The blackout in Ontario and the northeastern United States in August 2003 gave Andy Mastorakos an idea.
“”There are businesses out there that do not buy UPSs because of cost considerations,”” says Mastorakos, president, owner and founder of UPSforLess, a company that specializes in refurbished
UPSs. He started the company one year ago, seeing a niche market.
“”There’s a perception out there that UPSs are expensive and the reality is, if you buy new ones, comparatively speaking, they are.””
A recent study by the Consortium for Electric Infrastructure found that short duration utility outages cost companies in the U.S. approximately US$2,300 annually in lost business, lost products and equipment damage. Across all U.S. business sectors, it’s estimated the U.S. economy loses between US$104 billion and US$164 billion every year as a result of utility power outages.
In Canada, severe weather and power disruptions — blizzards in the Maritimes, a power outage in downtown Toronto and flooding in B.C., to name a few recent incidents — are not uncommon.
Small power
Small companies are less likely to have power protection in place to deal with utility outages than large corporations. UPSforLess is targeting these smaller companies by supplying refurbished UPSs that cost half the price of a brand-new unit. The majority of its UPSs are refurbished APC units, but it also sells Powerware and Liebert, among others; all refurbished UPSs come with new batteries.
“”At the small end of the range there are huge numbers of businesses out there and individuals with home offices,”” he says. They might not be willing to spend $800 on a new UPS, but would consider paying half that. This gives resellers a “”hook”” to go back to clients and offer a low-cost solution, he says.
The typical margin on UPSs is 10 to 12 per cent — higher than PCs, but not exactly huge, he says.
“”Our selling price is going to be half of whatever the retail selling price is, and then we offer dealers a discount typically between 18 and 23 per cent off that,”” he says.
They also get a 15-month dealer warranty; typically, refurbished products have a warranty of 30 to 90 days, while new units have a two-year warranty.
“”The tradeoff for the lower price is they get a used unit with a slightly smaller warranty,”” he says, “”and most UPSs come with an insurance component built into them where the manufacturer guarantees a certain amount of insurance in case equipment gets damaged . . . and obviously ours don’t include that.””
If the UPS fails within the first 30 days, resellers will get an advance cross-ship replacement and free pick-up tags, he says. The company is also offering stock rotation; if a reseller hasn’t sold product in 90 days, they can return it for full credit.
“”We supply replacement batteries for our dealers, we supply repair parts, we do repairs, we also accept trade-ins and we recycle everything that we get back in an environmentally compliant fashion,”” he says. “”The most serious issue is the lead acid batteries inside.””
Reseller strategy
When UPSforLess opened its doors for business one year ago, it found its online sales strategy was only attracting U.S. customers.
“”At this point we continue to derive a significant portion of our sales through online sales to users, corporations, governments and dealers, but all in the U.S.,”” he says.
“”I don’t have any explanation on why Canadians do not purchase online.””
So it’s taking a different approach in Canada and turning to the reseller channel to expand its business here.
It’s hoping to attract resellers with its high margins and by giving them a chance to offer something a little different to their customer base, Mastorakos said.
