The hardware industry is one of the more difficult industries to get into, but also one of the best as it generated $25 billion last year. Whether it's problems with dealing with fulfillment or just trying to make any inroads into a crowded market, you have your work cut out for you if you think this is the industry for you.
This article isn't going to talk about whether you should or shouldn't make an investment in hardware. What it will pose are the challenges of both creating and selling hardware products.
A Crowded Market
The big problem you have to deal with immediately is the crowded market. The US has just a few major providers of hardware tools. They dominate most of the market, particularly in the major cities. Independent hardware specialists tend to be confined to smaller towns and more rural areas of the country because it's not profitable for huge corporations to expand into these small markets.
And the US isn't just experiencing a crowded market with hardware. A similar story has been replicated in the rest of the world.
Do You Have Anything Unique?
That's the problem you are going to come up against when marketing yourself. The chances are you are not an inventor, so you won't come up with any revolutionary tools that nobody has ever heard of before. But that doesn't mean you are going to experience difficulties.
The problem you have is that you need something that's going to stand out from the crowd. This is harder than you may think because you often can't beat large corporations on price.
Through clever marketing and great customer service, though, you can come up with something unique. You can encourage customers to try your store out over one of the big brand names.
Expensive to Source
Hardware generally involves selling big ticket items to a smaller number of customers. Power tools are extremely expensive in the US, for example. As long as you sell a few of these per day, you can cover your overheads. That's what a lot of hardware startups don't grasp.
To begin with, you need to figure out how you are going to source them. For big corporations, they have found it profitable to setup their own manufacturing facilities. They can mass produce power tools at a fraction of the cost. To get started, you don't have to do the same.
There are many outsourcing and fulfillment services that you can take advantage of. You can source the products from a third-party and have them delivered at an affordable price.
The Distribution Chain
Corporations have the luxury of being able to setup a few manufacturing facilities and install supply chains that make their way across the country to stores large and small. These established distribution chains are cheap to manage, while being reliable.
Any newcomer to the hardware industry may think that they don't stand a chance of competing with something like this. Twenty years ago, this may have been the case. But the rise of the Internet has ensured that you can become a hardware company without ever needing to touch a single power tool.
There are more and more outsourcing services. You can outsource the production of power tools and they can fulfill the orders for you. All you have to do is bring in the customers.
It Takes Time to Gain Traction
The main difficulty of starting a business in an established industry is gaining traction. You are not attempting to convince people that they need to purchase hardware. They already know they have to purchase hardware. The only debate is over where they are going to purchase the hardware they need.
It's your job to wrestle away customers from established brands. That's why your unique selling proposition has to be truly unique.
You won't know whether your business has been a success for some time. It takes a lot of time and effort to establish yourself in an industry like this. There's no doubt that this isn't an industry that you can get started in with little starting capital, but that shouldn't deter you. With bigger risks come bigger rewards.
Conclusion
Establishing yourself in this industry will take a lot of time and effort. There's no doubt that there are a lot of challenges you are going to come up against. But you shouldn't lose heart and you shouldn't lose faith. With the right marketing plan, you can carve out your own little niche.
What do you think the main challenge is in the hardware industry?