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OEM vs Retail and the 3 Tier System

Caviat Emptor!!

We've all heard this phrase and few heed the warning but what I'm about to tell you is a closely guarded secret among resellers and manufacturers out there.


{ I use IBM as a reference here only because my lawyer has a real crazy idea that money grows on trees }

IBM is one of if not the largest manufacturer and distributor of hard drives in north America if not the world. They control a happy 60% of the market maybe more.

When IBM manufactures hard drives, they like all manufacturers have good ones and bad ones. In fact, they separate these units into three categories. Tier 1, 2, and 3.

You probably know where this is going...

Tier 1 - drives are pre-ordered mostly for internal IBM requests for things like their own computer systems like the IBM Aptiva and the like. Dell, Gateway and other Clone resellers also put in orders for for these drives as well as many government offices for use in mission critical applications. As you guessed it, these drives have the fewest errors and are in mint condition, almost perfect. If you call up IBM and ask to purchase a Tier 1 drive, you are not going to be offered any discount, and you're most likely going to pay full retail. These drives have a return rate of almost nothing. About 0.1% of these drive ever fail.

Tier 2 - drives are sold to resale outlets like Costco, CompUSA, On-line resellers like and others. These drive are the largest lot of this 3 tier system. You most likely have a Tier 2 drive in your system right now. The tier 2 drive will most likely not fail at all. They have a return rate of about 4%. Tier 1 and tier 2 are also referred to as boxed units in the CPU world.

Tier 3 - drives are the bottom feeders. They are the ones that these clone shops sell in the window. They have a return rate of an estimated 20%. They will most likely work just fine... for a while... but chances are, you're going to be sending that puppy back real soon. Most likely 1 day after that tail-light warranty.

Get the picture?