Losing Money to Be a Tycoon

December 31st…

Zhang Yuan arrived at Fish-Catching Internet Cafe’s Handong University early in the morning. After ordering a cup of coffee, he sipped it nonchalantly and browsed Tieba, intending to see if any interesting posts had been made by the netizens.

He had arranged for his employees to either refund all the problematic parts or send them for repair yesterday. He had also spent the remaining funds in the account on computer parts that had higher chances of malfunctioning. In particular, he had placed more orders for RAM sticks.

Although there were significant costs involved in hoarding parts like that, Zhang Yuan was more concerned about ROF’s reputation.

When the business had just started out, Boss Pei had poured huge sums of money into running 1024 Digital Day to build a name for it.

If the reputation was ruined by quality problems, wouldn’t Boss Pei’s hard work all be wasted?

Thus, Zhang Yuan had to guarantee good quality! He had to make sure that none of the computers malfunctioned. He also had to provide the best after-sales services to customers and ensure ROF had enough stock so that customers could receive their system units on the day that they placed their orders.

After working on all of those things, Zhang Yuan finally found time to relax.

Tomorrow was New Year’s Day of 2011, and the holiday would last for three days. That meant Zhang Yuan could take a good break.

Zhang Yuan sipped his coffee slowly as he browsed Tieba.

All of a sudden, a post on Tieba caught his attention.

‘MSC’s Factory Caught Fire Again?’

“F*ck! RAM prices are going to rise, right?”

“Unscrupulous!”

“Sh*t, it looks like the prices are already rising.”

“I was waiting for New Year’s Day to see if there would be any promotional events online so that I could assemble my own system unit! Now, that’s all gone down the drain! What a waste!”

“We’re finished. The unscrupulous merchants have responded instantly!”

“What exactly is happening? Why are their factories catching fire so often? Would their factories burn from Singles Day last year to 618[1] this year?”

“The experienced ones among us would know whether this really was an accident or not. I’m guessing that the manufacturers had set the factory on fire on purpose.”

“I think so, too! These manufacturers’ factories are taking turns to catch fire. On top of that, there would be floods and power shortages. Why don’t they just tell us directly that they would be reducing supply and increasing prices?!”

“The fire seemed quite serious this time. Wafer production was probably gravely affected as well. That means that RAM aside, the prices of flash drives would likely rise, too…”

As he read the netizens’ discussion, Zhang Yuan first felt confused and then pleasantly surprised.

He quickly accessed a shopping website to check the prices of the RAM sticks he had purchased before. They were now over thirty yuan more expensive!

What’s more, this was only the beginning. Zhang Yuan guessed that the prices would only continue to go up over the week.

After all, Zhang Yuan had been keeping up to date with Tieba for a long time. He knew very well how such things would develop. Each time prices of RAM sticks dropped to new lows, a factory would catch fire or experience a power shortage. Then, there would be news reports about manufacturers losing thousands of millions of yuan. After that, unscrupulous merchants would increase the prices of RAM sticks at once.

Even so, nobody knew when the ‘accidents’ would occur.

If they did, they would have bought a huge batch of RAM sticks for storage so that they could generate profits during that period. To Zhang Yuan, the news would have been bad.

This was because ROF’s computer-installation business had a similar pricing strategy as those other brands. Based on Boss Pei’s guidance, the original prices had already accounted for ROF’s brand premium and the value of their after-sales services. They were not to be adjusted frequently

If they wanted to increase the prices, they had to upgrade the hardware; if they wanted to reduce the prices, they had to run promotional events but not too many.

The main aim of this strategy was to get rid of customers’ worries and create the impression that ROF was a good-hearted and reliable brand with products that retained their value well.

The rising RAM prices would have caused the entire system to become more expensive. People might take ROF for an unscrupulous merchant; that would be bad for its reputation.

Thus, an increase in RAM prices would have been bad news to Zhang Yuan. If their costs increased but they kept their selling price the same, they would have generated much less profit.

Yet, the situation was different.

Zhang Yuan had already ordered a batch of hardware. He had placed more orders for RAM sticks especially because he had considered the standard of four RAM sticks for each high-end system worth over ten thousand yuan. Thus, he had hoarded a huge load of them!

To customers, that meant that the price-quality ratio of ROF’s high-end system units would go through the roof. Buying ROF’s system units would cost less than buying individual parts to assemble their own!

At the same time—even if Zhang Yuan sold the systems at their original prices, ROF would still be able to generate huge profits.

Of course, he could also consider increasing prices.

However, that was not aligned with the Tengda spirit. It would also not help to increase ROF’s market share.

Thus, after some consideration, Zhang Yuan decided to sell the current stock at their original prices!

Since RAM would be more expensive, Zhang Yuan also decided to make adjustments to the next batch of hardware. He would upgrade some parts and increase the selling prices based on the new costs.

Of course, those problems would only have to be resolved later. That was because they had already ordered a lot of hardware this time.

At that thought, Zhang Yuan could barely sit still.

He immediately called his employees, instructing them to design a new batch of posters to be displayed at the entrance of the Fish-Catching Internet Cafe branches. At the same time, he instructed them to update the publicity page on their online shop as well.

The contents of the advertisement would be simple. There would be no discounts or sales, but the prices would not increase either!

January 1st of 2011, Saturday…

The New Year’s Day holiday would last from January 1st to January 3rd. Pei Qian happily gave himself a break to rest.

The thought of Li Yada, Lin Wan, and the others returning from the United States on the 4th made Pei Qian’s head hurt.

Has one week passed so quickly?

Ai, time flies when you’re having fun.

Pei Qian strolled out of his house, towards Fish-Catching Internet Cafe’s Handong University branch to sit around, have some coffee, play some games, and relax.

However, when he reached the entrance of the internet cafe, he realized that something was amiss.

Why were there so many people?!

There was a long line at the entrance of the internet cafe, which extended all the way to the roadside!

Of course, the line was a far cry from those seen at sales buildings or train stations. It looked like there were only ten-odd people in line.

However, that scene was extremely rare at Fish-Catching Internet Cafe!

That was because Fish-Catching Internet Cafe was huge. Although there weren’t many computer stations in Fish-Catching Internet Cafe 1.0, those who wanted to wait for a seat could do so in the coffee area, the mini cinema, or the book area. There was no need to line up by the road.

Furthermore, the traffic at the internet cafe should have stabilized by now. There shouldn’t have been so many people visiting the internet cafe even though it was New Year’s Day.

Pei Qian tried to look in and became acutely aware that the problem was much more serious than he had imagined!

The coffee area in Fish-Catching Internet Cafe was not full, and neither was the internet area.

The long line only began at the counter. A pathway had even been set aside for customers to walk in and out as they pleased.

The few people at the front of the line were only filling up forms at the counter. They turned and left after paying money. None of them headed to the internet area!

The more Pei Qian saw, the more confused he became. What was happening? At that moment, a waiter tried to maintain order by shouting, “Don’t be anxious, everyone! Line up in an orderly manner! You can also place your order online! The URL is located on the poster outside the entrance!”

Pei Qian glanced at the poster, feeling more perplexed than before. The URL of ROF Computer-Installation’s online store was written on the poster. The configurations of the three different types of system units were also there.

However, those were the original prices. Neither the configurations nor the prices had changed. Why had those people rushed down so early in the morning to fill up forms and purchase ROF’s system units?

Pei Qian had a bad feeling about this. It seemed like there had been developments that he was unaware of!

Once again, the waiter shouted. “I’ll remind everyone once more that ROF provides repair services at your doorstep. We can also deliver upgraded hardware to your doorstep. The respective fees are already written on the flyers. “However, please take note of the disclaimer on the flyers. If you want to upgrade a part, you must keep the original part. Do not sell or transfer it, or you would not be able to enjoy this after-sales service…”

Pei Qian was even more confused now. Why did the waiter have to remind them of this specifically?

Feeling very suspicious, he entered Fish-Catching Internet Cafe and spotted Zhang Yuan, who was sipping his coffee with a proud look on his face.

“What’s happening?” Beads of perspiration formed on Pei Qian’s forehead.

Zhang Yuan smiled subtly. “Boss Pei, MSC’s factory caught fire, and RAM prices are soaring!”

“Huh?” Pei Qian’s face was a mask of bewilderment. At that moment, he could not understand the story behind what was happening Zhang Yuan said, “RAM sticks used to cost over two hundred yuan. Now, they’re selling for over three hundred yuan!

“The prices would probably only continue to increase in the near future!

“Our high-end system units contain four RAM sticks each. Now, each one of those is worth a hundred yuan more. In addition to the slight increase in hard disk prices, each system unit’s hardware alone is now worth over five hundred yuan more than before!

“Now, apart from computer-installation novices, even computer-installation professionals would find our system units incredibly worth their prices!

“Thanks to the hard work that you put into making a name for ROF earlier, our computers are now selling wildly!

“Don’t worry, Boss Pei. I have kept your words in mind this entire time. I didn’t increase the system units’ prices like the other unscrupulous merchants did!

“I only released news that the prices of ROF’s system units would remain the same yesterday. Yet, today, many people came from all over Jingzhou to order computers. We also managed to sell tens of system units through our online shop alone! “I think we should be able to sell over a thousand system units during the New Year’s Day holiday period, and this is a conservative estimate!”

Pei Qian’s face immediately drained of all color. He instinctively tried to think of a solution to this problem, but he could not think of anything.

Should he increase the selling prices?

He could not do that. He had already said before that he wanted to keep the prices stable. Wouldn’t he be slapping himself in the face if he asked Zhang Yuan to increase the prices now? What’s more, even if they increased prices now, people would still purchase ROF’s system units. Then, ROF would be generating more profit for each system unit sold!

Should he lower the selling prices, then?

That would make matters even worse. Crowds were already rushing to buy the system units. If they lowered the prices further, they might earn less profit. However, ROF’s reputation would only improve. Then, Pei Qian would be in a greater fix in the future.

Pei Qian began to feel light-headed. At that moment, he realized that he could not come up with a good strategy; this problem was unresolvable!

Yet, Zhang Yuan looked overjoyed. “At the end of the day, this was a blessing in disguise!

“Boss Pei, you told me to rent more warehouses and store more stocks before. Now, they’re all going to prove useful!

“If we did not have enough stocks prepared, we might have sold out in a single day. Then, we would have had to purchase the hardware at the increased prices, and our profits would have been greatly reduced!

“What’s more, a problem suddenly arose with the hardware yesterday, and we either refunded them or sent them for repair. I was worried that the rest of the hardware would malfunction as well, and so I ordered a new batch in advance. I even bought more RAM sticks in particular.

“From the looks of the current situation, the RAM sticks we have purchased would probably last us for a long time. Our next goal would be for ROF to dominate the desktop market in Jingzhou!

“We can already start pulling in customers who assemble their own computers or purchase branded system units!”

Pei Qian sat down in the coffee area, feeling breathless.

That’s not right. Did something go wrong somewhere…?

Pei Qian began to doubt his life.

It was only January 1st. 2011 had just begun! He would never have thought that the first blow of the new year would have been dealt so soon!

[1] This is a major shopping festival in China, held on June 18th.