Buying Parts for Building and Selling Computers

Discussion forums for the computer business are always full of threads from newbies asking where they can buy computer parts at cost, by which they mean, at the wholesale cost. The simple answer is, you can't. There's a reason that manufacturers sell directly to importers and wholesalers, wholesalers to distributors, and distributors and importers to retailers and to mom-n-pop shops. The volume drops at every level, the transaction costs rise, the processing for warranty returns and DOA components has to be taken into account. Years ago, we bought a couple fractional containers direct from importers, and while you'll never get lower pricing, it will tie up a huge amount of cash (they don't sell on credit) and you'll be stuck more parts than you can possible use unless you have a big government order to fill.

Most small computer businesses buy their parts from second tier importers and various Internet retailers, who often double as importers. NewEgg and TigerDirect are two companies I've been happy with over the years, and PriceWatch was always fun for looking for rock-bottom prices from importers. But if you are setting up a store-front and going after business and government customers, you'll want to sign up with one of the full-line distributors, IngramMicro, TechData or D&H, for access to their catalog of all the brand-name hardware and legal software you can sell.

Of course, the pricing from the full-line distributors is dependent on your volume over time, and it will rarely touch that of the low overhead Internet-only guys. But Ingram, TechData and D&H all have bid desks that will help you put in bids for business you couldn't handle or finance on your own (you're basically acting like a commissioned salesman at that point), and once the relationship is established, they will sell to you on terms, meaning instead of paying up front you'll get a chance to collect from your customers before the bill is due.

If you're planning on being in business for the long run, the last thing you want to do is start buying parts from random vendors on eBay who don't have an established track record and offer nothing but the lowest price. A warranty is worth nothing if they aren't around to pick up the phone when you call, and you don't want to get stuck with some cheesy importer who takes the defective merchandise you RMA (Return Merchandise Authorization) and ships it to another customer, while send you that customer's RMA. What works in the long run is to choose one prime vendor and to deal with them honestly, not returning parts that were accidentally damaged by yourself or the customer and hoping you'll get a "free" exchange. Nothing is really free, you'll pay for it on your future orders.

Finding importers and wholesalers to approach was once a matter of subscribing to Asian Sources and taking your chances. These days, you can start with the major Internet retailers and then compare prices with the reputable importers who sell through eBay (see their ratings) and other Internet platforms. Don't be surprised if you come across the lowest price on Amazon, they often fire sale hardware to get it out of their warehouses near the end of the product cycle, and many small importers sell in Amazon's Marketplace.

While it may come as a surprise to many Americans who are used to shopping at Walmart and paying the price on the label, there's usually room to bargain when you are buying computer parts for resale. Remember, you'll never get the parts "at cost" or true wholesale unless the person selling them to you came by the parts illegally. But even when dealing with the Ingram Micro's and Tech Data's of the world, you can beat them down on price if you have a legitimate alternative. The salespeople have some flexibility to lower prices if they want your business, but you'll have to earn it through volume and by not constantly lying to them that you can buy it $20 cheaper somewhere else when you can't.

The main danger in buying computer parts from wholesalers and importers is not paying too much, it's buying too much. Aside from tying up your money or credit, computer parts have a limited shelf life as newer technology and higher capacities lower the value of your "bargain." Then you'll find yourself pushing the stuff you already own on your customers, not because it's right for them but because you need to turn the parts back into cash. The experts who want to teach you how to buy computer parts cheap will con you into thinking that if you can just get low enough prices, you'll be able to compete with Dell or HP, so the more you buy the better off you'll be. It never works that way in the real world. Never.

One of the key points I make in the book, with some real life examples to back it up, is that you'll won't succeed in business if all you offer customers is the lowest price. Competing on price is just a fast way to lose money and lose customer's trust as you have to stiff them on warranty work and overcharge them for services to compensate. If you go searching on the Internet for the cheapest prices before you even talk to customers for fear they'll make comparisons, you're just setting yourself up for failure. I discuss setting prices in the book, and while there's always room to move depending on your specific circumstances, the basic formula shows you need to make a hefty profit on hardware to stay in business selling it. You're kidding yourself if you think you can just mark a PC up by $25 bucks over the parts cost for resale and make a living because it only took you a half-hour to put together and test. The instant download of the book is available for $11.95.

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