Is This Price Too Low?
Just this week we learned that Dell was losing market share by a tiny amount. How small are we talking about? We're in the neighborhood of 0.4%, but I suppose the number one PC maker wants to reverse this trend. Well, when a supermarket wants to get you in the door, they sell one or two items at a ridiculously low price, in the hopes that you'll do your weekly shopping once in the door. This is known as the "loss leader." I believe that Dell is doing the same thing currently.
Link to the Dell bargain system.
I thought it would be interesting to add up the cost of the components if I were going to screw the box together myself. I used NewEgg's prices for comparison as they usually reasonable, and sell a wide variety of parts.
Let's start with the processor. Dell is using a Pentium 4 chip running at a 2.8 GHz clock speed, and with a 533 MHz bus. This is hardly cutting edge, and for around $30 more if I was building a system, I would go for the intro dual core chip. However, this is the chip that Dell is using, and it should be more than adequate for most users with general needs. At NewEgg, the chip is going for $111, before shipping.
Next stop is memory. Personally, with Windows XP, I wouldn't build a system with less than 512 MB of RAM, and would much prefer a full gig. However, Dell is including a bare bones of 256 MB of DDR 400 SDRAM with their system. NewEgg has this part in its arsenal for a bargain $17.
The processor and RAM get inserted into the motherboard. Dell is notorious for using their own proprietary motherboards, that can't be flashed or upgraded. You can get this one at NewEgg for a bargain of $39.50. It is compatible with the RAM and processor, and uses a microATX format.
Of course, we'll need a case to house all of this in. About the cheapest you can go on a case and get a power supply is $24.99. Personally, a higher quality case is a good investment as it can survive several system rebuilds. However, we'll go for this cheap case, and its included power supply.
Next up is the hard drive. Dell includes an 80 GB 7200 RPM, ultra ATA 100 drive in the system. If you don't edit video, this is probably adequate for many users, but again,, nothing cutting edge here. NewEgg has a Western Digital hard drive with these specs for an even $50.
In the Dell system, the included optical drive is a combo drive that can read DVD's, and write CD's. For the price difference, I would include a DVD burner, but we'll go with what Dell includes. If you don't burn DVD's, this should be ample. NewEgg has a LiteOn combo drive for $24.99 that is comparable.
One of the highlights on the Dell system is a 19" LCD. I upgraded to this a few months ago, and it truly is the way to go if you have enough room on your desk. Even if you don't, make the room, cut a hole in the wall, whatever it takes. Anyway, how much is this worth? On the NewEgg site, the best price for a new 19" LCD display is still $232 for a Hyundai brand.
The Dell includes Microsoft's Windows XP Home Edition. Until Vista is released sometime next year, this is the consumer edition of Microsoft's latest operating system. NewEgg will sell it to you for $89.95.
Many users will simply reuse an old keyboard and mouse on a newer system. However, to be fair, the Dell does include a mouse and keyboard. You can get a standard keyboard at NewEgg for $5.25. The mouse will set you back $4.36.
So what is the verdict? Well compared to Dell's price tag of $399, my parts, even using many of the cheapest components, came in at $599.04. I'm 50% higher! A significant part of my system budget does go to the 19" LCD monitor. Also, the Windows operating system Dell can get significantly cheaper than an individual is able to purchase it at. Still, I can barely purchase the monitor, Windows and the processor for what Dell is selling the entire system at.
For this week at least, Dell's agressive low end pricing is the consumer's gain, assuming you can live with a low end system like this. In the end, at least you'll be able to reuse the monitor with your next system!
--Jonas
Labels: build vs. buy, Dell
33 Comments:
I think you miscalculated.
I don't see a $399 system with a 19 LCD on Dell's website. Your system is slightly cheaper at $368, excluding LCD and shipping costs.
How about doing a similar comparison for a high-end system? I have a feeling that Dell ends up being more expensive.
The monitor is included in the price. Look halfway down the page linked at top: "19 inch E196FP Analog Flat Panel [Included in Price]"
I'm not terribly surprised the Dell comes in cheaper - Dell is famous for its supply-chain management. They even go so far as to have their suppliers build factories next to theirs, in Malaysia and Taiwan and other East Asian countries, so that parts can be walked from one plant to another. When you assemble yourself, you're paying all the transporatation costs, retail costs, administrative costs, inventory costs, NewEgg's profit margin, etc. It's doubtful that NewEgg's supply chain is as efficient as Dell's.
Dell isn't necessarily taking a loss on its bargain-basement systems, either. It's quite possible that it runs a small yet adequate profit once all its supply-chain innovations are accounted for.
If you use the link at the top of the article, it will take you directly to a Dimension 1100 P4 priced at $389, configured as indicated.
Thanks for the article, nice work. I tell friends and family that they should buy Dell for the cheapest possible intro machine or old pc upgrade. I always end up building my own high end machines though because I want to be sure I get the best components and the pc will be easy to upgrade later. I'd love to see a comparison of a higher end pc sometime.
Good read.
Generally you get what you pay for. If you build a generic system - it's easy to upgrade and the components are somewhat portable between computers. What is a Dell power supply worth? Can you replace that all in one motherboard in a Dell with a $75 upgrade from tigerdirect?
heres somethin to compare - tigerdirect has more than 1 computer w/ an athlon 3200 socket 939, 160gb hard drive, 512mb dual channel ram, pci-e, dvd burner, among other things for under 400, now i know that doesn't come w/ a monitor, but i know they have 19" lcd's under 200
I did have the temptation to try and build something a little better using AMD parts. Personally, I would never buy the Dell unless I just wanted the monitor and intended to hand off the desktop to another family member.
The 19" monitor was based on the current price on NewEgg. I personally got a bargain on a 19" LCD in February for $200. However this was on a rebate, and it is not currently available. With some diligent surfing, I'm sure many of us could find many of the parts for a little less, but not by much. Also, the processor is probably overpriced, and a Celeron D like the 346 would be a better deal. With the dollars saved, the RAM could be upgraded to a more realistic 512 MB.
Thank you for all your comments, and kind words. Perhaps we'll compare a more expensive system down the road, i'm curious about that too now.
I think many suspect that what Dell loses on the hardware they make up in charging all the vendors for the inevitable pile of crapware that will come on your Dell.
Dude, you're getting popups!
I certainly tip my hat to Dell to be able to sell these parts at these prices. I understand that NewEgg is trying to make a profit, but then again, so is Dell!
You built a system using retail pricing and wonder why it's more? Dell buys tons of cheap components and slaps them together. I'm sure that even at $399, Dell is making a profit.
Here's the conundrum: You think a company like Newegg doesn't also buy in bulk to get the best wholesale deal? What? It wants to make less money than it could? Dell is also covering the assembly of the parts (that's called "labor") and issuing a warranty on them as a system.
The concept at hand isn't whether or not Dell is making a profit (personally, I subscribe to the loss leader theory of retail economics) but why aren't the sum of the retail parts at least as cheap?
Also, I just want to point out that this test fails to highlight the time you spent putting the box together. EVERY single review I see about building your own PC being cheaper than a Mac or other PC brand NEVER tallies up the hours they spent on it.
If you spent 10-14 hrs putting your system together (calling orders, traveling costs - ie, gas etc) then add that to the estimate.
Time is money, even when you have free time. I'm sure that would add another $250-$350 easily to your home-built box.
$400 vs $600
How's that 50%? ;)
50% of $400 is $200. Add them together and you get $600.
"Time is money, even when you have free time. I'm sure that would add another $250-$350 easily to your home-built box."
I gotta disagree with that. Maybe your schedule is so packed full of exciting things to do that you could never find 4 hours (realistic estimate for putting everything together extermely carefully after having it shipped to your house) you wouldn't mind spending putting together a computer, but... wait, no, actually, now that I think about it that's not true for hardly anyone. Unless you hate building computers for some reason, but I think that would make you somewhat exceptional among people reading this page.
Anyway, my added "time=money" estimate would be $0, as I think it would be for anyone who has even the slightest amount of free time and no particular aversion to putting computers together.
Personally, when I put together a box it is definitely a labor of love. A system will take me about 10 hours to collect the parts, assemble them, and then load up Windows and patch it.
However, I know it has a brand new hard drive with the extra cache, what brand optical drive, the type of memory and how many sticks, and that the wires are routed neatly, with airflow in mind. Is it worth it to me? Definitely! But there is more than simple economics and time going into the decision to build or buy.
--Jonas
I'd easily allocate $40 - $60 per hour (depending on whether your a Nerd or a Geek) and as much as 6 hours for assembly. (Antec's P180 case comes to mind.) Then there's formatting the drive(s), the wait for Windows to install, the online Windows updates, the motherboard software load... All those little things that the individual needs to get done without the benefit of a distributed software program.
There are definitely more hours to build it on the front end. I consider them learning or education hours. When the drive or sound card fails you know exactly where it is and how to replace it and don't have to deal with tech support to troubleshoot.
I'd rather spend 4 learning hours rather than 4 hours on the phone and dealing with shipping my box somewhere or having somebody visit to semi-fix something. This goes especially for the Mac as well as a Dell. Example: a friend's dvd drive is borked. He gets on the Apple discussion boards, calls support, takes it to the _counter_ at an Apple store. Me: order new 35$ drive from newgg, swap it out.
The nice thing about Dell is that their support website is a one-stop-shop for all the latest drivers for your hardware. You can enter the service code on your Dell and download all the latest drivers. You don't have to mess around with going to manufacturer's sites to download drivers. It's a big time saver, especially if you end up rebuilding your OS a few times during the life of the hardware.
I doubt that Dell is making a loss on the hardware. Support is another story - employing all those phone operators. Warehousing and shipping costs, etc.
But when it comes down to it, this is how the world works now. Big companies with cheap foreign labor will always be able to give you cheaper prices. And some things you just can't build from components - try making your own laptop or MP3 player from parts, for example.
The same is true across all kinds of industries - you will usually pay more to build something yourself. Take hobby electronics - almost anything a hobbyist builds will cost more than a pre-fabricated unit. Or radio controlled models - today you can get a complete, ready to fly plane for a fraction of the cost it took to lovingly build your own a few years ago.
Of course, the benefits often outweigh the cost - when you build something yourself, you can custom-build it exactly how you want. Build an audio amplifier with a nice, expensive power supply, instead of a cheaper one. Build that RC model the way you want it, instead of a cookie-cutter off-the-shelf unit.
Welcome to globalization. Craftsmanship and home building is largely a thing of the past. Although I can hardly consider assembling a computer from off-the-shelf parts to be either "building" or craftsmanship. It's just not in the same league as aother crafts.
I really consider homme assembly of computers to be a stop-gap method. It was attractive 10 years ago - and filled the gap between building your own "kit computer" like the Apple I, and buying modern pre-assembled machines.
It just doesn't have any relevance or resonance for me - it was always just about saving a few bucks during an anomalous period when economics made it attractive. Those days are gone, and there was never really much "joy of the craftsman" or advantage in plugging a bunch of Lego-like components together. So, who cares?
Harvard Irving-
With all due respect, while building a computer is not in the same league as building a radio controlled plane to you, it is for many of us. There is quite a bit of craftsmanship that goes into a well built computer. Just look at the last page of Maximum PC for their "system of the month" series, or the countless models that Bill highlights in every imaginable shape and size.
While some folks are content with any beige box with an "Intel Inside" sticker on it, there are plenty of others that are not. Even pedestrian Best Buy has a selection of neon fans for custom builders.
In cars, there will always be a market for "plain jane" Ford Escorts and Chevy Cavaliers (they're Cobalts now). Those with the knowledge, and the funds to back them up will pay extra for a BMW M series, or Mercedes AMG.
While this may not be relevant to you, it is certainly a passion for many of us around here. Thanks for your comment.
Ugh, Dell ships you a CRT! Not an LCD! That's where you miscalculated.
No... Dell ships the 19 inch E196FP analog flat panel [Included in price]. You have the option of alternately choosing the 17 inch E773 (16 inch viewable) conventional CRT for an additional $0. Sounds like a bargain deal to me.
My theory is that Dell subsidizes the low-end market with higher prices on the mid-level and high-end x86 market. They are gaining "mind-share". Possibly do an analysis of the mid-level and high-end to see if this is the case?
Dell high-end or Alienware now that Dell owns it?
Dell selling machines for cheaper than I/we can build them is nothing new. They've been doing it for a while. But if you start to add to the configuration to make it more reasonable, the situation changes. I doubt they're loosing money on it, but maybe this configuration it is at cost.
PS. They use Intel built and designed "customized" motherboards in most of their consumer desktop systems. May not have bleeding edge features, but they're reliable. And if you look inside their new cases, you'd be very impressed with their cable managment - very clean layout.
With the page views this story generated, you can bet that there will be a follow up looking at the higher end stuff at Dell. Check back soon to see those results!
--Jonas
Doc,
In cars, there will always be a market for "plain jane" Ford Escorts and Chevy Cavaliers (they're Cobalts now). Those with the knowledge, and the funds to back them up will pay extra for a BMW M series, or Mercedes AMG.
While this may not be relevant to you, it is certainly a passion for many of us around here.
Well, If you want a BMW, you buy an Apple machine. There is no way a home builder can match their attention to detail, or their Operating System. Your point is taken that many enjoy building - but you are limited to standard components. Nobody has their own processor fabrication plant, and nobody can make their own graphics card that outperforms an off-the-shelf item.
My bigger point was that in building RC models, or building analog electronic projects, one can easily surpass what is available off the shelf, and build thigs that just aren't available commercially. You can't really do that with computers. You are restricted to existing motherboards, for example. Only companies like Apple, Intel, and supercomputer manufacturers have the resources to design their own motherboards. So, you're just plugging stuff in to a predetermined form.
Personally, I'd never buy a system that doesn't have error correcting memory.
I've never seen that from dell at any price.
Harvard:
Most off the shelf pc's have very little attention to detail. They use the cheapest components, pay no attention to the wiring, and use a generic case.
Modders have a full selection of parts, route their wires meticulously, and use exciting cases.
http://www.extremetech.com/article2/0,1697,1874380,00.asp
Can we make our own graphics card? No...but we can overclock it!
By custom combining the components we can create a box that is not commercially feasible, and is tweaked to perform better than what could be purchased at a similar price.
--Jonas
the link is dead, and the lowest dell system with a pentium 4 and a flat 19' lcd monitor does not add up to $400 anywhere in the site. it comes up to ~$600, and as someone who's looking to buy a new machine the dell site seems to laugh at my budget. i personally hate building my own machine since it's time consuming and i'm not particularly good with hands. if you can repost the link, it will be helpful. thanks.
Fixed the link. Sorry about that but Dell's discount codes sometimes expire.
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