1.6 Smart Buying Practices

A decade ago, most computer products were bought in retail computer stores. Retail sales still make up a significant chunk of computer product sales—although the emphasis has shifted from computer specialty stores to mass-market resellers like Best Buy and Costco—but the majority of computer products are now bought from direct resellers, via toll-free telephone number or the Web. Local brick-and-mortar retailers, with their high overheads, simply cannot match direct reseller prices and stay in business. Nor can they match direct reseller companies for breadth of selection or convenience. We frequently order components late in the evening. Early the next morning, our FedEx guy drops them on the front porch. All without our having to leave the house.

That said, there are some drawbacks to buying from direct resellers. You're dealing with an anonymous company, probably located far away. You must know exactly what you want, and you need to understand the pitfalls of dealing with direct resellers. Most direct resellers are reputable, but some are not. Even reputable resellers differ greatly in their business practices, so it's important to understand the rules before you start playing the game. We've bought hundreds of thousands of dollars worth of products from direct vendors over the last decade or so, and have learned some things from that experience. Here are some guidelines to keep in mind:

Research the product

Make sure you know exactly what you're buying before you order it. For example, a hard disk may be available in two versions, each with the same model number but with sub-model numbers to designate different amounts of cache. Or you may find that a given hard disk maker manufactures two models of the same size that differ in both price and performance. Always compare using the exact manufacturer model number. Before you buy a product, research it on the manufacturer's web site and on the numerous independent web sites devoted to reviews. We use http://www.reviewfinder.com to locate reviews for specific products, or just do a web search with the product name and "review" in the search string.

Research the vendor

Vendors vary greatly. Some we trust implicitly, and others we wouldn't order from on a bet. Some are always reliable, others always unreliable, and still others seem to vary with the phases of the moon. You can check the reputation of a vendor with the Better Business Bureau. We also check the web site http://www.resellerratings.com, which maintains a database of customer-reported experiences with hundreds of vendors.

Know the market price

The list price or Suggested Retail Price (SRP) published by the manufacturer is meaningless. Many computer products normally sell for a fraction of SRP, others sell for very near SRP, and for still others the manufacturer has no SRP, but instead publishes Estimated Selling Price (ESP). To do meaningful price comparisons, you need to know what different vendors actually charge for the product. Fortunately, there are many services that maintain frequently updated lists of what various vendors charge for particular products. Two such services we use are http://www.pricewatch.com and http://www.pricescan.com. These services may list twenty or more different vendors, and the prices for a particular item may vary dramatically. We tend to discard the top 25% and the bottom 25% and take an average of the middle 50% to decide what is a reasonable price for the item.

The practice of Minimum Advertised Price (MAP) has been common for years in some market segments (such as astronomical telescopes and aircraft avionics), but until recently has been uncommon in computer components. U.S. law prohibits manufacturers from setting minimum selling prices, so manufacturers have begun using MAP instead. Under MAP, manufacturers "discourage" dealers from advertising (including via web sites) a price lower than the MAP set by the manufacturer. Dealers who comply receive co-op advertising funds from the manufacturer. A dealer that advertises a price lower than MAP receives no co-op ad funds from the manufacturer. Because co-op ad funds may make the difference between making a profit and losing money, dealers have a strong incentive to comply with MAP. But MAP determines only the lowest price at which an item can be advertised, not the lowest price at which it can be sold. Dealers are free to actually sell the product for however little they wish. A sure sign that MAP is in effect is when you see the same item being advertised at exactly the same price by numerous resellers. A few advertising identical prices might be a coincidence, but when everyone advertises the same exact price, you can bet that MAP is in effect. Prices for computer components are nearly always negotiable, but that goes double when MAP is in effect. If you are buying a component that you believe has MAP in effect, ask the vendor some hard questions. You might be surprised at how large a discount they'll offer from the advertised price.

Understand retail-boxed versus OEM components

Many components are sold in both retail-boxed and OEM form. The core component is likely to be similar or identical in either case, but important details may vary. For example, Intel processors are available in retail-boxed versions that include a CPU heatsink/fan and a three-year Intel warranty. They are also available as OEM components (also called tray packaging or white box) that do not include the heatsink/fan or the three-year warranty. OEM components are not intended for retail distribution, and the manufacturer may not provide any warranty to individual purchasers. Buying OEM components is fine, as long as you understand the differences and do not attempt to compare prices between retail-boxed and OEM.

Don't buy on price alone

As our all-time favorite unfortunately-worded ad stated, "Don't be misled by price alone." The market for PCs and components is incredibly competitive and margins are razor-thin. If a vendor advertises a component for much less than other vendors, it may be a "loss leader." More likely, though, particularly if its prices on other items is similarly low, that vendor cuts corners somewhere, whether it be by using your money to float inventory, by shipping returned product as new, by charging excessive shipping fees, or, in the ultimate case, by taking your money and not shipping the product. If you always buy from the vendor with the rock-bottom price, you'll waste a lot of time hassling with returns of defective, used, or discontinued items and dealing with your credit card company when the vendor fails to deliver at all. Ultimately, you're also likely to spend more money than you would have by buying from a reputable vendor in the first place.

Determine the real price

The actual price you pay may vary significantly from the advertised price. When you compare prices, make sure to include all charges, particularly shipping charges. Reputable vendors tell you exactly how much the total charges will be. Less reputable vendors may forget to mention shipping charges, which may be very high. It's not unheard of for vendors to break out the full manufacturer pack into individual items. For example, if a retail-boxed hard drive includes mounting hardware, some vendors will quote a price for the bare drive without making it clear that they have removed the mounting hardware and charge separately for it. Also be careful when buying products that include a rebate from the maker. Some vendors quote the net price after rebate without making it clear that they are doing so.

Watch out for web pricing versus phone pricing

Some vendors charge more for an item ordered via their 800 number than they do for the same item ordered directly from their web site. Some others add a fixed processing fee to phone orders. One of our formerly-favorite vendors, http://necxdirect.necx.com, did this, adding a flat $25 processing fee to phone orders. These charges reflect the fact that taking orders on the Web is much cheaper than doing so by phone, so this practice is likely to become much more common. But be careful. One of our readers desperately needed an $8 item that he could not find locally. He ended up paying about $68 for that item after the charges for overnight priority shipping and telephone order processing were added.

Don't be afraid to dicker

Most direct resellers are willing to sell for less than the price they advertise. All you need to do is tell your chosen vendor that you'd really rather buy from them, but not at the price they're quoting. Use lower prices you find with the price comparison services as a wedge to get a better price. But remember that reputable vendors must charge more than bottom-feeder vendors if they are to make a profit and stay in business. We generally try to beat down our chosen vendor a bit on price, but we don't expect them to match the rock-bottom prices that turn up on web searches.

Always pay by credit card

Using a credit card puts the credit card company on your side if there is a problem with your order. If the vendor ships the wrong product, defective product, or no product at all, you can invoke charge-back procedures to have the credit card company refund your money. Vendors who live and die on credit card orders cannot afford to upset credit card companies, and so tend to resolve such problems quickly. Even your threat to request a charge-back may cause a recalcitrant vendor to see reason.

Avoid vendors who place a surcharge on credit card orders

Some vendors apply a surcharge, typically 3%, to their advertised prices if you pay by credit card. Surcharges violate credit card company contracts, so some vendors instead offer a similar discount for paying cash, which amounts to the same thing. Processing credit card transactions costs money, and we're sure that some such vendors are quite reputable, but our own experience with vendors that surcharge has not been good. We always suspect that their business practices result in a high percentage of charge-back requests, and so they discourage using credit cards.

Insist on a no-questions-asked money-back guarantee

Good vendors allow you to return a product for a full refund (often less shipping charges) within a stated period, typically 30 days. Buy only from such vendors. Note that nearly all vendors exclude some product categories, including notebook computers, monitors, printers, and opened software, either because their contracts with the manufacturer require them to do so or because some buyers commonly abuse return periods for these items, treating them as "30-day free rentals." Never buy from a vendor who uses the phrase "All sales are final." That means exactly what it says.

Avoid vendors who charge restocking fees

Make sure to check carefully for any mention of restocking fees. Many vendors who trumpet a "no-questions-asked money-back guarantee" mention only in the fine print that they won't refund all your money. They charge a restocking fee on returns, and we've seen fees as high as 30% of the purchase price. These vendors love returns, because they make a lot more money if you return the product than if you keep it.

Get everything in writing

Don't accept verbal promises under any circumstances. Insist that the reseller confirm your order in writing, including any special terms or conditions, before charging your credit card or shipping product. The fast turnaround of web-based and 800 number ordering makes postal mail largely useless for this purpose. We're not lawyers, and don't know the legal implications of email or faxed confirmations, but we've always used them and have never encountered a problem doing so. If a reseller balks at providing written confirmation of their policies, terms, and conditions, find another vendor. Most are happy to do so.

Keep organized records

File everything related to an order step-by-step, including a copy of the original advertisement, email, faxed, or written confirmations provided by the reseller, copies of your credit card receipt, a copy of the packing list and invoice, and so on. When we order by Web, we print a copy of each page of the ordering process, and also use our web browser to save a copy of that page to the "never delete" folder in our data directory. We also jot down notes in our PIM regarding telephone conversations, including the date, time, telephone number and extension, person spoken to, purpose of the call, and so on. We print a copy of those to add to the folder for that order.

Accept no substitutes

Make it clear to the reseller that you expect them to ship the exact item you have ordered, not what they consider to be an "equivalent substitute." Require they provide written (or email) confirmation of the exact items they will ship, including manufacturer part numbers. Particularly when ordering a PC, leave no wiggle room. If the vendor has promised an ATi All-In-Wonder RADEON graphics card with 64 MB of DDR-SDRAM, for example, make sure that the component list includes that item by name, full description, and ATi product number, rather than merely specifying "graphics card," "ATi graphics card," or even "ATi RADEON graphics card." Otherwise, you'll get less than you paid for—a card with a slower processor, 32 MB rather than 64 MB, or SDR memory instead of DDR memory. Count on it.

Verify the warranty

Ask about warranty terms. Some manufacturers provide the full specified warranty terms only for items purchased from authorized dealers in full retail packaging. For some products, the warranty period begins when the manufacturer ships the product to the distributor, which may be weeks or months before you actually receive the product. OEM products typically have much shorter warranties than retail-boxed products—sometimes as short as 90 days—and may be warranted only to the original distributor rather than to the final buyer. Better resellers may endorse the manufacturer warranty for some period on some products, often 30 to 90 days. That means that if the product fails, you can return the item to the reseller, who will ship you a replacement and take care of dealing with the manufacturer. Some resellers disclaim the manufacturer warranty, claiming that once they ship the item, dealing with warranty claims is your problem, even if the product arrives DOA. We've encountered that problem a couple of times. Usually, mentioning phrases like "merchantability and fitness for a particular purpose" and "revocation of acceptance" leads them to see reason quickly. We usually demand the reseller ship us a new replacement product immediately and include a prepaid return shipping label if they want the dead item back. We don't accept or pay for dead merchandise under any circumstances, and neither should you.

Verify delivery terms

Direct resellers are required by law to ship products within the time period they promise. But that time period may be precise (e.g., "ships within 24 hours") or vague (e.g., "ships within three to six weeks"). If the vendor cannot ship by the originally promised date, it must notify you in writing and specify another date by which the item will ship. If that occurs, you have the right to cancel your order without penalty. Make sure to make clear to the reseller that you expect the item to be delivered in a timely manner, and that "time is of the essence" for the transaction. Reputable vendors ship what they say they're going to ship when they say they're going to ship it. Unfortunately, some vendors have a nasty habit of taking your money and shipping whenever they get around to it. In a practice that borders on fraud, some vendors routinely report items as "in stock" when in fact they are not. Make it clear to the vendor that you do not authorize them to charge your credit card until the item actually ships, and that if you do not receive the item when promised you will cancel the order.

Don't expect problems to solve themselves

Even if you follow all of these guidelines, you may still have a problem. Even the best resellers sometimes drop the ball. If that happens, don't expect the problem to go away by itself. If you encounter a problem, remain calm and notify the reseller first. Good resellers are anxious to resolve problems. Find out how the reseller wants to proceed, and follow their procedures, particularly for labeling returned merchandise with an RMA number. If things seem not to be going as they should, explain to the vendor why you are dissatisfied and tell them that you plan to request a charge-back from your credit card company. Finally, if the reseller is entirely recalcitrant and any aspect of the transaction (including, for example, a confirmation letter you wrote) took place via U.S. Postal Service, contact your postmaster about filing charges of mail fraud. That really gets a reseller's attention, but use it as a last resort.