Selling an undifferentiated product in a crowded niche to price-conscious customers isn't an ideal business. But Edy Bedoya, founder of EBC Computers, has spent a lifetime preparing for it.
It's the kind of business nobody wants to run: selling an undifferentiated product in a crowded niche to price-conscious customers. But Edy Bedoya has spent a lifetime preparing for it
Eduardo "Edy" Bedoya leans back in his office chair, wraps a telephone headset around his head, and punches in the number of one of his computer-component suppliers. He has received a bill that doesn't match the purchase order he placed the day before, and he wants to iron out the discrepancy.
"So, my good friend, how can I take you to lunch when I come to L.A.?" he asks. "Buddy, I want to take you to lunch, but how can I when you make money off me like this?" He laughs and then pauses. "I know, you're just trying to get that Mercedes before me. But if you buy the Mercedes, how am I going to have the money to buy lunch?"
After a few jokes and a short discussion, the supplier agrees to lop a penny off the price of the 4,000 CD-ROMs in the order. Bedoya hangs up the phone and slips off his headset, satisfied.
It's a perplexing sight, watching the founder and owner of a $13-million business pick up the phone to save one penny per unit. After all, what's 40 bucks to a computer reseller that's been growing at 30% a year? But what matters to him more, Bedoya explains, is the principle. "I need to make sure that I can trust him," he says.
Such relentless pursuits save EBC Computers Inc. (#83) a few thousand dollars a month. And without such vigilance, frankly, the business might not be around, let alone ranked among the nation's fastest-growing private companies. Eighty percent of EBC's business consists of selling computer parts like monitors to companies and techies who build their own machines. Bedoya says prices for such gizmos fall rapidly, sometimes several times a week. Even a one-day delay in a truckload container bound for EBC's shipping dock costs him about $500 because of the falling value of the goods inside, he says.
Given the ultracompetitive nature of the industry--last year EBC eked out a net profit of 3%--Bedoya doesn't have the luxury of working a niche armed with a unique product. It helps that he has no illusions about the nature of what he's selling (a commodity) or the most effective strategy for selling lots of it (prices in the vicinity of rock bottom). Others might view EBC's positioning as more of a trap to be avoided than a strategy to be embraced. How low can EBC continue to go, after all, before Bedoya prices himself right out of existence? By balancing on such a thin bottom line, he risks taking a false step that could precipitate a serious tumble.
Bedoya knows all that. And he loves it. From the start Bedoya, who came to the United States from Peru in 1985 with just $100, built the business around his "core competency," though he would never call it that: living on the edge. "If he had stayed in Peru, he probably wouldn't be alive today," says his brother Mario, the older of two brothers who followed Bedoya to the United States.
Bedoya runs a lean-to-the-bone operation because, well, that's what he does naturally. Driving to work in Salt Lake City, he instinctively checks the price of gasoline at service stations. Later he goes to the trouble of exchanging a few sickly tropical fish at Wal-Mart to save the $2.98 that he shelled out for each one. Even his sparsely furnished retail space is located in an industrial district rather than a mall with a lot of foot traffic. And for the past two years he has paid himself just $60,000 a year.
During lunch in a Chinese restaurant (food's great and the prices...well, you can guess) the waiter notices the EBC logo on Bedoya's shirt. "Are you the guys that sell computers?" the waiter asks. "Yep," Bedoya replies. "One of my guys here is looking for a laptop," the waiter says. "I hear you have good prices." Bedoya smiles and hands him his card.
On it he doesn't use the title of CEO. He's the purchasing manager--which is clearly the 41-employee company's most critical position. "I make 5% the first week I stock a product, I break even the second week, and then I lose 5% the third week," says Bedoya. Adding value? That's for wimps. He's most comfortable in an unforgiving landscape. "It's what gets me up in the morning," Bedoya says.
To maximize profit, Bedoya keeps his inventories bare and moves high volume. Each day he monitors the number of computer chips (CPUs) and hard drives in stock. Each day he orders more, aiming to keep no more than a day and a half of CPUs and five to seven days' worth of hard drives on hand.
"You can't afford to wait too long," Bedoya says, "or the price will change." Pentium III 450 chips, for instance, sold wholesale for $510 each in February, $289 in May, $262 in June, and $225 in mid-July--a 56% drop over five months, he says. For EBC to make money on a part, the company has to sell it before the price takes its next tumble. "You can't get too greedy," says Bedoya.