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Electronics! Yeah, that’s what I want to sell!
For guys and gals alike, our heads start to spin as we think about terabytes of memory for our iPods, the latest Dell Computer desktop with a super large flat screen monitor, or maybe that $8,000 surround sound system with an 80” Plasma TV. When I began looking for a business to get started with, my mind leaped tall buildings with a single bound towards the electronics industry. Why? Because not only could I make a huge profit by providing something that is attractive to people from all walks of life, but I could buy some of this stuff for myself at HUGE DISCOUNTS over what I could find it for on eBay.
Why did I believe this? Well obviously if someone is selling something for $1,000, then they are paying a lot less and making a huge profit. Let’s take a quick look at Digital Cameras. I wanted to sell digital cameras in one of my earlier fund raising efforts for my daughter’s trip to Australia as a Student Ambassador with the People to People organization. I also wanted to buy a really cool digital camera. I love to take pictures (always have). I even used to own a Cannon A-1 35mm SLR. That was big stuff in the old days. So I take a look at Wal-Mart’s prices for digital cameras. For sake of example, let’s look at the Canon EOS 20D. 8.2MP of pure “wish list” camera. Wal-Mart has this camera listed at $1,599 ($1,443 after rebate online). Pricy! So I wonder, what’s this camera going for now days on eBay? In checking the completed auction listings, I find $1,050 for complete camera, $1,250 for camera body only, and a bunch of cameras not sold with “Buy It Now” options of anywhere from $1,200 to $2,500 (but all were power sellers) depending on what they were offering. The camera that sold for $1,050 probably did so without much profit (only has a feedback score of 59).
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So I have Wal-Mart at $1,443 and eBay at probably $1,200 or so. Since I have ordered a few things from B&H before, I take a quick look at their catalog. Hummmm. $1,199.95 after rebate. Not making any progress here.
Target, Best Buy, CompUSA, Circuit City…..No bargains there either. OK. These guys all had to get their products from somewhere, so I decide to contact several of the Camera companies directly (after all, I want to sell digital cameras). This must be where all of these folks order from. Well, all of the companies do not want to deal with small companies, however, I learn from one camera supplier that a company called Tech Data Corporation handles distribution of their cameras for smaller businesses. After the signup and approval process, I finally log in, only to find that the price of their cameras does not even compete with Wal-Mart. WHAT GIVES????
One simple word. QUANTITY. There is such huge competition in electronics that the margins are barely 10%. Unless you have the ability to buy several hundred cameras, then you have no prospect of competing in the new camera market. So what are your alternatives?