Hey there - this is Toratek
Let me give an example ebay business that is pretty much what I would like to do.
http://www.toratek.com/
Check the ebay listings on the website and also their feedback.... they have sold many Custom Gaming Computers in the past year.
I wanted to weigh in and give you my personal opinion about starting your own computer business: do it only if you absolutely love computers and like the IT industry as a whole. If you're going into this for the money, you might be looking in the wrong place. It is a very competitive market, and I'm sorry to say this, but I see allot of people on eBay that are firmly convinced that just because of the simple fact that they can connect a couple of cables and twist a few wires here and there, they have "custom gaming computer business". I have been building computer systems since before I went to high school, and worked in a couple of local computer shops. I've also studied Industrial Design, and have a degree in computer programming. Gaming systems are not my favorite, because I've built workstations and small servers in the past, and had allot more fun doing that. But then again, by building so many types of computer systems, I have the experience to get things right the first time and build solid machines. It takes allot of passion and dedication and a strong will to do this. From everything that I see, you're looking at this in the wrong way:
- You want to buy and sell cheap, and at the same time you want to do this on eBay. The only market you will find is the worst niche market out there: folks that want a custom computer system, that is "cool" and has all the "bells and whistles" and is not just another "ugly" Dell, Gateway or HP, but they don't want to pay the Custom Boutique PC price tag. I see this on eBay every 10 to 15 minutes,or so, someone is posting some listing trying to undercut someone else. Remember this: those who start price wars loose them. A perfect example of this would be "Monarch Computers" that went Bankrupt because they where trying to undercut their competition, and at the same time had a bad product. This days it's like they never existed,
www.monarchcomputer.com doesn't even exist anymore. They where selling computer systems, motherboard+cpu+ram combos (why in the world did they do this???) and parts. Just google Monarch Computers and see for yourself. Another example that is very real is Intel vs. AMD. Back in 2006, AMD started a price war with Intel. Guess who lost? Yes, it was AMD. Intel responded by cutting their own prices to such a degree that everyone could afford a high performing CPU, either by buying something that would fit their budget or trough over clocking. And it didn't really matter, because no one has any reason to buy and AMD CPU anymore, no matter how cheap it is. The only time that you can start undercutting your competitor is when you have a superior product that you can manufacture for less than your are selling it. Basically if you can sell for less than your competitor and still turn a decent profit, then you can start undercutting your competitor. Most folks on eBay can't really undercut their competitors, so what they end up doing is: they quit after a while. But while they are doing this, they create allot of buyer confusion. For eBay this is good, because they get to cash in on fees, but for everyone else it's bad, because with so many "Ultimate Gaming Computer" listings on eBay, it is hard for the buyer to decide what to buy. So, you will get lost and just be another listing. My head is spinning when I see most of this listings, most of them claiming to offer the "Ultimate Gaming Experience" for cheap, but yet those listings look like they where put together by a little kid in kinder garden playing with Microsoft Paint for the first time. They just look horrible and are hard to understand.
- You want to build "only" 3-4 different computer models: it takes experience. Again, I'm getting back to twisting wires and connecting cables. Not everything goes well while building a system, and if you don't have the experience to diagnose hardware right away, then it will be a long, expensive and cumbersome learning experience. Most folks want their systems customized, so you will end up building what ever they want. If you don't have the fundamentals down in regards to what makes the computer tick, you will be in trouble.
- You think that this is easy: Wrong. This is not easy at all. Just putting together quality eBay listings is very time consuming. Then you need some basic knowledge in design, good taste, and a bit of marketing. If you have the "custom computer building & supporting" down, then you will face another bigger problem: getting your name out there. The Boutique PC market is huge, and there is a demand for quality computer systems and support, but not on eBay.
- You want to compete with HP and Dell: You can't. When you have at least one building facility somewhere in China, or a company that is willing to build for you there, then you'll be able to compete with them. Boutique PC makers aren't competing with HP and Dell, and HP and Dell know this, and that is why HP owns VooDoo PC and Dell owns Alienware. Let me put it this way: Do you see BMW competing with Hyundai or Toyota? No! That is why Toyota owns Lexus, which competes with BMW. Different markets, different customers, different prices. Same with Boutique PCs. They are bought by people who want a quality computers systems, and most of them keep a expensive custom computer system between 3 to 5 years. It is a much smarter investment than say a cheap Gateway computer, because custom computer systems are built from high quality parts (at least I know what to put in there and what to stay away from). For example all Gateway computers use cheap Bytec power supplies, which don't last more that 1.5 years or so, if the computer is used regularly. Let alone if you add a couple of hard drives and a better Video Card, that lifespan is drastically cut. If you're out of the 1 year warranty, and the PSU died on you (and those Bytec PSUs also kill the motherboard and maybe the Video Card), you either pay some shop to fix it, or buy another one. In the end you could spend more on the crappy Gateway than if you would have bought a quality custom built computer. Most folks don't look at it this way, because most folks don't think long term. This is your main marketing asset: Quality above all. Price is a secondary tool, and try to sell cheap only when sales are slow, so you can get by.
- How much do Boutique Builders make? Most quality builders make between $1000 and $2000 per PC (on their very high end stuff), around $800 per PC on their mid range systems, and $300 to $400 per PC on low end stuff (I consider low en systems between $1200 and $1800). This estimate doesn't include Alienware, Falcon NW, Voodoo PC and a couple other big names that have sell their systems for grossly inflated prices. The problem is not the price, but value (what you are getting for your money). Falcon NW for instance is using EVGA motherboards in their high end systems. I find it ridiculous to spend something like $8000 on a SLI system that is using such a low quality motherboard. They are notoriously unreliable. I'm also selling those boards, but I always give my customers an ASUS or Gigabyte alternative for the same price, because reliability is more important to me. On eBay you can expect to make somewhere around $200 to $300 per system, and this on the high end systems that cost over $2000, but sometimes less. You have eBay fees, PayPal, and a couple of other things like packaging materials, and building materials for the computer system. The margin is so paper thin, that the only thing eBay is good for is so that you can start somewhere to make a name for yourself, but you'll never be able to make a living there.
For me, creating Toratek Custom Computers was a life long dream, but at the same time it is an up hill battle, mostly because it is hard to get my name out there. If college for you is only $30,000, then I'd suggest you for it, because it is much cheaper than doing this. Remember, you must be passionate about it, and very enthusiastic, and that passion and enthusiast must be there even when you're facing hard times or sales are low, other wise you won't make it. I don't mind anyone who wants to do this, because the market is huge. The problem is that to many folks that want to do this have unrealistic expectations and try to compete in the market place by undercutting everyone else. Countless times I've seen this on eBay: "Better than Alienware for less than half the price", or similar advertising in different listings. Alienware, Falcon NW, VooDoo PC and others wouldn't be around anymore if they could be put out of business by ebay sellers or smaller Boutique builders (like myself) just by selling for cheaper than they do. Now, when you match the build quality of say, a Falcon NW "Mach V" or VooDoo PC "Omen", match their service and customer support, and do all this for less, then you can make claims like that. Most of that profit that they make is spent on "keeping the lights on", paying the employees, advertising, marketing, research, oh, and taxes of course.
This where just my 2 cents. I know that I'm not right about everything, so if anyone wants to comment on what I've said here, please feel free to do so. What ever you decide to do, think really hard about it, because this is not as easy as it looks.
Marc from Toratek Custom Computers
