eBay for System Builders, Part 2

In fact, it&'s a lot easier to compete on price than you might think. If you take into account the huge expenses that a Dell or HP incurs—such as advertising, marketing, enormous global staffs, even the rent on all those offices, factories, and warehouses—it's pretty clear why their retail prices go so steep.

Most system builders don't have those kinds of lofty overheads, of course. And more importantly, system builders can offer much more than just a box. In fact, a custom system has more inherent value than any assembly-line machine. This is especially true when system builders offer custom packaged hardware/software solutions designed for specific markets.

The bottom line: There&'s still room for the little guy. And eBay is a good source for getting discount hardware deals.

As background to this article, in my earlier TechBuilder Recipe, eBay for System Builders, I provided a basic overview on sourcing whitebox computer components though the eBay auction site. I also included tips on sourcing through overseas manufacturers. Plus, I covered niche marketing and product differentiation.

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This Recipe will go deeper. Here I'll show you how to compete against first-tier manufacturers by sourcing hardware components. I'll look closely at the actual pricing realities on eBay and compar their available prices to those found at retail outlets. For example, I physically browsed the aisles of my local MicroCenter and Fry&'s, then compared those prices to eBay listings, both the auction site's Buy It Now fixed prices and several of their completed auctions. Comparing Components on eBay

Let&'s look at components on eBay first. If you go to eBay.com and search for historical sales (that is, auctions that have already closed), you can get a feel for the prices that buyers have recently paid for the kinds of components you need. To do this, head over to eBay's advanced search page and check the box for "Completed listings only." Next, enter the appropriate search terms in the "Enter keyword" box, and off you go.

To create a historical search on the product you&'re interested in, first check the "Completed listings only" box. Then pull down the “Sort by” menu. Choose "Price: lowest first." Then examine the shipping costs alongside those.

For example, I did a search on routers, since I&'m currently setting up a network and a new box. Searching for a Linksys switch (model EZXS55W), I found quite a few that were sold, including 50 units in just the past two weeks. The average selling price for those 50 switches was just under $23, or well above the MicroCenter floor price of $13.99. But that's only part of the story. The other part has to do with shipping. Some of the routers were shipped for free, as shipping was baked into the price. But others, like the one that went for 99 cents, got heavily dinged for shipping costs. That buyer spent $15 on shipping, bringing their cost up to $15.99—not a great deal. The lesson: Always investigate the seller's shipping charges before you place an order on eBay.

I should mention, however, that it's possible something else might be going on here. The buyer of that 99-cent router may have purchased other components; if so, that might have brought his shipping total to $15.99. Unfortunately, you can&'t figure this out with eBay's historical data. But rest assured, all the totals I quote from eBay's listings in this Recipe include the shipping costs.

Getting back to my Linsys switch, I've found that in any given week on eBay, 10 to 15 of these switches sell for less than MicroCenter's $13.99 floor price. Not all of these switches were brand new, but most were. What's more, that low MicroCenter price is the result of a mail-in rebate, so you have to wait a while before you enjoy that low price. I avoided the hassle of mailing in the rebate form and instead found two switches for $9 and $13 on eBay.

Keep in mind, however, that eBay won't always have the best deals. For example, when I went looking for a Mad Dog 16X DVD-RW double-layer drive, the story was different. This time, MicroCenter&'s $49.99 price was the lowest I could find for a new system. Most prices on eBay topped $70 when shipping was factored in. But if I were willing to buy a used unit, a seller on eBay offered one for just $26.

How about hard drives? Can you save money on those by shopping on eBay? At MicroCenter, a 300-GB SATA hard drive from Maxtor costs $114.99. The selection on eBay wasn&'t as good as it was for routers, but some deals were there. Two of nine that sold in one recent week went for $103 and $107.50, less than MicroCenter's price.

Power supplies can be found at a discount, too. I searched eBay for a 350 Watt ATX 12V Power Supply and found three that sold in the past week for between $13 and $18.30. That same power supply sells at MicroCenter for $19.99. Beware of "Bait and Switch" Gambits

I noticed something strange when I searched on eBay for ATX mid tower cases. There were a bunch of "loss leader" sales on their so called "one cent" cases. I use the term loss leader, because it's basically the same bait-and-switch practice that goes on in the retail world. Here's how it works: The seller offers a really low price on an item to pull people into their store, and then sells the buyer something different and more expensive. For example, around Thanksgiving time, a supermarket may try to lure customers with $5 turkeys, then hope they'll fill their carts with full-price cranberry sauce, sweet potatoes, and other holiday trimmings. Similarly, electronics retailers often offer low, low prices for computer cases. Their reasoning: If you&'re buying a case, you&'re probably in the market for a bunch of other hardware to put into that case.

So our eBay ATX case buyers spent very little money on their actual cases, but their shipping totals were large. This could indicate that they bought other stuff, too. A typical example is a buyer who got a case for just one penny, but whose shipping total was $46.60. That shipping undoubtedly covered some other purchases. For the seller, the strategy worked. The person came in for the one-cent case and left with a few other things, as well. These cases typically sell for around $20 at MicroCenter or Fry&'s. And of course, both stores offer better and more fully-featured cases for more money.

Comparing Motherboards to Motherboards

For many PC components, there are so many different models and variations that it&'s difficult to compare apples to apples. That was the case with eBay for motherboards. Here&'s a small taste of my findings.

At Microcenter, I priced an Asus motherboard (P5wd2) at $279.99. I found one on eBay for $232.93. Great savings. But there was only one of these sold in the past week. Another Asus board (P5LD2) went for $164.99 at MicroCenter. Two on eBay sold for $123.93 and $125.93, and two others sold for $229.

Similarly, an Abit AV8 socket 939 via K8T800 motherboard goes for $119.99 at MicroCenter. Five of these units recently sold on eBay, and the prices were $35, $57, $60, $115.93 and $123.93. So four out of the five were good deals, while one wasn't.

Browsing for processors is a little different. At Fry&'s you can buy an Athlon 64 socket 939 4000+ processor for $379.99. Five sold in one recent week on eBay, and the prices ranged from $319.13 to $544.48. So only three of the five were cheaper than Fry's price. (Not including the sales tax you'd pay at Fry's).

eBay's Buy it Now feature is sometimes a great resource for good processor deals. For example, at Fry's, a Pentium 4 CPU (3 GHz, 800 MHz FSB, 1 MB cache) goes for $169. I found some on eBay with Buy It Now prices of $124.50, $144.30 and $242.50, or an average of roughly $158. Not only is that a good deal, but you don&'t have to go through a round of bidding, which can be time consuming.

Similarly for external hard drives. At Fry's, I found an Iomega external 120 GB hard drive for $179.99. On eBay there were recently three for sale—and new ones at that—all less than $130, plus a used unit going for $89.

Memory sold on eBay often comes in lots. For example, Corsair PC133 SDRAM modules of 512 MB each are sold in lots of 20. One lot went for $720, or $36 a piece. At Fry&'s they sell for $87.99 a piece, more than twice the eBay price. An equivalent module made by Kingston goes for $79.99 at Fry&'s, but on eBay, they sell in the range of $40 to $70 range, with the bulk at around $50. Here&'s a good general strategy for sourcing components on eBay.

Always remember, other factors may be at work, too. Some sellers ship quicker than others. In the worst cases (such as fraud), the seller won&'t ship anything at all. While this is rare, you will need to be careful.

If you have a consistent supply chain that needs replenishing, make sure you&'re bidding on eBay with vendors you can count on. Take a look at the feedback stars and additional commentary from previous buyers. This will show you how sellers have performed over the past several weeks, months, even years in some instances. As a rule of thumb, I only buy from sellers who have a positive feedback percentage of at least 98 percent. Anything lower, I stay away from, and I recommend you do the same.

Now you know how to work with eBay as a source for tracking down and getting good, solid hardware deals at a discount. Happy, profitable system building!

PHIL DUNN is a writer and strategic consultant. He is co-author of a new book, The 7 Essential Steps to Successful eBay Marketing (McGraw-Hill, 2005). Phil also writes the EBay Markeing blog and Marketing Writing blog.