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How does Dell do it?

O

ochadd

Senior member
Vostrol mini tower
$419

Parts
$125 Intel e7300
$20 2gb of memory
$110 Barebone chassis w/ MB, chassis, powersupply
$22 DVD burner
$165 22" monitor
$50 Hard drive
$13 Keyboard/mouse
$90 Vista basic
$595

It's $176 or about 30% cheaper to buy the same setup from Dell. You have 1 year warranty and 0 time sunk in setting it up. They obviously have a little overhead in the facility, install labor, testing, failures, etc. How can they do this and still make a profit? Maybe the goal is just to break even in the end?
 
Most companies make little to no profit on computers.

They make their money with the extra crap you buy with the computer.

I'm guessing the prices you have listed are from a site like newegg. Newegg DOES make a profit on every component they sell.

Dell may also be able to buy each component cheaper than Newegg does (especially the operating system).
 
Originally posted by: EarthwormJim

Dell may also be able to buy each component cheaper than Newegg does (especially the operating system).
Click to expand...

for serious. dell almost certainly gets bulk pricing on everything they have to purchase.
 
They're cutting it close though. I'd love to know what the profit on a low-medium end computer is.
 
They buy bulk but 30% off retail is a massive discount and that's what they are selling it for. Maybe they are getting 35-40% off. Margins have to be pretty tight considering Intel gives out their tray prices. If Dell buys that processor for $115 that leaves just over $300 for everything else.
 
does dell still get kickbacks from intel?
also if you look at things like upgrades to the base model + upgraded warranties, i think thats where most of the profit comes from

 
Something else to keep in mind is they get money from software developers for all that crapware that comes preinstalled.

I guess this isn't the case with Vostro (don't they generally come with a pretty clean install?), but is common to prebuilts in general.
 
They make money on the higher-end systems, upgrades on basic systems (ie: RAM, hard drives), warranties, accessories, installation services. Probably a little extra too from the crap that comes pre-installed too.
 
Originally posted by: Brainonska511
They make money on the higher-end systems, upgrades on basic systems (ie: RAM, hard drives), warranties, accessories, installation services. Probably a little extra too from the crap that comes pre-installed too.
Click to expand...

they make a lot of money on corporate CAD workstations.

when i worked for Northrop-Grumman, they had a very strange addiction
to Dell. they behaved as if the corporate CTO was a frat-buddy friend
of Dell himself. the workstations (typically dual-Xeon with an ATI FireGL)
were pricey, though down from the typical Unix HP workstation cost of $50K
in the '96-'97 time-frame.

it was always possible to buy cheaper dual-core systems from local
vendors (PC clone shops) in San Diego, but they had a big corporate
purchase agreement with Dell. i think those corporate purchase agreements
are one of Dell's cash cows.
 
Originally posted by: coxmaster
Its not just Dell that makes little to no money on PC's.. Retail stores almost ALWAYS lose money on PC sales
Click to expand...

That's why they try to sell you those warranties and accessories. Those are huge cash cows for them.
 
Yep, warranties, upgrades, and accessories. There parts prices are likely cheaper than you think. I would bet a good chunk that Dell does not pay $115 for an E7300. That may be the cost for 1,000 but when you 100,000 you tend to get an extra discount. $3,000+ XPS systems also tend to pad the bottom line. Then go to the business side with service contracts and the like. Not to mention the server business.
 
They use the cheap and shitty alps touchpads, thats how they freaking break even. Don't buy a dell unless you go to the drivers page and confirm that your touchpad isn't alps.
 
Like said, the quantities that they order parts in gives them huge discounts. Dell is the Walmart of the computer build world. They get massive discounts that no one else does.
That $115 e7300 probably costs Dell $50. remember, when intel or AMD make processors it's not like they have a line for each model, a plate or wafer is made and all the cores are the same, they just lock them to run at certain speeds and slap them together. So it costs just as much to make a high end chip as it does to make the lowest end with the same core, so Intel slashing their price to the lowest chip price for dell doesn't make them loose money, they just don't make as much.

With the OS, I bet MS is practically giving Vista away to get it out there. I bet Dell pricing is $20
 
Originally posted by: EarthwormJim
They make their money with the extra crap you buy with the computer.
Click to expand...

They most certainly do. Take a look at dell.com and configure a computer. I'll use a Studio 540 for this example...

Just the first component that comes up...
E7300 [Included in Price]
E7400 [add $30]
Q8200 [add $100]
Q9400 [add $200]
Q9550 [add $300]

Right off the bat, you'll see that the Q9550 upgrade is $300, and you can pick up a retail boxed Q9550 for about 10% less than that.

Now, here is one thing that most people don't quite see at first. That $300 cost to upgrade to the Q9550 is on top of what they are already charging you for the E7300, as it comes with the system at the base price, and of course you don't receive both cpu's when you upgrade to the Q9550.

This is not only true for the cpu, but probably every possible upgrade, especially memory...

2GB [Included in Price]
3GB [add $40]
4GB [add $75]
6GB [add $150]
8GB [add $200]

... and hard drives...

500GB [Included in Price]
640GB [add $40]
750GB [add $80]
1TB [add $210]


On other models, like the Precision T3400, these upgrade prices are even higher.

And the more obvious thing has already been pointed out...

Originally posted by: xSauronx
for serious. dell almost certainly gets bulk pricing on everything they have to purchase.
Click to expand...

Most definitely.

Originally posted by: tw1164
Doesn't google give dell like $5 for each PC w/ google desktop pre-installed?
Click to expand...

Another source of $$ for Dell, and not just google, but many other software packages, too.

Originally posted by: JeffreyLebowski
With the OS, I bet MS is practically giving Vista away to get it out there. I bet Dell pricing is $20
Click to expand...

Perhaps very close to that. The N series (free-dos and linux) they sell are priced, on average, about $30 cheaper than their Windows-based counterparts.
 
I'm sure that Dell is able to get their hands on these products for a huge wholesale price. Not to mention most of their operations are in Malaysia!
 
Originally posted by: Cheesehead
Ever taken apart a dell laptop?

Dell motherboards, cases, PSUs, et cetera are all really poorly built.
Click to expand...

😕

That really depends on the model. I find their internal case design to be brilliant. Although I have heard about some PSU problems, I have never experienced one.
 
Originally posted by: bamacre
Originally posted by: Cheesehead
Ever taken apart a dell laptop?

Dell motherboards, cases, PSUs, et cetera are all really poorly built.
Click to expand...

😕

That really depends on the model. I find their internal case design to be brilliant. Although I have heard about some PSU problems, I have never experienced one.
Click to expand...

Dell makes a fine machine, and I agree about their case design. PSU problems? No more than any other I've experienced.
 
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