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Comment by jacquesm | Hacker News Reader

Excellent reason to pay cash for your purchases, this is exactly the kind of privacy violation that people always think will never happen to them, but your credit card record is a nice way of tracking your previous interactions with the store.

Besides that, they were welcome to not sell him his second one, so I think they really messed up there.

As for being banned from buying ipads, he can always go to a different store and get them paid cash. Interesting how there is a 'lifetime limit' on customers buying your product, anybody else would be insanely happy about people buying more of the product.

The stonewalling on how many items you're allowed to order is the best bit, not only is there a rule, but you're not allowed to know it.

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They probably have limits to avoid scalping. Some guy repeatedly coming in buying iPads 2 at a time fits the profile of a scalper, so they cut him off. There's probably an economics paper waiting to be written somewhere about how consumer electronics manufacturers and retailers handle these types of supply shortages.

I'm sorry, but what is a 'scalper'?

http://en.wikipedia.org/wiki/Ticket_scalping

people who buy products with limited supply that are in high demand and then resell at a premium.

Very common for tickets(concerts, sports etc)

Right, ok that explains a bit about the stores actions, but still the guy at least says he did not profit from this, in fact it took him time and all he did was recover his expenses.

For every noble minded person who, out of the goodness of their own heart, runs other people's errands to the Apple Store, there's probably >1 scalper, on average.

How does Apple know that?

Possibly because he told them? Maybe he's lying I don't know but I tend to believe people. I realize that's a serious shortcoming :)

"hoarders who were unloading iPads on eBay to cash in on the $150+ markup. Instead, my asking prices were very reasonable, just enough to cover all the tax, international express shipping, and Paypal fees with a little left over for unexpected costs"

Notice how he specifically mentions a price for the "eBay hoarders", but avoids mentioning his markup. I wouldn't be surprised if his markup was close to $150 as well without actually ever being over. Like somewhere around $140.

His story is contrived in a way to give you a good impression of him and a negative one of the Apple store employees. Another couple of telling parts in the story are: "reservations are limited to one per iTunes account. Luckily I have a second account so I used that to place the reservation" and "Ok, so the gig is up" followed by a whole unnecessary conversation.

The first quote shows that he knows that what he is doing isn't exactly kosher with Apple. He is willingly and knowingly flaunting their policies.

The second quote shows that he realizes he's been had. He already knows why he was busted, but he persists in trying to troll the employees into saying something slanderous, like euphemisms for the fact that he's an unauthorized reseller.

I call into question the morals and ethics of the author of the post.

I don't call into question his morals and ethics, but it probably would have been more honest if he didn't try to paint Apple as the bad guys though.

Can you even associate an iPad with an iTunes account that's registered in a territory where they aren't selling them yet?

Yes, it's called capitalism. Not popular with Apple, I understand - they're a bit more corporatist.

(I jest, but to make a point.)

I think most retailers have policies to prevent scalping. I'd be more mad at Ticketmaster if I was you. (Most people already are, but not because their prices are too low!)

And to hell with the Green Bay Packers, if only their season tickets were more expensive, all those middle class people in rural Wisconsin wouldn't be able to afford them and the decades-long waiting list would just dry up! Stupid corporatists and their 3-4 defense.

I always thought "scalpers" just added a service charge, like ticket master.

(Long shaggy dog story - you've been warned.)

June 5th, 1999: The New York Knicks are playing the Indiana Pacers in the NBA playoffs. At the time, I'm living in New Jersey, and I'm heading into Penn Station to go home. A scalper walks up to me (and everyone else, I suppose) and offers me a ticket to the game. The ticket's stamped price is $100 (maybe $125). The scalper wants $450. I think about it, think about it, think about it. I pass.

Hours later, with just over 6 seconds left in the game, Larry Johnson wins it for the Knicks with an amazing, once in a decade 4-point play. I'm at home, jumping up and down, screaming. (Links below for the play.)

So, yeah, that's a service charge, but not quite like Ticket Master.

http://sportsillustrated.cnn.com/basketball/nba/1999/playoff...

http://www.youtube.com/watch?v=h3pGGjdBzns

http://www.youtube.com/watch?v=WA7JVEHbuG4 (Less drama, more basketball version of the video)

Damn but that was a good game. That was the one and only time I've ever listened to a sports event of any nature on the radio, and I managed to get to a TV just in time for that play of Johnson's - fantastic even though I was in Indiana and rooting for the Pacers!

Thanks for reminding me of that. Wow!

If it wasn't for the scalper though you probably wouldn't have even had the option to go it you had wanted to.

Scalpers are the people you'd see standing outside of a sporting event selling tickets at a markup. It works out because if you don't care about the beginning, you can often times score them for very cheap.

There was a beer tasting event I went to a few months ago where tickets were ~$60. I showed up really really late (I was the designated driver anyhow) and got mine for something like $15 (which was cheaper than what the promoter was offering the "designated driver" tickets [which don't allow you to drink the beer] for).

Traditionally, yes. Scalpers constituted a small fraction of the market and were largely doing temporal arbitrage: there will be a certain number of people willing to pay a higher price on Day N than on Day N-X (where Day N-X is when tickets originally went on sale).

Modern scalping constitutes a far larger fraction of the market, and consists entirely of artificially limiting supply. You don't think those pop teen idol concerts would really naturally sell out in 30 seconds, do you? That happens because somebody's running an automated system that hammers the online purchase form.

scalper: someone who buys something and resells it at a price far above the initial cost.

All retail merchants do that.

Sometimes people want to sell things for below their cost, to let more people enjoy them than otherwise would. A scalper takes advantage of this incorrectly low price, buys the item, and resells it for it's true market value.

Except that scalpers are also a part of the market. When a large percentage of original purchases are by scalpers, they artificially up the market value.

They still make market work the right way. Limited supply & higher demand -> price increase.

They do not up market value (they up price). It is a side effect of artificial supply limit by the original vendor.

If there is no artificial limit (tickets for example), it means that the price was too low in the first place and buyers are willing to pay more.

Scalpers are market-based correction tool.

Interesting. Your argument could be interpreted to read that apple misjudged their launch price.

Yes, sort of.

Yes apple could have made the launch price higher - but then they would have to lower it after the launch to get the rest of the customers.

But the last time they did that, there was a firestorm as all the early customers were very mad at the very quick price reduction.

So apple chose to start at the more longterm price.

The correct way for them to handle it would be a premium or collectors or limited time edition. AKA the first ### buyers get a special dodad, or a signed shirt or some item to make them feel important. Then they pay extra, and don't feel cheated when it goes on sale at the regular market price.

Nope they can artificially increase the price by hoarding and making it less available.

Think about any commodity... everyone needs sugar/salt, what if somebody starts buying all the sugar from the market and hoards it... some people will start consuming less but the prices will increase due to lack of supply and more or less constant demand.. and then the person can open floodgates and make some dough in the process... Pretty common in Third world countries (and hence illegal)

> resells it at a price far above the initial cost

This is often what happens but it isn't a necessary condition to be a scalper. You can sell tickets for at or even below the initial cost and still be considered a scalper.

Indeed many scalpers often unload tickets for less than face value if they can't find a buyer at the price they want.

A dude who resells tickets.

http://en.wikipedia.org/wiki/Ticket_resale

Scalpers are a market-making phenomenon that occurs in free markets when a product has a set price that is artificially low for high demand; e.g. concert tickets, sports games tickets, etc.

This is scalping: http://news.ycombinator.com/item?id=1295597

Bingo! Not probably, it is very much the reason. They underestimated the demand and are attempting to prevent people like him from being a middle man. This isn't a big story.

If it's an underestimate of demand, that seems like a very common mistake--most gaming consoles and new Apple products have this exact same problem. Either they're systemically "underestimating" demand to mitigate risk or increase the prestige of the product (by making it rare and hard to get), or the peak demand for something like an iPad or Wii within the first month is just completely beyond any reasonable manufacturing capacity.

In an idealized market, of course, manufacturing capacity would ramp up with demand, but that's because price does, too. In reality, while the market price will go up enough for scalpers to play arbitrage, the producer doesn't capture this surplus and has no incentive to increase quantity supplied.

The issue is that if you OVERSHOOT, you have inventory you paid for but do not get paid for in turn.

You almost always want to undershoot.

That's the risk mitigation part, and in the 90's Apple had a lot of problems like that (too much inventory of unwanted products) but then you start to wonder how, for instance, the Nintendo Wii went a whole year understocked.

It costs money to retool a factory to produce something different. If the cost of lost sales due to undersupply is lower than the cost of setting up another factory, it makes sense to undersupply.

Also in the case of Wii, Nintendo probably was expecting a sales downturn "any day now"

They almost certainly undershoot deliberately because that creates a sense of scarcity which makes the devices seem more desirable.

I'm wondering if Apple could pull off the continuous auction approach with new products?

It would have worked like this for some period of time after the announcement but before the official release dates Apple would sell you a numbered product at a multiple of the announced retail price, the earlier the date, the higher the multiple. So the very first iThingy would go for say $100,000 and the next batch might go for $50,000 each, and the third batch would be priced at $25,000 and so on. This would let them practice almost perfect price discrimination; most customers would pay what the product was worth to them...

There are of course very good reasons Apple does not do this.

What are the reasons in your opinion? I can see that it might give them a bad reputation, but that could be mitigated by parting with most of the profits for charity.

Or are they trying to create an image of scarcity and desirability?

What happens if someone has a bad experience with a preproduction device that they paid 100x premium for?

Once you factor in risks like that, selling a few models at an extreme markup doesn't seem quite as attractive.

Or I didn't want to talk about pre-production. I meant to talk about the begin of the normal production run, where demand for hyped devices (say: Wii, Nintendo DS, iPhone, iPad) far outstrips supply.

By the way, it may be rational for companies to let this happen, since mass production facilities cost a lot of money to set up, and they have to aim at the longer term demand instead of the spike at the beginning.

Unfortunately you must either use a credit card or leave empty-handed; Apple stores don't accept cash on these high-demand items in order to enforce this very policy. IIRC this was instituted some time after the launch of the original iPhone.

That said, enforcement is at least a little spotty. There are reports of Apple Store employees helping customers circumvent the no-cash policy by taking the cash for a gift card, and immediately accepting the gift card for the original merchandise. In the other direction, there are also reports of purchases with gift cards being denied for the same reason as cash.

I wonder if they would accept a pre-paid credit card at the Apple store. These technically use the credit network the same as a regular credit card...

They refuse cash?? WTF. Is that even legal?

I wonder if that is even legal. I thought the legal tender laws required anyone to accept cash as payment for any debt.

debt.

I guess you can pretend to pay with a credit card, then cancel the transaction (or something). Since you have the product now, you have a debt with them, and could pay them with cash.

Of course, in theory they could counter that by having an artificial hight price (say a few millions), but give you a discount (down to the normal price) if you pay with a credit card. This way you wouldn't want to pay cash.

Interesting. There are lots of people that do not have a credit card and that do not want one.

It's a pretty bad policy if you have to go so far as to enforce it by making your customers pay in a way that is more expensive to them than paying in cash.

I paid cash for my iPhone and they did the gift card thing. I did some reading later and surprisingly it is legal to not accept cash:

http://www.ustreas.gov/education/faq/currency/legal-tender.s...

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