Entering The PC Retail Market

[Dokka]

Hey guys, I'm new here but I have to ask a question to all of you guys.

Do you guys think its realistic for someone like me to enter the PC Retail Market? I'm personally interested in doing so because I personally like Computers and I like selling stuff to people. I was wondering if its possible to even do it though. And even if it were possible, how should should I start? Where would I even try to buy PC components at wholesale prices?

[aisle9]

Where are you located? If you're looking to flip builds on Craigslist, yeah, it can be done, more easily some places than others. Bryan's business model at Tech Yes City is basically exactly this: buy stuff cheap, build it into systems worth more than the sum of their parts, sell those off at a hefty profit. I made enough doing this in Florida over the course of a few years that I strongly supplemented my annual income at the expense of not having weekends.

 

If you're talking about buying bulk components and building systems yourself, I'm not one to kill a dream, but I will say that unless you're ordering thousands upon thousands of a given component, like the big boys (Dell, HP, Acer, etc.) do, you're not going to get a call back from the component manufacturers when you ask about OEM pricing.

[Dokka]

Well what i'm referring to is selling computer hardware by themselves and selling at retail price. I havent tried looking for OEM sellers however. I've only been looking for wholesalers. But I read you're not supposed to sell OEM if you're selling parts for Retail.

[Jae Tee]

29 minutes ago, Dokka said:

Well what i'm referring to is selling computer hardware by themselves and selling at retail price. I havent tried looking for OEM sellers however. I've only been looking for wholesalers. But I read you're not supposed to sell OEM if you're selling parts for Retail.

Unless you're referring to a MASSIVE scale production, that kind of business model doesn't have very large legs to stand on. Unless you have an insane amount of capital to join an already super competitive market, your best bet is something local as @aisle9 mentioned. 

[Dokka]

10 minutes ago, Jae Tee said:

Unless you're referring to a MASSIVE scale production, that kind of business model doesn't have very large legs to stand on. Unless you have an insane amount of capital to join an already super competitive market, your best bet is something local as @aisle9 mentioned. 

I want you to explain why you think this. I've seen similar comments on other platforms but said to other people. But I'd like for you to go into detail about why  you think it wont really work or why I'd need insane amounts of capital to jump into this market. 

[Jae Tee]

I work for an online retailer. Only occasionally do they go in to selling OEM PC parts, and the margins are never great. The only possible way to turn a profit is by selling millions of dollars worth of merchandise, and that includes hundreds of thousands in overhead let alone the merchandise it self.

[Dokka]

2 minutes ago, Jae Tee said:

I work for an online retailer. Only occasionally do they go in to selling OEM PC parts, and the margins are never great. The only possible way to turn a profit is by selling millions of dollars worth of merchandise, and that includes hundreds of thousands in overhead let alone the merchandise it self.

Is there any way you could break down the budget? Such as whats the profit margin per item, the fees, and price for bulk wholesale purchases.

[Jae Tee]

Roughly, I'd say per item, 10-15$ profit is generous, and that includes exclusive wholesaler deals. Then there's the logistics, you have storage, shipping, employees, electricity, lunch and so on. Then there's the business side such as seller platforms, insurance, accounting, legal issues. Further more theft, damages, and the inevitable returns will deeply eat in to your profits. All in all it's a difficult environment with a high chance of failing.

 

That being said it is for someone, and that someone just may be YOU.

[Dokka]

10 minutes ago, Jae Tee said:

Roughly, I'd say per item, 10-15$ profit is generous, and that includes exclusive wholesaler deals. Then there's the logistics, you have storage, shipping, employees, electricity, lunch and so on. Then there's the business side such as seller platforms, insurance, accounting, legal issues. Further more theft, damages, and the inevitable returns will deeply eat in to your profits. All in all it's a difficult environment with a high chance of failing.

 

ahh I see. 
Well what my plan calls for is that I use Amazon's FBA system as a method for shipping and storing products or Stamps.com as a way to get cheap shipping and packaging. 
I'm not gonna have any employees, it'll just be me. The business in general will probably start out small. I'll partner with either Ingram or the Ascii group. Biggest hurdle in my honest opinion are what the rates are for wholesale purchasing because I dont actually know what they are for either group. Also, maybe this lack of knowledge of what the rates are what keep me thinking that this is still possible. Returns are dealt mostly with the Wholesaler/Distributor you're with and I think some give you some kind of insurance on faulty goods. 

Also what do you mean by insurance, you mean buyer's insurance or employee insurance.

[Jae Tee]

10 minutes ago, Dokka said:

ahh I see. 

Lots to unpack here: Using FBA is a hassle in it self, too much to explain here, but needless to say you'll def. need some of your own storage. 

 

Cheap shipping adds up real fast, and have huge headaches involved. Personal experience is needed to understand. 

 

You WILL need an employee or hands on partner.

 

All returns are sent back to the seller directly so you'll need to deal with those. And getting refunds takes a lot of work with each item that's been returned. This is my job.

 

I meant you'll need insurance on your inventory. Hundreds of thousands of dollars sitting on a pallet is not safe.

[Dokka]

5 minutes ago, Jae Tee said:

Lots to unpack here: Using FBA is a hassle in it self, too much to explain here, but needless to say you'll def. need some of your own storage. 

Yeah i'm thinking about using my own home as a method for excess storage.

 

5 minutes ago, Jae Tee said:

Cheap shipping adds up real fast, and have huge headaches involved. Personal experience is needed to understand. 

the thing about that is this price can become ignored when it comes to something like FBA because you're supposed to the shipping price when you set up your pricing. 

 

7 minutes ago, Jae Tee said:

All returns are sent back to the seller directly so you'll need to deal with those. And getting refunds takes a lot of work with each item that's been returned. This is my job.

 

i do think that can become a time consuming problem. However, amazon does streamline refunding and makes it easy as a push of a button.

 

14 minutes ago, Jae Tee said:

I meant you'll need insurance on your inventory. Hundreds of thousands of dollars sitting on a pallet is not safe.

oh you mean theft insurance. I think if amazon lets my stuff get robbed then amazon would take the blame for it and pay me back what I paid for that stock.

[caldrin]

I did a similar thing about 10 years back now its very very hard to compete on prices with the big companies.. .well in the UK anyway.

Basically all retailers buy from one of the big suppliers like IngramMicro, but the main issue is if you buy in bulk from then you get the stuff cheaper.. 

 

So say they sell a laptop or whatever for £600 each.. now if you buy in bulk say 500 the price drops per item by like £25 and so on the more you buy.. so big companies like Amazon can buy 1000s and getting them at a super cheap price.. leaving the small guy that does not have the funds trying to compete.. in the end you make so little cash from actually selling something then its just not worth bothering with haha.

Now maybe if you live in an area full of old people that dont know what the internet is then you could still make a profit hehe

[Pixel5]

6 hours ago, Dokka said:

I'm not gonna have any employees, it'll just be me. 

that alone is already a reason it will not work.

put yourself into the position of a person that wants to buy a computer and you got the choice between established companies like HP, Dell or Lenovo and a one man show that offers you the same components for at best the same price but probably for more because you wont get the deals the big ones get.

 

now you also know right away if you have a problem with your Dell or Lenovo or whatever you got an existing support structure that you can work with globally, for the one man show its first the question if he is even still in business when you need the warranty.

 

Unless you go super expensive custom builds there is no money to be made and no reason why anyone should buy from you and if you decide that you want to do custom builds the first thing i would want from you is pictures and specs of existing builds you did.

Then you would also need to be known in order to get customers so you need to do crazy stuff people want to talk about to build yourself a name in the business and that alone takes years.

 

all in all its not gonna happen unless you got a few hundred thousand as a starting capital.

[aisle9]

6 hours ago, Dokka said:

Yeah i'm thinking about using my own home as a method for excess storage.

 

the thing about that is this price can become ignored when it comes to something like FBA because you're supposed to the shipping price when you set up your pricing. 

 

i do think that can become a time consuming problem. However, amazon does streamline refunding and makes it easy as a push of a button.

 

oh you mean theft insurance. I think if amazon lets my stuff get robbed then amazon would take the blame for it and pay me back what I paid for that stock.

Amazon charges pretty hefty prices to store your items past 30 days. Have you taken that into account?

 

Easy refunding is great for customer service, but bad for the bottom line. Over half of all merchandise purchased in the US gets returned. Do you know exactly how you're going to make all of the opened, used, unwanted components go away at a profit? Selling them again as new will get you into deep dookie with Amazon.

 

If the Amazon DC holding your stock was robbed, my assumption is that their insurance would cover it, but I don't know that for sure. If your home gets broken into, are you prepared for that? The excess stock you have at your home is business merchandise, and homeowner's or renter's insurance typically will find a way not to cover it. You'll need homeowner's and business insurance on your house, and given the type and cost of item you'll have there, that business insurance won't be cheap.

 

If you're serious about doing this for a living, you need to write up a specific business plan. What are your start-up costs going to be? How much inventory do you need to get started? Where will you source components from? How much do you know you can get them for, i.e., how much has your seller committed to in writing as a price for you? Where will you store excess inventory? What will that cost you? How about insurance? How are you going to handle each type of return? For example, if someone sends you a GPU that they used for a few days and don't want, how do you handle that? If someone sends back a dead GPU, how do you handle that? If someone buys an RTX 2060 and sends back a GTX 260, how do you handle that? What's the cost to you in each of those scenarios, given that Amazon is of virtually no help with returns? What do you need to price each item at to make a worthwhile profit? How much are other sellers listing the same items for, and how low can you take your price when (not if) someone undercuts you? What happens when a new model comes out and no one wants to pay retail for your GTX Old-60 anymore? What are your target revenue, profit and growth goals? Where do you realistically see this business scaling up to in five years, and how much capital will it take to get there? Answering any of these questions with, "I think..." or anything close to it means you don't have that business plan written down and ready to go yet.

 

If you want to go down this road, I strongly encourage you to get your feet wet with low-dollar flipping first. Buy PCs locally, either at yard sales, thrift shops or Craigslist and the shopping apps, then test them, strip them, clean them up and resell the components on eBay. In a high-risk category like PC hardware, you will very quickly learn what kind of margins you need and how to handle fraud loss. It's a little more forgiving in that if someone returns something they just don't want, you can test it, clean it up and list it as used again. The hit from new to used is huge, but used to used has no hit except for shipping costs. If you have the appetite for it after a few successful years of that, then look into going retail. You'll have a better idea of what you're in for.

 

For some context, there was a three year period where I was bringing in low five-figures of raw revenue by flipping local purchases, building and selling PCs with used parts or parts sniped off of online sellers at low prices. I was making mid four-figures in profit because I was able to pay so little for most of these items. You're not going to get the same discounts from big-name retail resellers, and if you just cold call them and say that you're looking to get into selling components online, they'll hang up. You need to come to them with your (large) budget and your specific list of parts. If you're up for putting in the work it takes to get to that point, go for it! The world needs more people like you! Just be aware of what you're going to run into before you start. Sitting on $17,000 worth of inventory that you took out a $20,000 loan to get and can't offload even at break-even prices is a really bad time to realize that it's not for you.

[Jae Tee]

6 hours ago, Dokka said:

Yeah i'm thinking about using my own home as a method for excess storage.

 

the thing about that is this price can become ignored when it comes to something like FBA because you're supposed to the shipping price when you set up your pricing. 

 

i do think that can become a time consuming problem. However, amazon does streamline refunding and makes it easy as a push of a button.

 

oh you mean theft insurance. I think if amazon lets my stuff get robbed then amazon would take the blame for it and pay me back what I paid for that stock.

You continue to believe that FBA is the answer to you're problems.

 

It is not.

 

I can assure you all of the mentioned above will be entirely necessary for you to be successful in an online retail setting. 

But really whatever you do, be prepared for major setbacks. Even if you find an amazing deal one day and buy lots of merchandise, a week later that product could have a price cut, leaving your stuff collecting dust. 

[Touch My Hamm]

Are you wanting to work for a company and build computers or start your own business building computers? There are a few major hurdles to get over if you are creating your own company. Many of which are Maintaining and building a brand. For PC boutique building in particular I would recommend against it.

 

Sourcing parts for a good price and making profit would be extremely difficult. How would you compete with say HP or other luxury brands like Ibuypower? They have issues with this and a big source of income is services.

 

Warranty would be another hurdle. For building many computers are you the person they go to for warranty? what happens if parts fail after sale? there are many considerations when taking this on. Are you telling the customer they must go through the part manufacturer for rma? 

 

If you are to create a boutique building company why would I go with your company over IbuyPower as an example? Are you going to compete with their prices and give me tech support for my kid once I get the computer. If im paying a premium for someone else to build the pc they better have full support over the parts chosen? What happens if I want to return the PC since it didnt hit the FPS in fortnite my kid wanted? 

 

There are many more examples but you can get the picture. Unless you really have alot of drive and funds to do so it would be extremely difficult to get into boutique building for clients. I would recommend setting up a facebook store page/kajiji page where you can build for people who want a custom build where you can help them choose parts and build the pc for them. There are a few people who do that in my city, I do not know how many people request them to do this.

 

 

Note that if you have the drive to do it I believe anyone can do anything if you put your time and effort into it. Just know there are big hurdles to get over but I believe in you if you wish to create your own startup.

[WkdPaul]

1 hour ago, caldrin said:

I did a similar thing about 10 years back now its very very hard to compete on prices with the big companies.. .well in the UK anyway.

*snip*

 

Same here, but in Canada (started almost 15y ago!). What I was doing back then was to order from China (it was easier and faster back then, really). All cheap stuff that sell at a premium here (accessories, cables, LEDs, etc..). PC components have a too small profit margin to even bother really.

 

If you're small, you HAVE to find a niche product and dig your feet in, it takes a LOT of work at first, and you need to know your market corner.

[Touch My Hamm]

6 minutes ago, wkdpaul said:

 

Same here, but in Canada (started almost 15y ago!). What I was doing back then was to order from China (it was easier and faster back then, really). All cheap stuff that sell at a premium here (accessories, cables, LEDs, etc..). PC components have a too small profit margin to even bother really.

 

If you're small, you HAVE to find a niche product and dig your feet in, it takes a LOT of work at first, and you need to know your market corner.

Most companies sell services now. Whether it be extended warranty or some tech support thing. Example that comes to mind but isnt a bc builder is GeekSquad where they sell those protection plans for monthly billing. Or one of my cities local PC shops they charge for extended warranty for like $299 lol. Unless you sell alot of product you make very little margin as you are competing with much bigger players. Sucks since I am an advocate for smaller business and people creating their own adventures. 

[caldrin]

Also don't let all this discourage you to much I mean if you have a good idea with what you want to do then sure go ahead and start really looking into it but as long as your eyes are open to the issues that will confront you that is the main thing.

[WkdPaul]

4 minutes ago, caldrin said:

Also don't let all this discourage you to much I mean if you have a good idea with what you want to do then sure go ahead and start really looking into it but as long as your eyes are open to the issues that will confront you that is the main thing.

True, all the replies here seems more about opening the OP's eyes rather than telling him to quit.

 

Also, @Dokka seems you're completely oblivious about how it all works (retail online and offline, profit margins, chain of logistic, etc... ), it's not an attack but rather an observation. I would suggest you do some research into this first (asking on a forum is a start, but you're lacking in the subject and it's not something we can fill here on a forum).

There are lots of ressources out there, and I'm too out of the loop of that sector to propose one, but places like Shopkeep.com have some interesting articles (that's only a start) ;
https://www.shopkeep.com/blog/opening-up-a-retail-store#step-1

 

Another place to look for help and knowledge would be your local chamber of commerce, or maybe an online ressource that is specific to your area or state ? Here in Quebec and Ontario, there are tons of online ressources to help people start their own business (both from private and gov ressources). You just need to know where to look.

 

But IMO, you need to do some more research before jumping in, but don't let this discourage you.