PUBLISHING WITH CD-ROMS!
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.
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. They may have bought a CD-ROM that they just plain
didn't like.
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 big 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 is easy and fun. 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!
