For those not familiar with the gaming industry, Alienware is the manufacturer of specially configured gaming PC’s. Very high priced ones at that!
This is a classic tale of the ‘I am going to do it anyway’ entrepreneurial attitude. One I am quite fond of, in fact!
Take a minute and think of the PC market… You have Dell, IBM, HP, Toshiba… That is some pretty stiff competition. How can a PC startup actually succeed?
By packing as much technology into a computer box as possible! And in web-speak, that is synonomous with ‘adding value.’
“Everyone told us, ‘This is insane!’”
You can’t open up shop and compete with the big boys! How can you hope to start a company with $10,000 and zero marketing?
Create a superior product…
Everyone told us, ‘This is insane.’
When Alex Ahuila and Nelson Gonzalez started Alienware, they were armed with good intentions and credit cards. Banks laughed at them. People thought their idea was ridiculous. “How can you possibly start a company and expect to sell $3000 PC’s?”
First year sales were to local gamers. Second year, the company started to gain some traction in the video game magazines. And that’s when their orders started coming.
But here’s the catch - customers paid for the computer first, then it was built. No inventory. No receivables. No paying for huge warehouses. Just pure, off the top, profit.
Method of success? Niche markets
What Alienware did was create a niche market. And it was the one they were gunning for from the beginning.
Focus on the gamer crowd. The ones who need all of the CPU and cooling that a system can muster. Put a crazy good sound card in there for some tunes and there is money to be made.
There are some aesthetic aspects to it as well. The computer case is patented and looks like an alien head (go figure). The cooling in the higher priced units is mostly liquid.
But they are in the computer building business!
The nice thing about thier market is that software developers, video editors, graphic design personnel, and the like are beginning to need much more powerful machines to get the job done. Oftentimes, their needs are handled by Alienware. Not Dell or IBM, but the small bootstrapped startup that no one thought had a chance.
$10,000 in credit cards to $112 million in sales
Niche markets have a way of paying off, especailly when that niche spikes. Video games have taken a phenomenal jump in sales in the last couple years. So much so that MSN and Google are investing in advertising networks that specialize in “in game ads.”
It only makes sense that the PC’s used to play those games also takes off.
Alienware operates from a website which is their only point of distribution. They have over 800 demo machines out and about to create buzz, but they don’t have a store worldwide.
The beauty of this story is the skyrocketing success of the company. The bottom line is that it’s all related to niches, branding, and added value. Establish those things, and success is imminent.
