November 21, 2000 10:20 AM PST
Consumers find hot deals in used computers
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The world is a tough oyster for U.S. PC makersNovember 8, 2000
Consumers answering "yes" to this question could pick up some of the hottest deals on PCs this holiday season, say analysts and PC makers.
These best buys are not used systems going to the highest bidders on eBay or scratch-and-dent models at the local computer store. They are instead refurbished, or reconditioned, systems--computers returned for one reason or another that have been fixed but can no longer be sold as new.
Savings range from 10 percent to 30 percent--or more--and companies such as Dell Computer and Gateway sell them with the same warranty and customer support plans as new systems.
For this and other reasons, "they're better than new," said ARS analyst Matt Sargent. "The savings are huge, maybe 20 to 30 percent over an identical, new system."
PC makers find that consumers and small businesses, more than any other customer segment, buy refurbished systems. "Refurbs" are popular with people buying for the second time, looking for multiple systems, or working within a fixed budget.
Not all refurbs start out as defective or returned systems. Some simply are canceled orders. Others are overstocks sold with reconditioned units at a discount. But once labeled refurbished, the systems are reconditioned--checked over for defects and refreshed with the latest software--then sold at a deep discount.
In some ways, refurbs are the bane of the computer industry. With margins already razor thin, returned systems are basically sold at a loss, with the PC makers or retailers looking to recover as much of their cost as possible.
"Because we're losing money on every system we refurbish, we don't want to see them again--ever," said one refurbisher for a major PC manufacturer, who asked not to be identified.
"In some ways remanufactured PCs are much better than new, because they've been looked over not once but twice for defects," said the refurbisher. "They're rugged. They're solid."
From another perspective, refurbs are big business and are a good way for PC makers to hook new customers on their products. But PC manufacturers are reluctant to talk about how good refurbished sales are for fear of jeopardizing the business in new systems.
Kim Stevens, head of product management for online retailer PC Connection, spoke cautiously about the benefits of refurbished sales.
"We sold 7,000 units during the first three quarters," she said. But Stevens would not put that in perspective of total sales for the period.
Dell has done so well selling refurbs that the company closed its outlet store in Austin, Texas. Demand outside the area compelled the company to expand to a solely online operation.
"The Austin success story really went national," said Mike Jagliardi, general manager of Dell's asset and recovery business.
On Tuesday, Dell's Factory Outlet listed more than 700 consumer desktops and portables, as well as a large selection of commercial systems and peripherals.
Dell refurbs tend to be canceled orders--systems pulled from the line for suspected problems or customer returns. They then are reconditioned and sold as refurbished.
"If we're doing our job right, the only difference between these and new systems is the red (refurbished) sticker," Jagliardi said. He estimated savings of 5 percent to 15 percent when buying refurbished over new.
Gateway gets returns mostly because the company offers a 30-day, money-back guarantee on every system it sells, said spokesman Greg Lund. Returned systems are reconditioned, and Gateway sells them refurbished with the same warranty as a new system but cuts the money-back guarantee to five days.
Anthony Dempsey, manager of information technology for the American Association of Colleges of Nursing, said he regularly buys refurbs, mostly from Dell.
"Part of the reason I buy refurbished is I work for a nonprofit, and basically we don't have a lot of money," he said. "I don't have an IT budget per se, and we're always looking to do more with less."
Dempsey said he's had more trouble with new systems than refurbished, as strange as that might sound. The savings keep him coming back for more refurbs.
"One of the laptops we bought a year and a half ago, we saved $1,000," he said. "It was almost a top-of-the-line model going for $4,000 new, and we got it for $2,995."
Such deals are not uncommon, but consumers have to be aggressive and persistent, Lund said. "If you're willing to pick and choose a little bit--and you have to watch because these things change almost daily--you can get some pretty good deals," he said.
One of Gateway's best refurbished deals Tuesday was a Solo 9300 notebook selling for $2,103 with a 15.7-inch display and 600-MHz Pentium processor. The refurb cost $600 less than a new model.
Many regular refurb buyers tend to be like Dempsey: mostly consumers or small businesses working on a fixed budget. They also tend to get the best deals, say PC makers. Someone already planning to spend, say, $1,500 on a system will shop more for features than a better price. For that shopper, a refurb could mean more system for the same price as a new model.
But shopping for refurbs also is risky--after all, many of the systems were returned as defective--and some analysts don't see much of a bargain in them.
"Especially in a category like computers where everything is obsolete in three months, what's the advantage of a refurb that's 20 percent off when in three months I could get that product for 40 percent off?" asked PC Data analyst Stephen Baker.
He warned consumers to be wary and to look closely at the store's or PC maker's policy on handling refurbs. "If you go into a Circuit City, for example, they'll have a lot of open-box-buy kind of products on their shelves," he said. "Best Buy very rarely does it."
PC Connection's philosophy on refurbs is that they're as good as new. "Our refurbs are perfect machines, as in no nicks, no scratches," Stevens said. Nicked or incomplete systems are sold on the company's auction site, but never as refurbished machines.
Warranties can be another problem. While Dell and Gateway back their refurbished systems with full warranties, not every company does. Many offer protection for only 90 days.
When buying from stores, consumers should find out where the refurbs came from. Many retailers buy them directly from the PC manufacturer, which guarantees they are as good as new. CompUSA, for example, typically sells these kinds of refurbs.
But systems returned to the store and reconditioned there might not go through the same strenuous testing, analysts warn.
Even after the systems are tested and retested, some do fail. Because the companies already are losing money on them and because of their policies covering refurbs, they might not be willing to replace a defective refurb.
One reader, who asked not to be identified, is working with Dell to fix a refurbished notebook that was dead on arrival. Rather than replacing the unit as the reader had hoped it would, Dell is sending a new motherboard to be installed Tuesday.
"I am disappointed but at least am pleased that Dell has so far not hung me out," the reader said. "If things do not work by Wednesday, I will likely send the thing back and just order a new one."