So people don't even ask or look. If we advertise like they do, then we would have to sell the same c**ppy computers. So what is the solution? You might say "amazing support" (which we have) but the average person doesn't think about support until they need it - after the sale. So, what is the solution?
** For those of you who take things too literally, I'm using the word "Dell" to represent any company that has reached the top, however short that stay was.
Re:Store? (Score:4, Interesting)
A week later, I'd get a call on the phone. The user got his machine from Walmart because it was a couple hundred dollars cheaper, and now he's having a problem with it, and would I help him out over the phone.
No thanks.
Why ask why? (Score:3, Insightful)
Here's to Slashdot and all the armchair geeks!
Margin (Score:5, Informative)
Re:Margin (Score:3, Insightful)
Re:Margin (Score:2)
1) Just because Dell doesn't sell an Opteron machine, doesn't mean they haven't realized there is *SOME* demand. There are probably more factors involved (and they probably involve deals with Intel).
2) I emphasized *SOME* because it is a pretty wild statement to claim the general population is clamoring for Opteron machines. In fact, I think if asked 20 random people if they w
Re:Margin (Score:5, Interesting)
While it's true that the margin on hardware is virtually nothing, your average restaurant will be worrying more about turn-over than margin; the bulk of costs for a restaurant is in the fixed costs (i.e. renting a place, taxes, employees, fresh ingredients that you have to stock in case people do show up, but that expire quickly whether they do show up or not).
Ever notice how just about every "meal" at a fast food restaurant costs about the same? That's because they're in the business of extracting $5 per visitor rather than being interested in the exact margin on stuff. That's also why fries and a coke are thrown in their meals for a relatively low price, and they cost a lot more separately -- it's all about discouraging sub-par revenue customers. (Grocery stores (or Fast Moving Consumer Goods Retailers as they like to call themselves) have things slightly better than restaurants in that they sell a lot of non-perishables as well - stocking more and more non-food items has been an ongoing trend in supermarkets and grocers' for ages now).
Of course, fixed costs are also a big barrier to entry for any would-be competitors of Dell. Spending a few million here and there to set up a plant and do distribution is peanuts to Dell since they're shipping insanely large volumes, so even relatively large fixed costs translate to a small cost-per-unit. Plus, they can get volume discounts from OEMs. Without a large initial investment it's pretty hard to suddenly gain such a big market share that you can compete with the economies of scale that Dell enjoys. Dell is the Wallmart of PC systems.
Added value is the only way to go for smaller would-be competitors; e.g. better after sales service, warrantees, real life expert human salespeople, full-service-one-stop deployment, etc. Of course, it may well turn out that it's cheaper for you to only offer the added value and buy the systems themselves from Dell!
The markets are wide open.. (Score:2, Insightful)
The people like Gateway, and the sound of those Intel chimes. They fear computers and the big Tier One OEMs feed on that fear.
Re:The markets are wide open.. (Score:4, Interesting)
Please don't underestimate the ignorance of the people either. Aside from reasonable prices your next biggest item should be the best tech support money can buy. Without good tech support people will just go elsewhere. You WILL get people calling you that don't understand how to plug in their color-coded cables or even how to turn it on even though it's clearly explained in a 3 foot by 3 foot fold out poster in very simple pictographs. This isn't 1990 when most of the people using computers were either businesses with support personnel or very techie home users who were used to dealing with DOS and drivers, boot disks, config.sys, etc. The majority of people today using computers are complete and utter morons. That is the problem with success: Once you've exhausted your techie base you're left with the common cattle to support your profit margins.
Sun is also trying to become another dell/hp (Score:2, Redundant)
Re:Sun is also trying to become another dell/hp (Score:2)
Sorry, it's not "instead of", it's to supplement the bottom-end... big difference.
They plan to use dual, and possibly quad-cpu Opterons in their bottom-end product line, but this does not compare to machines that can hold many more CPUs, nor does it compare with the versatility or reliablity of the higher-end SPARC architecture.
If you've ever worked on their recent (SunFire), you'd know what I mean.
Full remote administration via OpenBoot/OpenFirmware (drastically more versatile and usable than the feeble
Commie Freaks Finagle Their Way Inside The Box (Score:5, Insightful)
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.
End of the Beige Box? (Score:4, Insightful)
"Joe Sixpack" will surf the net on an "Internet Center", listen to MP3s (or whatever DRM-crippled crap has replaced it) on "Media Center", etc. Regular people will stop thinking of these things as computers, and they'll just be happy that they work. To be honest, I don't know what to think of this. If Apple has survived in its niche, I'll still be able to get the stuff I need (heck, *somebody* will make sure that Linux can still run on these devices), but it's a little sad to think that this era might come to an end.
Re:End of the Beige Box? (Score:5, Interesting)
And if the things you mention - "internet center", "media center" - are so important to your "Joe Sixpack", computers will come with them preconfigured and simple to use.
So ten years out, why would anyone want to buy an "internet center" and a "media center" and an "et cetera", when they can buy all of them (and more) at once, for a low low price of $29.95?
Re:End of the Beige Box? (Score:5, Insightful)
With generality comes complexity, and people don't like complexity, not one bit.
Computers are pretty good about Just Working, but especially with Windows boxes, you have to worry about things just randomly blowing up, viri, whatever. A specialized "Media Center" can be built from the ground up to do one thing, and to do it well and consistently, much more so than Joe User can configure their PC to do the same things.
Keep in mind (Score:3, Informative)
Re:End of the Beige Box? (Score:2)
Or, you could buy a Mac...
Yeah, right? (Score:4, Insightful)
Internet appliances came and went. All in the blink of an eye. What you're talking about has happened. And failed.
Re:End of the Beige Box? (Score:5, Insightful)
I think the only way it will happen i the greater market is if OEMs start squeezing functionality out of commodity PCs, and to be viable in this market, they'd have to collude on the specs. (Tho "Trusted Computing" may well provide the specs and collusion for them.)
Sometimes, consumer ignorance works in its own favour. If average users didn't have fantasies about how much they can do with a honkin' big PC that's overkill for their real work, the general consumer market might never have gotten out of the 486 era. (Which, personally, I don't miss.
Just the Start of the Glowing Box! (Score:4, Interesting)
From the article:
Actually I prefer Glowing Box vendor, but what the hell. With WindowsXP and a bunch of free and open source programs (Fire/Thunderbird, etc) a small time vendor can do alot more than any time in the past ten years to provide a safe and good user experience to the massses. And I'm too busy trying to be a small time vendor working from home while my wife works outside the home, keep the two tech savvy friends who work as my full time road techs working (and one more part-timer/trainee), and get my new 2004 website online to actually sit down and write something about it.
HighSchool Startups [highschoolstartups.com] building basic companies for dummies
Tech from home Part 1 [mac.com] and Part 2 [mac.com] A must read from someone who has "done it"
Incorporate or LLC Online [bizfilings.com] One stop business creation for any state
U.S. Business Advisor [business.gov] sponsored by the SBA and a great resource.
Jonah Hex
Whiners and doers (Score:5, Insightful)
Bulk purchasing clout is needed... (Score:5, Informative)
Re:Bulk purchasing clout is needed... (Score:5, Insightful)
Re:Bulk purchasing clout is needed... (Score:3, Informative)
When I lived in California, I worked for a small computer store that sold computers that were custom built. Building computers (while I was there) went from being barely profitable to a loss section of the store. Why? Because people stopped buying better custom built computers, and started buying HPs at the Best Buy that opened 30 miles away. Peo
Re:Bulk purchasing clout is needed... (Score:3, Informative)
A commodity is something that is NOT unique. It is easily replaceable and has almost no differentiation from one producer compared to another.
Given that all of these PC makers are basically selling the same machine (commodity), the one with the lowest cost structure will have the highest profit.
Dell wins hands down. They have literally only about 2 hours of inventory (meaning that a computer will live in a warehouse for about 2 hours on avera
Re:Bulk purchasing clout is needed... (Score:3, Interesting)
Bollocks.
Considering I work in a computer retail store selling "white box" PCs, I think I'm allowed to have a say in this, even more so when you consider I'm supposed to sell PCs to the cheapest people around, the Dutch, hehe. Anyways, people want QUALITY instead of cheapo bargains. They will not want that at first but o
How wants to become the next Tom's Hardware? (Score:5, Funny)
How many companies... (Score:4, Insightful)
Two problems (Score:3, Insightful)
What if people realized... (Score:5, Interesting)
Trying to compete with companies like Dell only makes sense if you're the star of Brewster's Millions.
There is certainly money to be made in the computer industry. But the days when hardware firms could be started out of someone's garage are long, long gone.
Of course I'm sure there will be a whole army of dreamers and wet-behind-the-ears schmucks lined up to argue with me about this for the simple reason that the truth I speak is a threat to their pipe dream. Well I say they need to put that crack pipe down and start looking for sectors and markets that don't already have dozens of 800 pound gorillas stomping about. Just because you have a love for something doesn't mean you can turn it into a successful business, especially when that business would be servicing a competitive market with razor-thin margins.
The most anyone could hope for would to eek out a marginal existance selling highly customized systems built from hand-picked components for gamers and similar enthusiasts. (Most of whom can do it themselves, or at least think they can)
Lee
Re:What if people realized... (Score:2, Insightful)
There's *always* rooom for improvement. That's what competition is all about. It might be a tough fight, but if somebody can find a competitive advantage, it can always be done. Hell, the pizza delivery market was saturated about 10,15 years ago, but Papa John's came right in and kicked ass. It *can* be done. I don't know the computer market well enough to know what that advantage could be, otherwise I'd be doing it, but I don't think it's
Re:What if people realized... (Score:3, Insightful)
Who?
Re:What if people realized... (Score:2)
Re:What if people realized... (Score:5, Interesting)
A few clone shops go on to become successful chains (PC Club comes to mind) but that's not the norm.
Myself, I no longer build new custom machines for clients, because there's no money in it. When they need a new box, I give 'em specs and point 'em at my favourite clone shops.
Re:What if people realized... (Score:3, Interesting)
One of my roommates did that (our last 2 years of college) and made a *lot* of money without a whole lot of work. What'd he do? He bought Dells *from Dell* with whatever the gotapex deal of the day was and made a fancy looking page and put it up. And retards would pay *more than pre-discount retail* for the things.
Same with Apples. Scour ebay for the shitty-looking pages that aren't
Re:What if people realized... (Score:3, Interesting)
The most anyone could hope for would to eek out a marginal existance selling highly customized systems built from hand-picked components for gamers and similar enthusiasts. (Most of whom can do it themselves, or at least think they can)
Don't compete with Dell on generic boxes. Create customized, high end machines. It is poss
Don't forget businesses... (Score:4, Insightful)
There are a lot of niches to be filled while working with businesses. They're focused upon doing something other than computing, and could really care less about what WEP encryption is. Outsourcing that to someone else makes a lot of sense, and being the guys who sold them the hardware is a good way to get into their offices... and vice versa.
One tip... (Score:4, Informative)
But seriously, it's all about volumn. You have to buy a lot of parts to be able to compete - the margin on hardware is small. Your fortune isn't made just because you can sell a thousand boxes and make 10 or 20 bucks each. Now you have to be read, when half of them calls you and tell you that they can't figure how to connect that 56k modem to their adsl line or that the cup holder is broken.
Good luck...
Re:One tip... (Score:3, Insightful)
Dell didn't have any venture capital when he started. I'm sure the "common wisdom" at the time was that you couldn't compete with IBM or Compaq without lots of capitalization, too.
Maybe you can't become Dell by starting out selling computers out of your trunk while you attend college, that path is fairly worn out, but there may be other similar ideas that will
Re:One tip... (Score:2)
Anyway, I've been thinking about it for a bit, and I got one idea: Besides volumn (e.i. compete on price), you need to have a hook.
I would go for the people who are going for their computer number two. Either because the old one is crap or because the wife/kid needs one. This marked must be fairly big and it can only get larger.
Do not make the mistake of thinking these customers are tech-savy and lighter on support. Just beca
Common (Score:3, Informative)
The dragon CPU is not supported very well (or at all) currently and does not bring a huge advantage yet. Its hard enough to convince someone to use a non windows/x86 machine when you are a huge company nevermind when you are a singly guy knocking them out of your garage.
No next, please. (Score:3, Interesting)
The Dell model, such as it is, is already dead. It may have worked for Mikey, but it won't work if cookie-cutter'd. There won't be another Dell, thank god.
Re:No next, please. (Score:2)
I do think you're right that there will not be another Dell. Most of the OEMs from the past have long since gone tits-up, or are struggling to stay alive (like Gateway), or have other divisions that can even out the bottom line (like HP/Compaq).
Re:No next, please. (Score:5, Informative)
Dell always came out as the worst to deal with, compared to IBM, Sun, HP/Compaq. Dell would negotiate for a certain number of units at a certain price, then order 25% of the original quantity, while demanding the original unit price. Sounds like smart business? When they break their original commitment, and then bully their way on, it's bad business.
The end result is their suppliers keep waiting for the 'big' contract that never comes along. They lose money and go out of business. Dell moves to another supplier and doesn't look back. That is one less supplier for the other buyers. Another carcass on the fire. It's called 'hollowing out', and most companies know better than to go down that road.
If you do business with me, you expect a certain percentage of every dollar we handle. Under ideal circumstances, I get 60 and you get 40. This proportion lets us both survive. Dell seeks 70/30...this helps Dell grow, of course, but the 30 means slow death for the other side. Most businesses honor the 60/40 balance, knowing that anything more will be abusive...Dell has long ago decided to cross that line.
The hope is to take the market, and then go back to 60/40...but with no suppliers left willing to take the abuse, Dell will be alone and cutting their own throat.
Re:No next, please. (Score:2)
As to "their suppliers keep waiting for the 'big' contract that never comes along" -- this is something one has to learn to avoid doing in ANY business. That big contract may sound wonderful, but if it never happens and meanwhile you have to short your existing regulars to keep enough inventory on hand to fill that pending but still uncertain "big one", all yo
Re:No next, please. (Score:2)
Right, many use this tactic to climb, but they know when to turn it off. Problem with Dell, is they use this as their principle business model.
Breaking a rule isn't innovative. Dell will die the death it deserves, sooner or later.
Re:No next, please. (Score:2)
Re:No next, please. (Score:2)
With no prey, the predator can no longer survive. Natural forces work to insure they either curb their hunger (and play fair as part of the chain), or be forced out of the game when the food supply dries up. At that point, cannabalizm sets in and evolution takes over.
Give it time.
Re:No next, please. (Score:2)
Now, if you stupidly kill ALL the suppliers, then you *and* everyone else will die.
Re:No next, please. (Score:5, Insightful)
Electronics suppliers that I've bought from were quite upfront about a sliding scale for more units, lower price. If the bid says 1 widget at $10/ea, 100 widgets at $1/ea, no one expects to get one widget for $1. - This is where Dell gets dirty. They break these types of agreements with impunity. 10 for $1 or 5 for $1.10 becomes 5 for $1 or we'll go to your competitor.
As I said, there's always that promise of the next contract being the big one...kind of like one more pull on the slot machine. The fear is that the payoff will come just as you let your competitor step in.
Then there is also the image thing. You can tout them as a client, pretending you're in control. The hope is your competition doesn't see you bleeding, and they give up the fight, thinking you've managed to beat the beast at their own game. It's a complex issue, and one that is only slightly better grasped by being consumed and worn down. Is it better to lose face by not engaging them in the first place, or do you worry about losing face by being beaten up down the road...?
There is no honor in sitting on the side lines. You got into this business to compete. But when Dell moves the ball after the whistle blows, you'll lose everytime.
Errr, Apple? (Score:5, Insightful)
Um, I wouldn't put Apple in the same group as Gateway or Dell.
Gateway and Dell did start by piecing together PCs... not much innovation there, just source some parts, stick 'em together, bundle it with an OS, and then you've got yourself a PC business! With good marketing and by learning from mistakes, you could have a billion dollar business!
In contrast, Apple was a manufacturer first. Basically, Apple designed a computer, made boards, designed a custom power supply, had a custom case designed, wrote software, wrote some technical manuals, etc etc.
That's pretty much how Apple does it today, with the exception that Apple has been taking more advantage of some commodity components like drives (they always have) and highly integrated ICs.
Admittedly, Apple has become quiet adept at marketing - and that's a good thing, because Apple has a niche business that requires both innovation (both in marketing and technology) to stay relevant.
It's only recently that Apple started to get into the retail business.
Re:Errr, Apple? (Score:3, Insightful)
Au countraire, Dell is highly innovative. You're just looking in the wrong place. It doesn't innovate much technologically, but its supply chain is state of the art. You can count the corporations that know as much about supply chain as Dell on your fingers. Apple does innovate technologically - but its supply chain is relatively ordinary and compared to Dell's (or Walmar
I tried to be the next Dell once... (Score:5, Insightful)
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!
Re:I tried to be the next Dell once... (Score:2)
Re:I tried to be the next Dell once... (Score:4, Interesting)
I started selling computers in college. Opened a storefront. Did it for 8 yrs. Was a success in every way except financial. We kept our heads above water most of the time.
Margins went from passable (1990) to total crap (late 1997). Margins seemed to move in inverse proportion to my sales. It gets to the point where even doing decent volume and being reasonably well connected isn't worth the time.
98% of my customers are what I now refer to as "End Users" (this is NOT a compliment). Clueless losers who wanted everything for free. When they break something, it's my fault.
Most people have no clue when they go into business. There are LEGIONS of government agencies that show up at your doorstep. Every year it seemed that there was a new agency that I needed to pay protection money to. Tax reform is the best thing ever, if only it happened on the state level where it would make more of a difference. I can't imagine how bad it would have been in California or New York instead of Alabama.
People I meet find out that I ran a business, and will usually end up saying something about how that would be so great (it was, for a while). I then spend 30+ minutes educating them on what they're getting themselves into. I change a lot of minds.
I started my business to do something I liked doing: Working on computers. The last 2 years I spent 75% of my time pushing paper. 80 hrs a week because there was too much to do, and I couldn't afford the extra employee to make up the difference.
Things I got by working for someone else (that I didn't have for 8 yrs):
Health insurance, life insurance, retirement, vacation (8 yrs is a LONG time not to take more than a 3 day weekend), 40-50 hr work week, respect, 8 x increase in pay...
AND - 99.8% fewer End Users. (I'm a network admin - 2 layers of support to go through to get to me)
Re:I tried to be the next Dell once... (Score:3, Interesting)
This was an excellent and informative post. But I'm curious about this particular bit -- wasn't the carrier liable since you specified signature delivery and, presumably, no signature
Oh goodie (Score:5, Funny)
So, where are the horizntal bar graphs comparing Dell, Gateway, HP, Compaq & Packard Hell? Why aren't there 30+ advertisements for whoever gave Tommy the most dough? Why isn't there a seperate section in the article with benchmarks on a bunch of those brand-name PCs? I want to know how Quake 3 will run at 1600x1200! How good are these babies in overclocking? This isn't Tom's Hardware! Someone messed with my DNS settings!
Untill I see at least 20 useless horizontal bar graphs with various benchmarks that mean nothing, at best, I refuse to believe we're talking about Tom's Hardware.
Ergh... (Score:5, Insightful)
You have to look at it realistically. As a national manufacturer / re-seller the road will be very tough. Hardware isn't profitable to begin with (margin-wise) and there's not much room in the market. Only company I can think of that "came in" was eMachines, but I don't know anything about them, I just know I didn't see them 10 years ago. But for example, what happenned to Packard Bell?
I think where a lot of value and opportunity lie would be any niche market... Take for example, AlienWare, who makes specific game-oriented PCs. IIRC they will even install games for you and tweak them for your hardware configuration (at no extra cost). Dell doesn't do that, so they're not in direct competition.
So where are there niches? Could someone compete with AlienWare? What about a super high-performance company that sells already-cooled OCd systems? Or an anti-Wintel company that is setting itself up correctly so that, no, you won't be clogged by DRM in a few years? I could imagine a company setting up computers for very cheap that, say, boot up in 10 seconds or less. Sort of internet or email machines for other parts of the home. Or extremely sleek looking systems -- hire a good designer and make stuff that looks better than Apple's, but is a PC inside.
There's lots of room for interesting business models. But why would you need another Dell?
Re:Ergh... (Score:2)
Off the mark... (Score:3, Informative)
So much wrong with this kind of statement. China doesn't need those markets. It does need the western style of pragmatic project management, etc, but the market is now inside China/Asia, and much larger than Europe and North America. This statement only serves to show why the west is being left further and further behind.
Re:Off the mark... (Score:2)
Selling slippers and DIP switches keeps the mid and lower tier firms happy while the big boys play. The big boys aren't dumb enough to rely on Wal-Mart class incomes. Shut the doors on outside markets today, and China will still move forward.
Scale Matters (Score:3, Insightful)
1. Amortizing R&D: It costs money to develop and document a new PC (learning the vagaries of drivers, interactions with myriad software packages, and cranky connections to all the possible peripherals that customers might have). The more PCs you sell, the more you get to spread this fixed cost over the customer base. (Even if you, Mr.NewPC Inc., wants to ignore this, the vendors that must supply you with engineering data and support won't).
2. Uncertainty of Sales: If you expect to sell 10,000 PCs tommorow, then the basic statistics of random arrivals of orders means that there is a 95% chance of recieving betwen 9,800 and 10,200 orders. So, you order parts for 200 extra systems (2%) provides cover in case of high demand. If demand is low, you can sell the extra 400 systems in the first few minutes of the following day. On the other hand, if you expect to only sell 25 PCs tomorrow, then these same statistical issues mean that there is a 95% chance of recieving between 15 and 35 orders. To cover the same range, you need to order 40% more parts than the average expected sales and a low demand day leaves you with 20 extra systems (almosty a full day's sales) sitting in inventory.
3. Marketing Costs: If you want to be the next Dell, you need to tell people about you. A nationally broadcast ad costs the same regardless of whether you sell millions of PCs per year or only a few PCs per year. Maybe you can find more targetted ad outlets. Maybe you can rely on word of month (although given that most dissatisfied customers are more vocal than satisfied one, word of mouth is a dicy strategy). EVen if the ad is targetted, the creation of the ad is stil a fixed cost that gets divided by the number of PCs you sell.
I'm not saying that small Mon&Pop PC companies don't have a niche (some customers will always be willing to pay more in order to buy face to face from someone they know locally). I'm only saying that big PC makers have advantages in scale.
why not? (Score:3, Funny)
Why not pt 2. (Score:2)
Maybe if you made super-high end systems like Alienware, or some other companies, and could justify a heavy premium, you might make money.
Of course, then you would need even more money to star
Re:Why not pt 2. (Score:2)
Re:Why not pt 2. (Score:2)
Toilet paper prices don't go down every 2 weeks, and they don't get obsoleted by new models every quarter.
There are far better business to go into, but hey I'm happy if all of you go into the PC making business. Coz PCs make for fun toys, and the more of you around, the cheaper my toys get.
There will never be another Dell (Score:2)
As computers get cheaper, which in turn makes them more disposable, which in turn makes the purchase of one not that big of a deal, people will seek out the lowest price, not caring as much about quality, if they can get another one cheaply. We're not there yet, but almost. It's looking like the new opportunity is laptops, they are coming down in price and accounting for m
Interesting New Version of History (Score:2)
> forming your own store, getting in touch with
> Asian suppliers...
Um, perhaps you should actually _read_ about how Apple started?
The next big thing... (Score:2)
I personally think that the next big thing that people will want although they don't know why are Mini-ITX computers.
Look at the apps.
It is a computer, but it looks like a gamecube in size and is a good price. It is the new WebTV with REAL FEATURES.
Laptops are great, and WebTV was a great idea that never caught on, but why not Webtv? Well my mother had one and this is all I can say:
1. It was only one service, and that was getting expensive. Dial up only.
2. When a person gets net savvy
Computer Engineering (Score:4, Interesting)
If you want to start a business, identify a real problem or need, and develop a product or service to address it. If you want to build computers, don't try to copy Intel and Microsoft. Design a computer that does something new and unique, or does it significantly better than existing systems.
A true Linux-based consumer PC (Score:5, Insightful)
Consider this: Design a Linux-based home PC targeted at Wal-Mart customers and their kids. The "no nonsense, no excuses" PC for America.
Commodity market (Score:4, Insightful)
Unless you want to go after a niche market (witness Alienware's success with PC gamers), taking on established vendors in what is now in many ways a commodity market is a very dangerous proposition.
Low margins, relentless competition, and an undifferentiated product aren't exactly the factors that would lead an experienced entrepreneur to want to enter a market.
Do any Slashdotters build their PCs? (Score:4, Insightful)
I build PCs for myself, my friends, and my family. Most of them have custom "Solprovider" machines. I pick the parts; I build it; I install the software; I support them. PCs I build remain usable for over 5 years, and I average about 1 support call per machine per year. (If you are interested in what I build, see my October recommendations [geocities.com] from the last time I built a PC.)
I am not attempting to turn this into a business. I have a very successful career, and the effort is too high and the margin is too low for this business to be worth my time. I refuse any money, although I expect a home-cooked dinner for my trouble, but then I only build PCs for people I care about. The other side is that these people know that I will never interrupt my paying work to help them, so sometimes their problems can take over a month to solve.
But why aren't you trying to sell PCs? You are already technical. You probably understand what the hardware does. You can learn how to use a screwdriver. You already know how to install software. The bad side is that you might have to install MSWindows if the buyer insists, but you could install grub for dual-booting, so every time the buyers watch it boot there is a chance they may choose Linux.
(Use the Maxtor 160GB drive. Use only 10GB for Linux and they will not complain. Tell them it is there so you can troubleshoot easier, but they can try it if they want. I am actually installing a new hard drive this way this week.)
I usually spend several days to research my recommendations. One day is spent researching the new technologies; one day is spent researching the various products; and a few hours are spent checking prices. Someone who builds more than one PC every 6 months would spend much less time per PC because their knowledge would remain current.
Don't overlook the inefficiency of big business (Score:3, Informative)
I've learned that big companies are doomed to becomming appalingly inefficient. I mean, words just can't describe how inefficient they are. The worst part is, most people at big companies started there, and have always worked there, or at another big company so they have no idea what the other world is like.
Honestly there are things that take a month at a big company that take 5 minutes at a small one. (Not because of cutting corners on needed process, but just plain inefficent stupidity).
So how do big companies survive? Just what eveyone's been posting, margin and big-company bullying. This is what balances things out.
But don't assume you can't beat Dell because you don't have their margins. You also don't have their inertia.
Incidentally, one exception is Microsoft (yah I worked there too, probalby should post AC). MS operates like a small company with 20,000 employees. My group consisted of 31 people: 30 engineers, and 1 admin. That would be unheard of at any other big company. They feel much better with like 5 working engineers, 5 people with engineer titles that do nothing, and 20 people that make spreadsheets that track what day today is, and what day tomorrow will be etc...
Not as easy as you'd think. (Score:3, Insightful)
So we've focused on a different market. There is no "Dell or Compaq" in the server market - sure they sell rackmount machines, but they can't get the same discounts on them as they do on desktop hardware, so small companies like us can compete with the "big guys" (and we usually come out below their prices). We also offer better quality workmanship and customized modifications (something that can't always be said of our competitors) - the case manufacturers don't always understand that 1/16 of an inch tall or wide can make a difference between "fits" and "doesn't fit" in a rack, or that certain pieces of metal sticking up might short out certain motherboards.
Re:You should forget about going into business (Score:2, Insightful)
Not only a spell-checker, but a nice proof-read for clarity would help too. I, for one, had no clue what the article was actually about other than that the article was "thought provoking" and "interesting" reading. For example, where did this sentence come from and what does it mean?
"Why should you learn all the specs on the latest processor and slam the competition just because you may happen to own a P4?"
Huh? Thi
Re:You should forget about going into business (Score:2)
Very good points, but you forgot one thing. The slashdot editors don't edit. They just post stuff that people send in, minus the editing function that is supposed to go on.
Re:Right on! (Score:3, Funny)
For those that didn't RTFA, including the mods, Omid is the guy who wrote the article.