selling computers..

[nicK]

i'm just after putting a computer together (online) with komplett components which i found is a lot cheaper than a very similar Dell model. which got me thinking...
i'm wondering how easy it would be to set up a business and compete with the likes of Dell, putting pc's together with parts bought from websites like overclockers and komplett, and selling them on at a price slightly cheaper than bigger companies such as Dell..
i think a business like that could do well around my area (monaghan) where most people wouldn't know much about putting pc's together and are looking to save money buying pcs.
Would it be hard to set up such a business? Are there "VAT savings"? Is it legal?
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nicK.

Dr. Dre

How would you work warranty/support ? That's big factor for newbies to the computer world, me thinks it would be a nightmare tbh. I've often thought about it myself.

dahamsta

I've often thought about doing this too, but I wouldn't have the technical knowledge to back it up on the support front. So here are my thoughts on it, but be warned that they are only thoughts...

i'm wondering how easy it would be to set up a business and compete with the likes of Dell

I'll stop you there anyway. Although you might take a little business away from Dell, calling it competing with them is stretching things a little. (I mean no offense by this, I'm just trying to bring a little pragmatism to the suggestion.) Most Dell buyers or prospective Dell buyers are unlikely to buy elsewhere: on the corporate side, the more they buy the more like they are to stay, because they have increasing leverage when it comes to support; and on the consumer side, people buy Dell because it's nice and simple from start to finish. It's very hard to compete with the simplicity of Dell's system, even if you think you could do better. Of course there's also Dell's massive marketing budget to think about.

So you're much more likely to be competing with local suppliers, and this is almost as hard as competing with Dell, because these guys will have built up their business on word of mouth, a link that can be very hard to break. So you'll need contacts and prospects, and you'll need to get everything right to make sure /you/ build up word of mouth. Unless you've got tons of money that is.

And that brings up something else to think about -- if it was that easy to do, wouldn't system builders like PC Pro in Cork be setting up a website and pushing systems out the door? They don't seem all that keen. And that in turn brings up another item -- a few Internet-based system builders /have/ sprouted up in recent years, and you'll have to compete with them too.

All negative I know, but it bears thinking about. Personally I'd like to see more system builders out there, and I'd like to see them putting more thought into streamlining their build processes and leveraging their websites -- Encom and JaguarCompSys come to mind here. If you think you can do better, and you've got the brains and the balls for it, there's nothing stopping you.

EDIT: By the way, a lot of guys in HW Tweaking build systems for people in their spare time, they'd be good guys to talk to. Oh, and if you do decide to go ahead with it, gimme a shout about the Internet stuff, I have some great ideas.

adam

daveg

I too have thought about this. Tbh you would be hard pushed to compete with Dell when you factor in legit licences for your software. For example the company I work for bought the following:

P4 2.4
512MB RAM
15" TFT
DVD/CDRW Drive
On board sound/Lan/Graphics
Win XP Pro
Office XP PRo

All came to 1,000 Euro (ex VAT). The software alone would set you back the guts of 500 Euro. You might build a cheaper machine but not by much. The problem as I see it is you have 2 types of customers. A boardsie techie type who knows you can build a cheaper (slightly), better machine than you can get from Dell - but he will build it himself. The other type is the person who hasn't got a clue and they will more likely go to Dell for (as dahamasta said) the support.

dahamsta

If I was going this route I wouldn't touch Windows with a barge pole, and I'm not saying that on philosophical grounds. Linux all the way, most likely one of those icky Windows-a-like ones like Lindows. Linux isn't perfect on the desktop yet, but it's near as dammit. Jesus, if you used that German distribution most people probably couldn't even tell the difference.

adam

azraelissime

I'd like to add on thing to this (this is also my opinion).

A company like Dell is building computers mainly with OEM or Bulk/SI products. These are cheap components but they have to assume the technical support and driver development for it. The manufacturer doesn't give any support to that type of parts.
Customers who choose to buy that type of computer often didn't have a clue on how it works. Try to explain to a 50 years old customer that never touches a computer in his life that he has to update the motherboard chipset...
As the company supports the all computer (hard and soft), it's easier for customers. They call the hot line and they will have help for the all computer at once.
They will never have an answer like "you have to modify a setting in the BIOS, please contact your motherboard manufacturer" or "to reinstall Windows, please contact Microsoft".

So if you can build computers for a lower price than one of these companies, using only retail products (to get the support and warranty from the manufacturer) and providing yourself the support (onsite beeing the best option) then you may success in business.

An other way of doing business is to build computers for people who don't have the time or don't bother paying for and only with specific products (such as "Music Configuration" with professional soundcard like E-MU onces, high range speakers, keyboards,... or "Graphic Config" with professional cards, high spec monitors,.... and so on). The price can then be higher because the service level you'll provide will be really high but the number of potential customers will be lower.

[nicK]

Originally posted by dahamsta

So you're much more likely to be competing with local suppliers, and this is almost as hard as competing with Dell, because these guys will have built up their business on word of mouth, a link that can be very hard to break. So you'll need contacts and prospects, and you'll need to get everything right to make sure /you/ build up word of mouth. Unless you've got tons of money that is.
[/B]

I think this is one of those very few times that coming from Monaghan is actually a benefit because there arn't very many local suppliers of pc's. The closest thing we have to a local supplier would be the ESB shop whose prices are extremely high.

Although you might take a little business away from Dell, calling it competing with them is stretching things a little

Yeah, sorry, i meant that i would be competing with Dell prices.

I think if i was to go ahead with this, (big if atm) i would firstly make the website where people would look at various systems for various needs. From there they would phone/email me and talk about it. (i dont think i would get that many online orders but if the demand was there, online ordering could be set up.) I would then go ahead and order the parts, stick 'em together and the system could then be delivered to the buyer within a week, all going well. I would advertise this by going to local championship GAA championship matches and putting flyers on cars. (how annoying ) and advertising in local papers/ perhaps local radio stations.

Are there many legalities in setting up/registering such a business? Do i need any qualifications? (still at college atm) Would i be making VAT savings by ordering parts from companies as a registered business?
Amn't i overlooking something?

Nuttzz

if you are going to have a turnover of ~40k a year you can register for VAT. to set up a company costs about €300 if you get a company to do all the paperwork for you. Watch the legal situation on the machines, i.e. if you sell a pc that is "mission critical" and it dies what happens to you?

dahamsta

Originally posted by Scrappy]-[Nick
I think this is one of those very few times that coming from Monaghan is actually a benefit because there arn't very many local suppliers of pc's. The closest thing we have to a local supplier would be the ESB shop whose prices are extremely high.

Fair point, but presumably people in Monaghan still buy computers. So your first job should be to ask as many consumers and businesses as possible where they buy their computers, how much they pay and are willing to pay, what kind of support they get and want, the spec they'd be looking for, etc.

Take a day off and rack up the phone bill, print out leaflets and hand them out at a shopping centre or push them into people's letterboxes, etc, etc. And don't skip this step, because you're almost guaranteed to fail otherwise.

I think if i was to go ahead with this, (big if atm) i would firstly make the website where people would look at various systems for various needs. From there they would phone/email me and talk about it.

I'd go the other way, but that might be because I'm an Internet guy. Think about it this way though: If you spend an hour on the phone to a customer when it could have been done in ten minutes, that's 50 minutes you could have spend cold-calling or administering your business. Because I'm a developer, I'd be able to plough my own time into developing "configurators" for my website, but you don't have to be a developer, you just need to find one that'll take a percentage of every system sold via the website. The better the site is, the more sales you make, the more money they earn...

I would then go ahead and order the parts, stick 'em together and the system could then be delivered to the buyer within a week, all going well.

Running without stocks is another troublemaker. What if all /doesn't/ go well? What if some parts are delayed and the customer cancels the order? What if the deposit they give you doesn't cover the cost of the goods you've ordered already.

Plus there are other issues that can crop up whether you keep stocks or not, such as debt collection -- believe me, you'll get plenty of customers that won't want to pay you. Or what happens when IBM release another batch of dodgy drives that keep coming back to you? Et cetera.

Are there many legalities in setting up/registering such a business? Do i need any qualifications? (still at college atm) Would i be making VAT savings by ordering parts from companies as a registered business? Amn't i overlooking something?

If you incorporate a company you'll need yearly accounts which will need to be sent to the Revenue. As Nuttzz says, if you're making over €40k a year you'll need to register for VAT and you'll need to do a VAT return every two months, which can be very tiresome if you don't have a head for books. (I wouldn't recommend anyone to register for VAT if you're earning less than that, because it's such a pain in the arse, but that could just be me.)

adam

Victor

Originally posted by Scrappy]-[Nick
and putting flyers on cars. (how annoying )

How illegal

The way you can compete is on personalised service, everthing from actually setting up the PC on their desk (which Dell don't do), connecting peripherals (which Dell don't do), to wiring their LAN (which Dell don't do).

Consider becoming a Dell reseller for some orders where people want a brand name computer and the corresponding "comfort".

RicardoSmith

I have friends who were Dell resellers, and other friends who sold PC's and PC Services both in small and large scale. Some had companies with one or two people, one had as many as 50 people. But at the end of the day margins were so small and they got so much hassle from selling and supporting systems that they stopped doing. They've all moved away from hardware to purely software.

Doesn't matter where you are you'll be competing with the internet. So you'll have to beat the prices on the internet. Most people will know someone who can fix or configure a PC so you'll have to be very cheap to complete with that.

Finally, if your target market is people who want the cheapest of the cheap, then your profits will be quite marginal. So you either have to do a lot of business to make money, or you'll have to increase your profit margins to make money. But if you do that then you are competing with the known brands.

Personally I think its a hard way to make money. But if you find a niche in the market you might make a go of it.

Capt'n Midnight

Originally posted by RicardoSmith
Finally, if your target market is people who want the cheapest of the cheap,

Trust me you don't want to provide after sales support to those sort of people.

Probably better off renting umbrella's for use in pub car parks.

RainyDay

Have you put a cost on your time? How much of your time are you going to have put into;

1) Taking an order
2) Ordering stock
3) Assembling a PC
4) Testing a PC
5) Packing a PC

How are you going to charge for this? I think you'll find it very hard to make a margin on hardware. Might be easier to just sell your time - helping people to use their PC, fixing software problems, consultancy, advice.

BigEejit

A good mate of mine was in the computer biz a few years ago, and most consumers want cheep cheep cheep pc's .... he was barely scraping by, locals who wanted a performance PC got a knowlegeable friend to make it for them and would only come near him as a last resort because people have this impression that he may be expensive (even though he was only making 50 squid a box.) He was also driven demented by the people who bought the cheep pc's .... he barely made it out of the buisness with any bit of sanity....

RicardoSmith

Originally posted by RainyDay

How are you going to charge for this? I think you'll find it very hard to make a margin on hardware. Might be easier to just sell your time - helping people to use their PC, fixing software problems, consultancy, advice.

`

I think thats the only way you'd make money is charging by time and not selling PC's unless someone specifically asks you to build one or repair one.

Zascar

I used to work for Dell, and I had a lot of repeat customers (resellers) who use to build pc's and try to compete with Dell, but ended up chucking i in as it was not worth the hassle. Now they resell Dell and try to make money any extras etc, and more so; Service Contracts... There is no money in PC's any more. Dell only sell PC's as it enables them to sell Services & Enterprise which is where they make their money. HP loose millions every month competing with Dell, but they just ofset the losses from the amount of money they make from ink.