News PS5 Scalpers Explain How They Can Sleep at Night

Oct 7, 2020
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i don't think scalpers are any different than doctor Seuss's Grinch. i hate them and wish they would just stop.
 

Endymio

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Glad to see the idiot brigade has chimed in with this article. No, scalpers are not "heroes", but they do provide a valuable service for consumers. But emotions trump logic in modern-day society.

In a free market economy, scalping can only exist in one case, and one case only -- when prices are being held artificially low. This usually happens when the government interferes in some way -- today, though, it's happening because companies like Sony, Microsoft, and NVidia are afraid of being accused of "profiteering" from the pandemic. So they continue to hold prices below their proper level, with many people willing to pay two or three times as much for a product as they're charging. What do they think is going to happen?

The "anti-scalping" laws, regulations, and website-security checks being proposed to stop it are even more hilarious. Scalping was endemic in the former Soviet Union, and they couldn't stop it with sentences of hard labor in Siberian gulags. You think any of these measures will be more successful?

Raise prices, or increase supply. Nothing else will work. Period.
 

USAFRet

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it's happening because companies like Sony, Microsoft, and NVidia are afraid of being accused of "profiteering" from the pandemic.
Scalping of devices like this happened long before this pandemic.


 
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Heat_Fan89

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Scalping of devices like this happened long before this pandemic.
Agreed. I remember the Playstation 2 was being scalped at launch and selling several times more than MSRP and that was 20 yrs ago. It’s become more of a problem because more people are at home and have more idle time on their hands. So it becomes a matter of patience.
 

Endymio

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Scalping of devices like this happened long before this pandemic.
Sure, on initial launch of a hotly-anticipated product-- especially when it's timed to drop just before Christmas. (as in your links)

But that only lasts a month ... it's not the long-term phenomena we're seeing now. And again, it's an intentional act by the manufacturer to set a price they know is significantly below what people will be willing to pay.
 

CerianK

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In my e-mail last night: "You weren’t selected in the Newegg Shuffle". No surprise there.
Now I will just have to suffer with a 3700X, and not enjoy 5950X goodness.
I am not sure how I am going to sleep at night.
 

USAFRet

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"timed to drop just before Christmas"
As in....mid september 2020, just before the run up to the magical Black Friday.
Add in Coronoa....

"Intentional act"? So you're saying they should have priced it 1.5 -2x more than it was?
How would that help?
 

Endymio

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"Intentional act"? So you're saying they should have priced it 1.5 -2x more than it was?
How would that help?
It would help in the manner that all floating prices help -- they equalize supply with demand, ensuring that everyone who wishes to buy a product, can. No shortages, no oversupply. Econ 101.

And no, I didn't say that a price increase of "1.5 -2x" would be necessary. Though scalpers are charging that much, they do so on a small fraction of the total supply, and they have additional overhead costs as well. If the manufacturer themselves raised prices, I doubt more than a 25-30% increase would be required.
 

Phaaze88

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A good bit of the logistics and analytics of this stuff goes over my head, but what little bit I do understand:
People who give in and buy from scalpers are dumb. It doesn't matter if they're wealthy or not, that's not the point.
You want it to die, don't buy. You buy, it lives to see another day, to become a pain in the butt for you and others later.

I'm also appalled that some people are ok with the scummy MTX in games these days - mechanics that are DESIGNED to test one's patience to 'spend a buck' for content that should've already been in the game for free.
$1 turns into 10, 10 turns into 1000... none of those funds are used to improve the game; look at those sports games - recycles from like 5 years ago.
Keep that mobile nonsense away from PC and consoles, KTHX.

Ahem! Back on topic: Some of these folks really think they're middlemen?
Since I'm patient enough, I still have the option to buy a product at its advertised price. But since that guy bought up all the stock, but they're willing to part with it 'for a fee'.
Get the heck out of here... I'll get it sooner or later - and at the price it was advertised at. Time is not a factor.
UGH. FOMO is one hell of a drug.
 

USAFRet

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It would help in the manner that all floating prices help -- they equalize supply with demand, ensuring that everyone who wishes to buy a product, can. No shortages, no oversupply. Econ 101.

And no, I didn't say that a price increase of "1.5 -2x" would be necessary. Though scalpers are charging that much, they do so on a small fraction of the total supply, and they have additional overhead costs as well. If the manufacturer themselves raised prices, I doubt more than a 25-30% increase would be required.
Change the MSRP from $500 to $650 would not have impacted the scapler volume at all.
IMHO, of course.

But, here we are.
 

CerianK

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"Intentional act"? So you're saying they should have priced it 1.5 -2x more than it was?
How would that help?
The idea I originally had posted in another thread was to set the initial MSRP based on researched market value, then dynamically scale it down over time so that scalpers would be less willing to buy in at the higher value due to lower profit margin and built-in devaluation. This is somewhat simplistic (e.g. getting AMD and nVidia to both jack-up initial MSRP in a way that does not violate existing laws or create bad press), but does bring up the question of whether setting an unrealistically low MSRP is just as bad-practice as (illegal) low-priced anti-competitive dumping.
 

Endymio

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Change the MSRP from $500 to $650 would not have impacted the scapler volume at all.
IMHO, of course.
Certainly it would have, as that increase is paid by all purchasers, not just the few who buy from scalpers. That depresses overall demand -- and it also increases supply, albeit slightly, as the additional profit margin allows the manufacturer to take otherwise nonprofitable steps to increase production. So you now have fewer people chasing a larger volume of products. The pool of unsuccessful purchasers is thus significantly smaller, and thus the market, as well as the potential margin for scalpers is smaller as well.
 

USAFRet

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Certainly it would have, as that increase is paid by all purchasers, not just the few who buy from scalpers. That depresses overall demand -- and it also increases supply, albeit slightly, as the additional profit margin allows the manufacturer to take otherwise nonprofitable steps to increase production. So you now have fewer people chasing a larger volume of products. The pool of unsuccessful purchasers is thus significantly smaller, and thus the market, as well as the potential margin for scalpers is smaller as well.
If a scalper has a spare $5k to drop on 10 of them, he can scrape together $6.5k for that same 10.

And of course that doesn't impact the mining farms in the least.
 

Endymio

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If a scalper has a spare $5k to drop on 10 of them, he can scrape together $6.5k for that same 10.
a) That isn't true at all, of course. Some scalpers -- most perhaps -- are cash-limited. They're already buying all their means allows. Furthermore, their profit margin per card just dropped by (at least) 30%, meaning their motivation to buy has been reduced somewhat as well.
b) Even if true, it's irrelevant. Scalpers only purchase if there is a market. When you raise the overall MSRP 30%, you WILL decrease demand. Maybe by more than 30%, maybe by less (depending on the elasticity curve), but it ineluctably does drop. That's how the law of demand works.[/QUOTE]
 

jpe1701

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Glad to see the idiot brigade has chimed in with this article. No, scalpers are not "heroes", but they do provide a valuable service for consumers. But emotions trump logic in modern-day society.

In a free market economy, scalping can only exist in one case, and one case only -- when prices are being held artificially low. This usually happens when the government interferes in some way -- today, though, it's happening because companies like Sony, Microsoft, and NVidia are afraid of being accused of "profiteering" from the pandemic. So they continue to hold prices below their proper level, with many people willing to pay two or three times as much for a product as they're charging. What do they think is going to happen?

The "anti-scalping" laws, regulations, and website-security checks being proposed to stop it are even more hilarious. Scalping was endemic in the former Soviet Union, and they couldn't stop it with sentences of hard labor in Siberian gulags. You think any of these measures will be more successful?

Raise prices, or increase supply. Nothing else will work. Period.
I didn't know that Surak had teachings in economics. Live long and prosper.
 

King_V

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It would help in the manner that all floating prices help -- they equalize supply with demand, ensuring that everyone who wishes to buy a product, can. No shortages, no oversupply. Econ 101.

And no, I didn't say that a price increase of "1.5 -2x" would be necessary. Though scalpers are charging that much, they do so on a small fraction of the total supply, and they have additional overhead costs as well. If the manufacturer themselves raised prices, I doubt more than a 25-30% increase would be required.
Dead wrong. Digital edition release price is $399, disc edition is $499. So, let's say 30% more. That means $520 and $650 respectively, for those two.

Just perusing completed eBay sales, I see a digital edition sold for $690, and the disc edition selling for $750. Most of the sales for the disc edition are $800 or more.

That digital edition is thus 72.5% higher than the release price, and the disc edition is a "mere" 50% higher. I don't know why you think market forces are magical somehow for your argument, but there's no way that a price increase of 25-30% would have stopped scalping. Not even close.

Oh, and let's not forget that they're charging $40+ shipping. Let's say ONLY $40.

That $690 digital edition unit is now $730, and that $750 disc edition one is now $790. So, 82.5% higher than retail for the digital edition, and 58% higher than retail for the disc edition.
 

JTWrenn

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The primary differance is that Wal mart serves a purpose. They are in fact the middle man...ie the store owner where you can walk in and buy something. Sony doesn't have stores....so they need a middle man there. Having an extra middle man, is not needed.

In addition, the idea that stock is so limited that people are willing to pay more...is hard to judge right now. Yes people will pay more...but stock is being suppressed by these scalpers. We have no idea if the stock was extra limited on launch or about normal.

The problem with the scalpers is so many fold it is hard to get it all in one post but it hurts consumers, it hurts developers, it hurts stores (because of all the drama and lost ability to hold first day sale events), it just hurts a whole lot of people....some someone can take advantage of a market.

Capitalism generally works well when nobody is a bad actor....using bots to buy up all the stock of an item then doling it out to the highest bidder is not proper functioning capitalism. It is exactly the type of thing we need regulations on in order to allow companies to sell things the way they want.

Remember the PS5 is a losing seller for Sony...the games that are bought on the consoles are the winners for them. Suppressing use of the consoles is horrible for them, and that is exactly what scalpers do.
 
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Wolfshadw

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Folks here may have passed Econ 101, but it appears their failing Bus 101.
"Dear Consumers! We at Company A commiserate with each and every one of you who are hit hard in these difficult economic times. We are also dismayed by the actions of some few people who are taking advantage of our limited supplies. Therefore, until this crisis is over, we are raising the prices of our products by 50% so that more of you, the common folk are able to purchase our product!"

I'm sure that's in the business model handbook somewhere. [/sarcasm]

Now I'm no business major either, but I think the first rule of business is NPNP (No Profit, No Product) and it's a lot more complicated than "here are our costs, let's charge 10% more".

You're not going to sell a product if your target audience isn't willing to buy it. I'm sure these companies have teams of well paid market researchers who find out who the target audience is, what their income level is, what their disposable income is, and what they're likely willing to spend that disposable income on. I'm sure they go through mountains of data and perform marketing polls to see how much they figure they can sell a product for. Now that probably results in some sort of skewed curve, but lets take a final selling price of $500 (and the following are arbitrary numbers).

This tells me that something like 10% of your target audience is willing to spend $900 for your product. (<--- BTW, this is your scalper's target audience)
30% of your target audience is willing to spend $750 for your product.
50% of your target audience is willing to spend $600 for your product.
80% of your target audience is willing to spend $500 for your product
90% of your target audience is willing to spend $400 for your product.

Given this research data, where, exactly, do you price your product so that the following three things happen?
  1. You actually make a profit (not necessarily from product sales if reciprocals are involved i.e. side product sales).
  2. You maintain a positive corporate image with the purchasing public.
  3. You actually remain competitive with others in the same marketplace
Now I'm sure there is a lot more to this (as I said, I'm no business major), but I'm pretty sure this is the gist of it and why simply raising prices isn't going to work.

-Wolf sends

Edit:
The only way to put an end to scalpers is to withhold product supply until it is sufficient to match estimated product demand. Of course, this is not possible since corporations and manufacturers cannot afford to place resources (developers/manufacturers) on hold until such conditions exist.
 
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jpe1701

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Not to mention that they didn't have ebay in the old soviet union. If the large platforms made it difficult to sell the products it would certainly have an impact. But then we have the old catch 22 of too much oversight and how do you define scalping.
 

Johnpombrio

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My elderly sister regaled me with how her daughter gamed the system to get her and her husband vaccine shots quicker than they would have otherwise. It involved 3 AM monitoring of websites and several hours of driving but they got their shots. If there is a way to take advantage, someone will figure it out.
 

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