Hobbyist Product Design - Competing With China - Page 1
Forum section: electronics / general

author: David
author_rank: Frequent Contributor
timestamp: November 24, 2010, 10:08:56 pm
content: Hi all,I have often been tempted to design and sell my own small projects on the internet and have now become even more inspired after watching Dave's new video on PCB design for manufacture. I already have several designs essentially waiting for me to "hit the button" and put into production. However, one of the main obstacles that always puts me off is trying to compete with the prices of similar Chinese products found on Ebay etc. For example, I have an Altera USB JTAG programmer which I have designed and developed but I simply cannot compete with the prices of similar units on Ebay (and that doesn't include a nice plastic case for it...). Some other products I have seen for sale cost nearly as much as the cost price if I were to produce them.Now I assume the obvious answer is to come up with better USPs (Unique selling points) but for some items there is very little you can do...This then brings me to the question of how much profit margin it takes to make a product sustainable, and more importantly worthwhile.Just a few thoughts,Dave

author: PsI-On
author_rank: Contributor
timestamp: November 24, 2010, 10:20:53 pm
content: Hi Dave,I found the cost of doing anything in Ireland or England is prohibitive. You can buy a finished product for less than the price of the parts (I'm guessing you already know this).Sorry if that sounds off-putting but that’s been my experience.How much do you want to make? Well that's up to you, but I would aim for your normal hourly rate or a bit more. You could always work for free, out of love for electronics-Paul

author: tinhead
author_rank: Super Contributor
timestamp: November 24, 2010, 11:15:01 pm
content: Quote from: David on November 24, 2010, 10:08:56 pmfew months ago i and my buddy MockUp we designed and produced Xilinx JTAG cables clones.http://www.mikrocontroller.net/articles/Xilinx_USB-JTAG-AdapterWe managed to sell them for 50EUR each, even with alu enclosure.At that time the cheapest Xilinx JTAG cable on ebay was about 70eur. So yes, it is possible to produce cheaper,but it costs a lot of time to find parts supplier (only CPLD for such JTAG cable clone costs 17eur on DK, and that's only one of the expensive parts).

author: EEVblog
author_rank: Unknown
timestamp: November 25, 2010, 12:13:23 am
content: The obvious answer is to never try and compete with anyone, let alone the ebay/china/OneHungLow combination, the goal is to find a niche.QuoteThat depends entirely on the individual.The general rule in the kit business is if you aren't doubling your money when all costs are taken into account then you are wasting your time. I would generally shoot for 3 times. So a $20 cost product/kit you'd sell for $60.I know one magazine kit designer who sold his pre-programmed microcontroller to one of the kit suppliers for like a $1 royalty or something like that on the kit that was like $80 retail or something. It was massively popular and sold tens of thousands. Sound ok that he got a couple 10's of thousands of dollars out of it, until he realised that he was spending half his life supporting the product while the kit supplier made over a $1M in sales on just that one kit.That's one thing that never gets factored in, your time and effort.Also see my reply on TheAmpHour comments:http://www.theamphour.com/2010/11/15/the-amp-hour-17-ee-movies-part-rants-and-spice/#comment-627Dave.

author: Jon Chandler
author_rank: Frequent Contributor
timestamp: November 25, 2010, 04:00:30 am
content: It's pretty tough to complete with a commodity product. Take PIC programmers for example. With the PICkit 2 at $30 and the PICkit 3 at $40, you'd be pretty hard-pressed to offer any reason for somebody to pay any more than that price. "Doing it better" just isn't an option.If you have a unique product that fills a need, you stand a chance. Dave's uA meter is an example. It fills a unique need for a group of people. The key may be to not appeal to too large of an audience. If a thousand or ten thousand people need one, someone may recognize the market and crank up a production line.

author: Mechatrommer
author_rank: Super Contributor
timestamp: November 25, 2010, 05:35:38 am
content: I agree with Dave 100%1) never compete "directly face to face" with China. you'll lose! they are dragon!2) you thought, the margin already covered everything, but you forgot the time and effort spent on that, esp after sale effect.In order to compete with China, you have to design something that they cant. Or creating a better product "compared to / based on" them. Just a 2cnt ideaps: nice simple rule... price = 3 x cost (product cost, profit, after sale service)

author: johnboxall
author_rank: Unknown
timestamp: November 25, 2010, 09:41:47 pm
content: Three things come to mind:1) Design and market your kit/widget - but on a preorder basis. Be honest and upfront, tell people when you hit x number of preorders the production will start. Still take payments, and only refund if you don't get enough over your advertised period of time. If you do, great - get makingNo loss, and if you have a good idea people will tell people and so on.2) Work with China. For example, get them to do the production work. E.g. Dangerous Prototypes work with Seeed Studio for hardware manufacturing. Your costs will be lower, therefore the process should (theoretically) be simpler.3) Not entirely relevant - a Chinese supplier I know has some good products but absolutely terrible chinglish manuals. Now they employ me to write documentation in the Queen's English... so I get paid real money plus a box of hardware to play with for writing about something. Win-win.

author: EEVblog
author_rank: Unknown
timestamp: November 25, 2010, 09:46:34 pm
content: Quote from: tronixstuff on November 25, 2010, 09:41:47 pmI can't do that. My golden rule is never take people's money unless I have stock to ship. But that's just me.But then I do usually have the money to fund pilot production runs.Dave.

author: David
author_rank: Frequent Contributor
timestamp: November 25, 2010, 09:56:50 pm
content: I have to agree with Dave on that point. I never pre-order products myself and can't see why anyone else would!

author: tinsmith
author_rank: Contributor
timestamp: November 25, 2010, 10:11:19 pm
content: That's a good rule, especially if you're experienced with the risks and have the funds to do a pilot run.But I can see this working. The main thing is that you'd have to minimize the risk to either party if something goes off the rails. Set up a way to have a trusted third party hold the money, make a clear plan in advance about what you'll do if N orders are met and communicate it to customers, et cetera.Maybe I'm just inured to stuff like this from MOSIS, multi-user PCB fabrication, and so forth. But I don't have a problem with it if it's handled responsibly. You just don't want to rely on "it'll run smoothly, trust me" because that's a good recipe for unhappy relations in both directions.

author: abraxalito
author_rank: Contributor
timestamp: November 26, 2010, 02:25:36 am
content: Dave's right on the money about trying to compete. That's a mug's game. Life (and therefore business) is not a competition, its all about cooperation. I'd go even further than Dave though and say don't 'find a niche' butcreateone.I liken business to evolution - in nature, animals co-evolve with the environment. The environment (the market in business terms) is not a fixed thing, its changed by interactions with the creatures in the ecosystem. So niches are created by the creatures who are the best adapted - that's what 'survival of the fittest' really means. In business, your know-how and your knowledge of the market are the measures of your fitness. You bring together these two elements to synthesize your service. Products mustn't be the focus - the true focus of business is service, products are just a means to the end of serving the customer. Peter Drucker puts it best - the purpose of business is tocreate a customer.

author: Mechatrommer
author_rank: Super Contributor
timestamp: November 26, 2010, 02:40:26 am
content: Quote from: EEVblog on November 25, 2010, 09:46:34 pmlike all the business did, to risk money at a stake. thats what a marketing/niche/prospect research is for, i think.

author: EEVblog
author_rank: Unknown
timestamp: November 26, 2010, 03:03:45 am
content: Quote from: shafri on November 26, 2010, 02:40:26 amThat comes with experience of the industry and market. I've been in the hobby kit business for more than 20 years, so I've got a good feel for how many of something will sell and at what price.Although something like my uWatch was a bit unusual, so I simply asked on the calc forums who's interested at a particular target price. Normally you would take that number and half it, as many will not follow through, but I've found that once people see it's available they will make the decision to buy it, so the numbers kinda even out.And it's easy to do 10,50, or 100 of something these days, so up front cost are pretty minimal.You can also start off with manual assembly and then progress to automated assembly when it gets more popular.You don't have to be a Mitch Altman and go crazy and spend $30K upfront (he was lucky as it turned out).Dave.

author: Unknown
author_rank: Unknown
timestamp: November 26, 2010, 04:14:58 am
content: I can't speak for the rest of the planet but it's pretty obvious that in Australia at least, Kits sure don't appear to be a path to riches.You only need to look at the floor space in your local Dickies, Jaycar, Altronics devoted to kits and actual components to get the picture.That said it's not out of hand for the right items to be a viable concern. But like a good things in life its not going to happen without a lot of effort.Niche manufacture in Australia is still viable despite the best efforts of Governments and government departments various to make it impossible. Like the man says ability and enthusiasm can overcome almost anything.You really have to wonder about the electronic publications and the whole kit market. Silicon Chip appears destined to go the way of the dodo much like it's predecessors it's just lost touch. Look at their latest flagship, a Digital radio kit which will cost nearly double the cost of an arguably better performing pre-built unit from the same component house. That's madness, the enthusiasm aspect sure seems to be gone from both the publications and the select few kits suppliers. Worse still they seem hell bent on discouraging hobbyists and independent developers at every turn.But there is hope, the Arduino community exists and is growing. As a budding hobbyist kit supplier I'd be steering towards that type of market. A lot of clever people albeit most with looking for ideas form someone else. The enthusiasm exist there and the market is worldwide.

author: tinsmith
author_rank: Contributor
timestamp: November 26, 2010, 04:53:00 am
content: Realistically, the only time people should even be thinking of riches as a serious possibility is if the project is part of a full-time business venture that you are currently dedicating yourself to launching...and even then, only as a "maybe down the road" thing. A "midnight engineering" project is typically something you do for yourself, then share mainly for the sake of getting to have other people enjoy and admire your work.If you're lucky - and good - then it may get to the point where you're hoping to make back enough to cover the time and money spent on the project, perhaps even enough to restock the beer cooler and buy some new lab equipment.

author: EEVblog
author_rank: Unknown
timestamp: November 26, 2010, 05:46:32 am
content: Quote from: Uncle Vernon on November 26, 2010, 04:14:58 amNever has been.QuoteBut they still make a LOT of profit on those kits, that's why they still have them.QuoteI wouldn't say that, they still do a pretty decent job at stocking the kits considering the declining local market.QuoteThere isn't really anything like "that type of market", kits are still kits, and the market has been global for many years now.There is so new hype over open source kits however, and that can be taken advantage of.The rules are still the same. If you want to make money in the kit/electronics/hobby business then you have to produce a product a lot of people want at a good price.SC continually fail in this respect IMO, because they are in the business of producing articles for a magazine, not designing affordable or useful kits. So little effort goes into optimising the cost or construction aspects of the kit. So most of their projects (whilst technically very good) are usually big and expensive and lack cleverness, and therefore not cost competitive. Especially when Jaycar and Altronics make their large mark-ups.Dave.

author: Unknown
author_rank: Unknown
timestamp: November 26, 2010, 06:43:51 am
content: Quote from: EEVblog on November 26, 2010, 05:46:32 amIt is a continual fail, and a myopic view of sucessfully selling a magazine. To be fair it's a mighty tough business from all angles. From where I sit I see both the suppliers and the magazines doing themselves a disservice. The projects seen to be based more on offloading whatever surplus buy Jaycar has secured and about stringing articles across multiple issues. It's that old success is producing something that a whole lot of people want to buy thing. Most of the kits are more about what the kit shops want to off-load.The condescention show to readers and the inability to adapt does little to grow the appeal or to encourage growth in the geek marketplace. A solar alarm should be a litle more than yet another kit alarm bundled with a 12V solar panel. If the designs weren't about shifting stock maybe they could even lay out a few boards with the connectors emerging in a manner that doesn't make the end product an design and ergonomic disaster.Chasing components since the 70s I'd have to conclude it's never been easier and at the same time never been harder to do. I have no doubt the mark-ups on those kit-sets are healthy but the limited appeal of many is obvious. There doesn't appear to be a legion of developers like yourself willing to have designs published.I mentioned Arduino and don't see it as the any real product revolution, what I've found refreshing is seeing the Arduino thing inspire a plethora of cottage developers and retailers. Only time will tell how many grow, fail, expand or implode.In my own business I gave up any idea of economically producing boards a decade ago, I've grown a product line and a marketplace and am now in the position where the economics will work for some limited local manufacture in the new year. Nothing is impossible.