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on Southland Businesses

The Strategist Next Door

PC Club Finds Its Niche by Sticking Close to Its Rivals

June 30, 1999|BARRY STAVRO | TIMES STAFF WRITER

Jackson Lan tested his daring business model by opening his first PC Club store only 50 yards from a CompUSA superstore. Seven years and 18 additional PC Clubs later, Lan is sticking to his copycat location strategy. His PC Club stores are usually within walking distance of CompUSA, Best Buy or Fry's Electronics.

In the last 18 months, Lan opened his first stores outside of Southern California, in Las Vegas and Mesa, Ariz., both near CompUSA stores.

"If I can make money right next to them, I can survive anywhere," he said.

Lan carved out his coexistence with the big chain stores by chasing after a different corner of the computer market. Giant retailers sell electronic gear with flashy in-store displays, piped-in music and row after row of hot software titles.

But Lan's stores are much smaller and bare-bones, with only a handful of software choices, because he caters to the do-it-yourself PC hardware techies, the computer version of weekend mechanics who repair their own cars.

His customers pry open PCs to upgrade their slow systems by slipping in the latest Intel processor, or change motherboards or CD-ROMs, add networking or sound cards, fax modems, hook up second printers or buy hard-to-find replacement parts such as audio cables and adapters for old keyboards--all of which Lan sells.

PC Club also sells Lan's own Enpower brand of desktops and laptops. Many of these are made to order and assembled in his factory in Industry. They are usually delivered in one or two days, beating by up to a week the delivery time of custom-made PCs sold by Dell Computer, Gateway or Compaq Computer.

Lan sells about 45,000 PCs and laptops a year and staffs his own repair department. It all added up to about $82 million in sales for PC Club last year, according to Dun & Bradstreet.

But it's more than just a copycat location strategy that keeps PC Club growing. Lan, a Taiwan emigre, relies heavily on Asian contacts he cultivated during six years working for Hewlett-Packard as a sales and marketing manager in Taiwan and Singapore. Scores of electronics firms he once had as clients now supply him with hardware, or help steer him to other reliable parts makers.

This is critical because the life span of the latest computer technology is measured in months. When Lan sells a motherboard--the main circuit board of a computer--it will be a cutting-edge product for only six months to a year; after that he must line up a replacement.

With hundreds of motherboard manufacturers in Taiwan, Lan strikes deals with his contacts for the next wave of product shipments. Almost half what he sells in his stores is made in Taiwan or in affiliated factories in China.

"Jackson stays in business and keeps growing because he's well-connected to Asian suppliers," said Lee Little, Advanced Micro Devices' Southwest regional sales manager. "In this business, it's how well you are buying. If you don't have reliable products, you won't stay in business long."

The 49-year-old Lan also keeps up with his Taiwan connections as a member and former president of the Southern California Chinese Computer Assn., which has about 200 member firms.

In his native country, Lan studied engineering, then earned an MBA before working five years at a large Taiwan plastics maker. Then he jumped to Hewlett-Packard, where he sold mini-computers while getting to know Taiwan's major electronics firms.

One of those companies, a manufacturer of motherboards, in 1989 asked Lan to take over its U.S. sales operation. So Lan and his family moved to Southern California. Three years later, he decided to open his own business.

He needed $500,000 to start PC Club and raised most of it by selling a house in Taiwan, taking advantage of the soaring real estate market there, where prices shot up 1,000% to 3,000% in 20 years.

Lan opened his first small store in Industry, and it was four years before he indulged in the extravagance of air conditioning. In the summertime, his customers griped about the heat. "We save money for you," Lan told his customers, laughing at the memory.

Lan opened more stores in clusters, from San Diego to the San Fernando Valley. But he still dislikes wasting money. In his headquarters, a conference room sign reminds employees to turn off the lights and the air conditioning when they leave the room.

By putting his stores near big retailers, Lan not only picks up extra foot traffic, but, thanks to his rivals' advertising campaigns, avoids spending much money on market research about where to locate.

"We trust their analysis," he said wryly.

A typical customer is John Price, who built a desktop computer from scratch using parts he bought at PC Club. The original equipment manufacturer parts that PC Club sells, he said, are "10% or 20% cheaper than at Best Buy. And they generally run cheaper than at CompUSA, which is nice to have next door, because if [PC Club] doesn't have it, I go over there."

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