CD-ROMs
are the way of the future. Not only do
the turn your computer into
a
super-high-powered knowledge and entertainment machine, they can make a
LOT
of money for you, if you have vision and the willingness to try some
new
things. This report will explain exactly
what CD-ROMs are, and how
they
can bring high profits for you.
A
CD-ROM is basically a compact disk (like the kind music comes on) that
can
be used in a computer. CD stands for
Compact Disk, ROM stands for
Read-Only
Memory (which means your computer can read what's on the CD, but
it
can't write new information to it). In
order to use a CD-ROM on your
computer,
you must have a CD-ROM unit, much like a disk drive, installed in
your
system. These CD-ROM units can either be
internal (installed inside
the
computer case) or external (hooked to the computer by a cable). Note:
Most
CD-ROM units can also play regular music CDs, as well as the new Kodak
Photo
CDs.
Why
would anyone want a CD-ROM unit? Well,
for one thing, a CD-ROM can
hold
tons more information and programming than a regular computer disk,
almost
400 times as much, to be exact. For
example, there are whole
encyclopedias
that come on only one or two CD-ROMs! And
these aren't just
plain,
boring encyclopedias, either. The high
amount of storage on a CD-
ROM
allows full-motion video, digitized sound, and other special effects to
be
included. For example, if you look up
the first moon landing, you might
see
an actual short video of Neil Armstrong stepping onto the moon, and you
might
hear him say his famous "one small step" speech!
CD-ROM
games are incredible! Many CD-ROM games
are ultra-realistic, with
real
actors, real speech, and thousands of possibilities.
Desktop
publishers love CD-ROMs, too. There are
CD-ROMs available that
hold
thousands of typestyles and clip-art graphics.
The
ability to use CD-ROMs is almost essential these days if you run a BBS
(Bulletin
Board System, accessible by modem users).
There are dozens of
CD-ROMs
available that contain hundreds of shareware programs each.
Callers
to your BBS can download these programs to their computer, so they
can
use them. With a few of these, you can
have the largest file base of
any
BBS in your area literally overnight!
Major
software companies are jumping onto the CD-ROM Catalog bandwagon.
Some
companies are now putting all of their programs onto a CD-ROM. These
programs
will be hindered in some way from functioning 100% (for example, a
word
processing program may not be able to save what you've typed). They
do
this so you can try the program and see if it's what you want. If you
like
the program, you can call them, give them your credit card number,
they
will charge you for the cost of the program, send you the manuals, and
give
you a code you can type in to make the program fully functional. They
are
discovering that it is very cost effective to operate this way, plus,
people
get to try more software out, and potentially purchase more.
So,
this is the "why" of CD-ROMs.
Just how can they make money for you,
you
might ask?
First,
you need to know how popular CD-ROMs are becoming. According to an
article
in Fortune magazine (February 21, 1994), about 15% of the 5.85
million
computers sold last year contained CD-ROM units. That's over
877,000
CD-ROM units, just in 1993. That doesn't
count the tens (or
hundreds)
of thousands of people who are adding CD-ROM units to
computers
they already own. In other words, this
is a HUGE market!
Have
you ever been to a music store where they sell used music CDs? Used
CDs
are as good as new ones, and you can usually buy them for half the
price
of new CDs. This has become an industry
in and of itself. People
naturally
want to save money, but get the same quality of product.
Remember
the number of people I mentioned earlier who either bought a
computer
containing a CD-ROM or bought one to add on to their current
system? They'll be buying CD-ROMs. After awhile, they'll get tired of the
particular
CD-ROM they purchased. They may have
finished a game, and not
want
to play it again. Or, they may have
bought a CD-ROM that they just
plain
didn't like.
START
YOUR OWN USED CD-ROM BUSINESS! HERE'S AN
OVERVIEW...
You
can run a used CD-ROM business much like the used music CD business is
run. Here's a nutshell description of what happens
in a typical used music
CD
store. Almost everything will function
the same for CD-ROMs.
A
customer brings in a CD that they want to trade-in. If the music store
owner
wants it for his or her stock, they'll usually offer the customer $2
to
$5, depending on the demand for that particular CD. Then, they'll slap
a
price of $6 to $10 on the CD, and put it out for sale.
That's
basically all there is to it. The
difference with CD-ROMs is the
price. Music CDs, at least in my neck of the woods,
retail for around $14
to
$16 each. CD-ROMs usually start around
$25, and can cost over $150!
The
price varies with the type of program on the CD-ROM (games are cheaper
than
encyclopedias, for example). If you were
looking for an encyclopedia
CD-ROM,
and could buy the same one for either $150 new, or $75 used, and
they'd
both function the same, which would you buy?
The
basic formula for this is to offer the customer who brings in a CD-ROM
20%
to 40%of the usual selling price for that particular item. Then, you
retail
it for 50% to 75% of the usual selling price, depending on the
demand
for that item. If it's a hot new game,
give the customer a bit more
and
price it higher.
You
don't have to give the customer money, either.
You can give them
credit
toward another CD-ROM from your stock.
One used music CD store in
my
area might give me $3 for a CD I bring in if I want cash, or one new or
used
CD for every two I bring in. This makes
a lot of sense. For example,
if
they paid $4 for the CD I want and I give them two CDs, they've
basically
paid $4 for TWO CDs, which they might sell for $8 each. Thus,
they
paid $4 for $16 worth of CDs. Not bad,
and you can do this too, with
your
used CD-ROM business. Be sure to keep
good track of the amount you
paid
for the CD-ROM your customer selects in this sort of trade, making
sure
that you will profit from the two they bring in.
Well,
that's an overview of the used CD-ROM business.
Now let's get down
to
details. I'll tell you how I would run a
business like this. You put
your
thinking cap on while you're reading this, and I'm sure you'll think
of
some ideas, too.
HOW
TO START THIS BUSINESS
First
of all, immerse yourself in the CD-ROM world.
If you don't already
have
a CD-ROM unit, spring for one. Here are
two sources for low-priced
CD-ROM
units: CRAZY BOB'S (yes, that's the
actual name of the place), 50
New
Salem St., Wakefield, MA 01880 (800) 776-5685 (an excellent source
for
CD-ROM units starting at $259, plus tons of CD-ROMs at low prices -
call
for their catalog); and CORPORATE
SYSTEMS CENTER, 1294 Hammerwood
Ave.,
Sunnyvale, CA 94089 (408) 734-3475 (new and refurbished CD-ROM
units
from $149). Read the computer magazines,
especially ones dealing
with
multimedia topics. Many of them will
have lists of the top selling
CD-ROMs. Become a frequent visitor at your local
computer stores - pay
attention
to what people buy. All these will give
you clues as to what the
big
sellers are. Take good notes, and keep
them handy!
Next,
decide how you will run this business - in a store, or by mail. This
business
can be run equally well both ways, though the methodologies are a
bit
different. If you run it retail, you'll
need to be in a good, visible
location,
with a decent amount of advertising and publicity. If you
operate
as a mail order business, you'll need to put together a catalog of
what
you have to offer and get it out to CD-ROM buyers.
Now,
put together a starting inventory. You
can do this by advertising in
local
and national magazines. Put a classified
ad out saying something
like
this: "CASH FOR YOUR
CD-ROMS!!! Excellent condition only,
must have
all
manuals. Send your list for quote. (Your name and address)." Good
places
to put this ad include Computer Shopper Magazine, Computer Monthly,
PC
Magazine, multimedia-oriented magazines, BBSs, and local computer user
group
newsletters. When you receive lists in
the mail, compare them to the
information
you compiled earlier. Find out what your
local dealers and
national
mail order retailers are selling the titles for. Offer the person
an
average of 25% of the normal selling price.
Most of them will take it,
rather
than have the CD-ROMs sitting around on a shelf, gathering dust.
You
should try to compile at least one to two hundred CD-ROMs before you
advertise
them for sale.
When
you DO start advertising, emphasize that you will take trade-ins
(remember
the two for one deal described earlier) in addition to selling
for
cash. This is a very cheap way to build
inventory. Remember to get at
least
double what you paid for each CD you sell.
If
you want to run your business as a retail store, you should consider
stocking
some new CD-ROMs. Allow customers to
trade their old CD-ROMs in
for
new ones, keeping your costs in mind.
There's no reason why you have
to
have a hard set concrete rule, such as "you get one new CD-ROM for every
three
used ones you bring in." You can
set a certain dollar credit amount
for
each CD-ROM they bring in, if some are more desireable than others.
Also,
you don't have to take EVERY CD-ROM that people bring in. Like any
other
product, some CD-ROMs will be total dogs that no one will want to
buy,
except someone who's never heard how awful it is. Don't take these.
If
you manage to pass one off on an unsuspecting customer, good for you,
but
you'll probably never see them again.
You want customers to return,
and
return, and return. You want them to buy
a CD-ROM from you, come back
and
trade it in, then do the same again and again.
That's where the real
money
is.
After
all, say a customer buys a CD-ROM from you for $50 that you paid $25
for. You've made $25 profit. That customer comes back in a few months
later
to trade it in. Now, that CD-ROM might
only be able to bring in $35,
so
you offer $17 for it. You still have $8
profit. You'll make $17 profit
on
it when someone else buys it, bringing the profit amount back up to $25.
The
customer now buys another $50 CD-ROM, giving you another $25 profit.
And
so on...
If
you're running a retail walk-in store, you won't need a huge one. In
fact,
a smaller store can be better than a large one.
Your products are
small,
so a large store will just look empty, even when fully stocked.
Plus,
get four or five people into a small store and it looks busy. Put
four
or five people in a huge store, and it looks dead. You want your
store
to at least LOOK busy, don't you?
The
best way to display your stock is to put the CD cases out and keep the
disks
behind the counter. You can either put
cheap racks on the walls to
put
the cases on, or build some cheap bins for people to flip through. The
advantage
to the racks is that people can see the artwork on the front of
the
case, which draws their attention. The
bin advantage is that you can
store
more CD cases in less space. Plus, it
appeals to human curiosity to
rummage
through the bins. I'd have bins in my
store.
If
you build your own bins, all you need to do is make a wood box that's
16.5
inches wide and anywhere from 10 to 15 inches deep. Now, divide the
box
into three compartments that are 5.5 inches wide. You will be able to
stack
the cases in each compartment so that the spine with the CD-ROM title
is
showing on the top. That will make it
easy for customers to flip
through
them. Arrange them alphabetically by
title in the bins.
To
keep the disks, get some 5 inch wide strips of 2 inch thick high-density
foam
(not the styrofoam that flakes apart - you want the tough stuff that
can
be sawed). Glue this foam to strips of
plywood that you have nailed
either
under your counter or on shelves. Next,
saw slots 3/4 of the way
into
the foam every 1/2 to 3/4 inch. Use a
vacuum to get rid of any foam
dust. Now, you can insert the disks into the slots,
where they will take
up
little space. You may want to put labels
on the foam and corresponding
labels
on the CD cases, so the disks are easy to locate when a customer
wants
to buy one.
A
good idea, if you can afford it, is to have a computer or two out, so
customers
can try out the CD-ROMs. This will
drastically increase your
business,
because customers will be less warry of being "taken". Plus,
when
it isn't busy, you can play some games...!
Where
to advertise? Use your head when buying
advertising. You want your
ads
to be seen by people who will actually be interested in buying your
products. You'd be better off to contact every BBS in
town and offer to
pay
maybe $25/month for a full screen ad that everyone who calls in sees,
than
to pay the same total amount for a few newspaper and radio ads. Why
is
this? Because the BBS ads are TARGETED
ads. They will only be seen by
people
who own computers. The newspaper and
radio ads will be seen by a
higher
total number of people, but most of those people probably won't own
computers
or even know what a CD-ROM is. Good
avenues for targeted local
advertising
are: BBSs; computer user group newsletters; computer
stores; high school and college newspapers (students
are big CD-ROM
freaks,
especially games!); and other media that
appeals directly to
computer
users. Be sure to put flyers up around
school campuses,
especially
in computer labs, if possible.
It
may have occurred to you that there is a hidden possibility for profit
in
the used CD-ROM business... CD-ROM RENTALS!
Why not? Video rentals
brought
forth video game cartridge rentals, which have exploded nationwide.
Rent
your stock of CD-ROM disks.
You'll
get the student who needs an encyclopedia for the big term paper;
rent
them an interactive CD-ROM encyclopedia.
You'll
get the game freak who just has to play something new; rent them
your
newest and most exciting CD-ROM games.
You'll
get the parent who's looking for a new educational program for their
kids; there are hundreds of educational CD-ROMs out
there.
You'll
get the business person who needs special reference material; rent
that
CD-ROM in your stock that contains the names and phone numbers of
every
buyer for every large company in the U.S.
How
much to rent your CD-ROMs for? Well,
it's pretty much an open market,
since
there aren't many (if any!) CD-ROM rental stores around. I'd say,
start
your rentals at $3.50/day, and see how it goes.
You need to find the
highest
price the market will bear, without damaging your business. For
example,
if you can rent 100 of your CD-ROMS per day for $3.00 ($300), or
75
for $3.50 ($262.50), it should be easy to see which price to charge.
As
with any rental business, you should get a heavy supply of standard
rental
agreements. Standard video rental
agreements should do. Your
customer
needs to fill one out and sign it before the first time they rent.
Basically,
the agreement states that anything they break or steal, they
buy.
Should
you charge for memberships to your CD-ROM rental club? I would
answer
a resounding NO!!! Many video rental
stores charged for a
membership. Those days are over. The smart rental stores realized that
they'd
make far more bucks down the line by giving out free memberships and
having
many more potential renters, than they would make by having only the
people
willing to pay $10 to $25 up front, before they rent. Make up some
inexpensive
rental membership cards (plain cardboard will work fine), and
give
them out FREE, after the renter fills out the agreement.
A
good idea is to stock up on CD-ROMs that contain collections of
specialized
programs. For example, get a collection of
CD-ROMs with
shareware
programs on them. Let BBS owners know
you have them available.
Keep
in mind that there are over 60,000 BBSs out there, with more starting
every
day. Sounds like a good market for
rentals and sales.
Or,
put together a stock of CD-ROMs containing typestyles and clip art
graphics. Then, do a special mailing to desktop
publishers, businesses
that
have in-house art departments, schools, etc., any business that could
need
these CD-ROMs. Be careful about renting
these, though. If you're
dealing
with CD-ROMs that contain programs that can be copied, such as
graphics,
make sure the contents of the CD-ROM aren't protected by
copyrights. If they are, they are only intended to be
used by the
PURCHASER
of the CD-ROM. If they are public
domain, then you may rent them
as
many times as you want.
I
hope you can see the profit potential locked inside CD-ROMs. They are
not
a fad, they are a coming wave. Look at
how CDs revolutionized music...
they
WILL do the same for computers.
Establish yourself as a source of
quality
new and used CD-ROMs, for sale or rent, and you'll do well! This
is
a fantastic business that can be easy and fun.
Plus, you'll be keeping
up
with exciting technology. Be sure you
start right away, though. It's
hard
to open a profitable video store these days, because everyone's in on
the
technology. CD-ROMs are the new
technology on the block, waiting to be
picked
up and used profitably by you!
No comments:
Post a Comment