Bots behind the game console shortage
theverge.com
theverge.com
But, yeah, blame the players and not those that could shut down the game any time they like.
They know local markets, and it's easier to deal with a few of them than all the consumers. For a heck of a lot of businesses.
Apple is pretty special in that they've got the whole consumer end themselves.
that no one is doing this... maybe it has something to do with the fact that it would show up as a liability in accounting until they deliver the product
There are plenty of retail outlets that are more than happy to sell Apple products while Apple also sells...
It wasn't just a queue, though. It was a time limited shuffle of the pool of people who saw a notification with enough time to join the lottery. It still took me months of attempts.
Your playstation, on the other hand, requires you to buy two or three games, and if the games aren't there yet for mass market appeal or sufficient genres, well, the console will still be there in four years when the games catch up, and your iphone will be out of date in six months.
In both the manufacturers and scalpers minds, nobody would bother scalping an iPhone - the margin was already sucked out of it and it has a shorter shelf life; In the case of a console, the margin won't be had for a few years, but none of it flows to the casual scalper, so it's a lot of work for 100$ - they'll do it, but it's a grind.
But either way, people are happy to wait in line for the latest fondleslab, and they get it when it's their turn
Source? This has not, to the best of my knowledge, been true in console production for a very long time.
To me a more persuasive argument, with the lack of evidence, might be that part of the supply crunch is being unwilling/unable to raise the price and so being less able to ship units than if they could be more price flexible.
This of course could be part of the problem—Sony may be unwilling to spend a premium to reserve more processors in advance as they already are operating on razor thin margins. Apple, on the other hand, pays TSMC far in advance and helps fund their research to get priority.
I would have been happy to place an order and then wait a year. Instead I did the follow a guy on twitter to find out when consoles are available and then use Firefox containers to make a bunch of simultaneous orders. It worked, but I’d rather just pay some money and sit in a queue.
where the buy button should be, they instead invite you to sign up for email notifications for when it's in stock
AT&T losing their iPhone privileges would hurt them far more than Target or Walmart would from losing their PlayStation privileges.
Before implementing a system where you can place your order before the device goes on sale, the issue Apple had was that they didn't have enough manufacturing throughput to launch products in all nations simultaneously.
>People wait in line at an Apple store to buy the newest iPhone for $600, paying a premium to skip the AT&T contract. They then sell the phones to middlemen, usually at electronics stores in Chinatown, for about $750.
The phones are shipped off to China, where the iPhone 4 is not yet on sale, and are distributed to local shops and e-commerce sites, where they sell for as much as $1,000.
https://www.nytimes.com/2010/09/23/technology/23iphone.html
You can fix the problem of customers being ripped off by scalpers while manufacturing ramps up, but companies choose not to do so.
Sony has been selling PlayStations for 23 years and still can’t figure out how to meet demand?
Sony is only expected to produce 18 million units this year. Reports are that Apple is going to “limit” iPhone production to around 220 million (https://www.bangkokpost.com/tech/2316406/apple-to-keep-iphon...).
Why can’t Sony produce as many PS5’s in a year as Apple produces iPhones in a month?
With that said, that does not excuse Sony. They have had time to figure some basic solutions out. When I bought my 5900X I had to wait almost 6 months but I eventually got it because I was able to order it at launch even though it was already sold out.
Let people put up a small deposit as well for getting a place in the queue, and it'll be deducted whenever you buy the machine. Keep the deposit if you cancel your place in line. Would incentivize less manipulation as well.
I've been trying to get a PS5 for 2 years now, and I refuse to pay some scalper 200USD more than market price, out of principle. (But I guess that is also why I still don't have one :) )
Don't pay scalpers, just use technology as your friend :) An old coworker did something similar but he wrote a chrome extension to do the same.
I'm sorry if someone uses this knowledge to scalp nextgen systems.
If it's been 2 years I think you have been underestimating the market price of a ps5.
Assuming the scalpers are able to sell their supply, what they're charging is the market price.
(But I guess that is also why I still don't have one :) )
Yup.
Are you trying to suggest the situation is somehow optimal? Market prices in short supply situations cause market inefficiencies, and this is one of them. The old platitude is that this inefficiency is only less bad than what would happen otherwise. Of course that thinking is rarely put forth with careful thinking about the alternatives, nor admissions of the many times in history that preventing inefficiencies actually worked.
Wouldn’t it be better if Sony received the market value themselves, and invested the money in the PS6? Wouldn’t it be better if we were not encouraging people who add negative value to the system to create artificial scarcity merely for the purposes of extracting extra dollars? The problem with your argument is that for markets to be free, customers need both choice and access to information, and supply needs to be able to meet demand. Scalpers hoarding are effectively an anti-free-market force on top of inducing inefficiency for profit. It’s a schadenfreudey bonus when scalpers get stuck with supply because they overestimated demand, but that doesn’t actually amount to a market correction, it just adds even more inefficiency, money wasted on top of money wasted.
Of course. The best outcome would have been for them to start with something like a cosmetically different "founders edition" that's more expensive and then to release the normal version when supply becomes available. But they decided not do to that, probably because the same people screaming about scalpers would vilify them for "price gouging" (which for nonessential products is a silly concept).
Wouldn’t it be better if we were not encouraging people who add negative value to the system to create artificial scarcity
The scarcity isn't artificial. There are more people who want to buy a PS5 at MSRP than there are PS5s. Scalpers are only adding to scarcity if they're sitting on inventory they're not selling, which there's no incentive for them to do.
The problem with your argument is that for markets to be free, customers need both choice and access to information
What choice or information do customers lack? If you want a PS5 your choices are to pay market price to a scalper, or spend a lot of time watching stores or running bots and trying to get lucky. This is all widely known.
Are you trying to suggest the situation is somehow optimal?
Obviously the optimal situation is for the shortage to be eliminated. The next best is for Sony to charge the market-clearing price. With both of those off the table, then probably the current situation is the best available. Do you have a better solution?
Pre-ordering with a deposit is definitely a very creative/smart accounting hack that Tesla (and Amazon) has used pretty effectively. It creates a negative cash conversion cycle (get the money upfront from your customer before you have to pay your suppliers) - which is highly profitable - especially when there is known demand.
Retailers do not have this kind of power. If Best Buy pre-sells more iPhones than they have inventory for, there's nothing obligating Apple to actually sell those iPhones to those customers through Best Buy. Apple could decide tomorrow to cut Best Buy's allocation because AT&T needs them for a big customer promo. Compounding this is the fact that almost all retail businesses are cash-flow limited. Their job isn't to buy things and sell them at 1% markup, it's to predict the future three months ahead of time so that products arrive on shelves exactly when they will be purchased. In other words, they're futures traders that take physical delivery. So every dollar they get needs to be spent on more inventory, or they run out of things to sell.
This means that, in the event of an iPhone shortage, Best Buy has two terrible options and one good one:
* Treat those iPhone orders as ordinary revenue and use it to order more stock of other products. If Apple cuts your allocation, then you have to refund your customers money that you don't have, meaning that you have to take out a loan on future revenue to pay back existing orders.
* Tie up your cashflow by holding that iPhone money in escrow until those orders are fulfilled. You don't take on the risk of not being able to refund orders, but now you are paying the opportunity cost of not being able to buy as much inventory three months down the line.
* Don't sell unallocated iPhones. Your customers will buy something else instead.
Now, could Apple extend their queue system beyond their own online store? Perhaps - but that requires a lot of coordination from other retailers who would rather just be able to move product quickly. The flip side of the cash flow problem I mentioned above is that, if a product doesn't move quickly, retailers want to get rid of it quickly to cut their losses and take a chance on something else. A good example of this would be the iPhone SE 3rd gen, which sold like garbage. Under the current arrangement of retailers getting allocation and buying inventory, Best Buy can at worst fire-sale iPhones nobody wanted. But with a queue system, they're either...
* Just drop-shipping iPhones from Apple to customers, which means they can't have in-store inventory
* Holding inventory they can't sell unless Apple lets them, which means they're letting iPhones live rent-free in their warehouse tying up cash flow.
The "just let me queue up" model is something that works out great for customers, but makes the rest of the business a lot harder, because modern supply chains are not designed for shortages.
So without scalpers you have to wait until supply catches up, while with scalpers you can either wait until supply catches up or you can pay extra if you really want it now. How is the first scenario better?
as is, Sony has been doing a "sign up to be notified" thing where by the time I see the notification they're sold out again. Just let me put in my order and get it to me when you can.
if enough people take that deal, scalpers have a smaller and smaller market
It leads me to believe these companies do not really care enough to implement the systems to fix this or that they actually like the artificial scarcity as it fuels additional demand. The fact that they can figure out how to implement live lottery systems, sadly, makes me conclude it is the latter.
I personally flatly refuse to pay over retail price or lineup outside of a store for the “opportunity” to buy something. Nothing is going to change if people keep paying a premium for products be it an SUV or a PS5.
Who cares about everything else?
Wouldn't it be better for everyone if the retailers adjusted the prices? At least then, the incentive to be a reseller/scalper would diminish to nothing, which means you don't pay for their premium.
Even if the price moves suddenly and they're forced to take a haircut, the low barrier to entry means other resellers can enter the market.
Which isn’t quite as bad as pure scalping but what they add is often high margin product.
What would be nice is to see more “proceeds over retail to charity” type deals.
I think it's for the same reason why car manufacturers don't like it when dealers sell over MSRP; it hurts the long term customer relationship. Higher MSRP means fewer buyers which means fewer services, repairs, etc.
More expensive consoles means fewer owners, fewer people buying console games and subscriptions.
But if you're selling them faster than you can make them, this isn't really true.
If you buy a car for 50k, and it's 30k 6 months later, while still being a new model, you feel screwed by the company, and next time, you'll delay your purchase until the price drop (even if the price is a good price and won't drop). As before, if the price drops after a new model comes out, people understand that, but if the price drops regularly after a few months the product is out, that's a whole different story.
They have - you could buy a console bundled with a game, headset and a tshirt for huge markups.
- Sales figures (units shipped) are a marketing point. A product being so in demand that it makes the news is a free marketing campaign.
- Retailer got so many units to sell at a margin/price they already decided on. The fact that the stock moved out the door is a win already. Customers coming inside to find out that there are no PS5s are customers inside the shop.
- It seems likely that Sony/whoever may have some control over the pricing. Whether this is a formal agreement or a gentle suggestion, ignoring or breaking that deal would presumably (at least) sour the relationship.
- Surely the retailer that moves first would lose business to their competitors. I guess at that point, the competitor/s run out of stock and now the first mover is the scalper?
- If we're assuming that the retailers have some altruistic motive, they could implement strategies to combat the bots / buying en masse. This does not appear to be something they are interested in.
> Wouldn't it be better for everyone if the retailers adjusted the prices?
The people who are already priced out will be in the same situation, except now it's the "good guys" doing price gouging. The scalpers will have lost their business to the retailer I guess.
> “When your browser checks out an item on a retail site, it sends ‘requests’ to the site’s server. These requests are basically commands that tell the server what to do. Add this item to the cart, submit my order, and so on,” they wrote. “We send those commands associated with checking out to the servers of sites we automate without requiring a browser. Basically, we can mimic what a human does, stripping out the unnecessary lags and delays of a browser.”
> "The service is optimized for Target, Best Buy, Amazon, and Walmart."
This is hardly just game consoles, the whole baby formula problem is similarly gamed:
https://www.forbes.com/sites/laurendebter/2022/05/13/baby-fo...
Basically, if you see a shortage anywhere in the consumer/retail goods market, you can use a pool of capital to buy up all the remaining product as quickly as possible - assuming you have access to a pool of capital. This is the same kind of thing that happens in wartime scarcity, the only difference between this and say WWII is the bot technology being used. Now you're the sole supplier and can jack up prices and earn huge percentages. The resellers are just little black market manipulators, in other words, and the bot writers are their facilitators.
However, the main sources of product are the big corporate retailers, Amazon etc. They can't jack up the prices themselves (well, they can to some extent as current 'inflation' price hikes are resulting in record profits), but do they really care if automated bots are placing orders? Are they going to write bot-detecting software that might reduce the amount of orders being placed online? Why would they, that would reduce revenue.
It's not too surprising that this situation has come about, it's basically monopolistic manipulation of markets throughout the whole supply chain. A deregulated neoliberal paradise has many similarities to a war zone economy.
This is misinformation. Walmart's net income is down 25% year-over-year. Target's is down 41% year-over-year. Excluding the $7.6B Rivian Automotive loss, Amazon's net income went from $8.1B to $0.04B, down 99.5% year-over-year. That loss would have been larger if AWS wasn't doing so extremely well on growth - AWS operating income was up 57% year-over-year. North America retail went from $3.45B operating income to a $1.568B operating loss. International retail went from $1.252B operating income to $1.281B operating loss.
I think a lot of people look at revenue (which will go up with inflation) rather than income (which is what is left over when you take out the costs). As costs rise faster than retail can raise their prices, margins are getting squeezed. Consumers have an idea of what a product should cost in their heads and it takes time for that to get un-stuck.
There's a reason that retail stocks tanked 9 days ago - investors saw Walmart's earnings on the 17th and Target's on the 18th. They weren't raking in profits. Inflation was squeezing them.
They can't be "sole suppliers" because they would need to beat out everyone else running a bot. As a consequence, they're not able to price goods arbitrarily high. (But, as usual, efficient price discovery tends to be viewed as evil by consumers).
This is the whole story. You can tell that game consoles, baby formula, and GPUs are under-priced, because it is worth spending hundreds of dollars and hours/weeks of dev time /on top of/ the too low price, just to get your hands on them for resale.
I think people get confused, because the effect of a spike in demand or a decrease in supply can look the same, from a pricing standpoint, as collusion amongst multiple retailers - but we're not talking about gas stations across the street from each other agreeing not to sell below X price, this is a massively distributed phenomenon, which again goes to show that it is a genuine reflection of the mis-pricing of goods in the current market.
The real tragedy when it comes to shortages of goods with inelastic demand, like baby formula, is that the various price gouging laws that prevent traditional retailers from correctly pricing items in the face of shortages, do nothing to actually control the price - in fact, they introduce a lot of inefficiency, and opportunity for counterfeits etc. I would much rather pay triple/quadruple at Target or Walmart than pay 0 because I'm looking at an empty shelf, or pay quintuple to some rando on eBay who may or may not actually be selling a genuine product.
Turn the clock back 23 years to 1999 and the GPU market was exploding, with tons of vendors, tons of chips, tons of competition, and excellent competing prices.
What's changed since then? The same shit that Michael Crichton spent a 10 minute video on YouTube talking about in 1999... the consolidation of companies in all markets by ever-growing behemoths who swallow up all competition.
There are what... three major chip foundries left, one of them is barely considered a "major" chip foundry (Global Foundries). The other two, Intel and TSMC, are so busy and booked up that they're running 24/7 nonstop to fill demand.
This could never happen... would never happen... if we had a dozen different foundries all of similar technological prowess and size, and 1999 GPU markets are a clear indicator of that. Literally dozens of brands, using half a dozen or so different chips from companies like PowerVR, NVIDIA, ATI, 3Dfx, etc.
GPUs aren't underpriced, our entire economic engine has become fouled by a lack of serious competition.
Don't believe that? Go read an entire list of Disney's holdings. It's damn near unbelievable that our cowardly politicians haven't trust-busted the megacorps that are around today. It's so egregious that America's founders would probably drag their peers out into the street and shoot them themselves if they could see how corrupt the system's become.
I actually tend to interpret it the opposite direction. This is clearly price gouging, which can hypothetically be regulated.
To me, the underlying issue is that near direct-to-consumer sales combined with public APIs and tooling like these bots has led to democratization of price gouging. Instead of being able to track the gouging back to a few businesses who are doing a lot of it, we now have to track a huge number of people who are individually doing a little of it.
It creates two problems. The first is that we don't have the resources to investigate and prosecute all the people doing it. The second is that each individual does a relatively small amount of damage, but it causes a large amount of damage in aggregate. We usually prosecute based on damage caused, but it's hard to show the damage of price gouging $1,000 or $10,000 worth of goods. If they were the only ones doing it, it wouldn't even be a problem. Yet, there's also no obvious collusion. They aren't causing scarcity individually, but they are in aggregate. I don't think the laws consider that at the moment.
It also looks bad for regulatory agencies to go after fairly normal folks. I don't get the impression these people are generally rich.
I can at least understand the motivation of such laws when it comes to essentials like food or water (although many would argue that such laws do more harm than good by erasing market signals), but inability to run the latest video games in 4K isn't an emergency.
These companies have the advantage of scale, and huge amounts of pre-existing capital.
Sony could make 100,000,000 PS5s and send them all out to retailers and just flood the market so drastically that scalpers can't make a dollar. All of those consoles will eventually sell, and the real money in consoles is, and always has been, the game sales anyway.
They cannot order that many parts from their suppliers. The chip shortage is ultimately quite real.
This was all very, very frustrating. Sony knows I have years of history with them going back to PS3 era. They could throw me a freakin' bone and let me reserve a spot in a queue, even if it was in agreement with a 3rd party retailer - I'd be cool with that. They could manage this situation so much better.
// Not to mention that once I got my unit, the storage evaporated almost immediately. PS5s hold about 5 or 6 "large games" at a time!
Basically I'm questioning the commenter's claim that they kept trying to get their hands on a 10-series, then 20-series, then 30-series card before giving up. They must not have tried at all in 2019.
* There's always new product releasing in the future, and the hardware you buy will inevitably depreciate. If you can get value from buying now and using now, then it's not worth waiting. If you can't, then you didn't have to buy in the first place.
* Futhermore, new product releases are staggered. Taking the RX 6000 series as an example, the high-end 6800 XT and 6900 XT released several months before the 6700 XT, and the 6600 XT came a few months after that.
Why? More future proof interfaces. DDR5, PCIe 5, AM5(?) etc.
It sound like you're in the second category, then. If you really belong there, that's fine.
But honestly, I got a DDR3 machine towards the end of DDR3's lifecycle, and I have no regrets. I used the CPU/Mobo/RAM for more than 5 years, and by the time I upgraded, DDR4 got fast and cheap enough where I felt I got my money's worth from both my initial purchase and my upgrade.
> The PS5 has been selling 80,000 units in 82 minutes, on average.
Whether they are scalpers or not, they ultimately end up in the hands of consumers.
https://www.forbes.com/sites/paultassi/2022/05/26/ps4-sold-6...
What service?
> Pay $200ish over MSRP and all the headache of locating and securing one goes away.
They create the headache in the first place.
Do you also think a protection racket provides a service? If you pay them for protection, all the headache of your business being firebombed goes away!
Trying to regulate away this problem will just lead to more "innovative" scalpers.
if anything microsoft's plan of offering two sku's lowering the price has been more effective
How's that? If that's what people are already actually buying them for, then people can already afford them.
Supposedly, the world is more complicated than some stuff you picked up from Econ 101.
Imagine if, to get the latest gadget you had to queue outside a store for 30 hours - but you could hire someone to queue for you.
Theoretically one could argue the scalpers are queuing so you don’t have to.
Only if the console wouldn't completely sell out every time without the scalper. But it would.
So the scalper provides a service to consumers with more money by allowing them to avoid the hassle of competing with lower classes for popular goods.
I don't think this is true. The fact that scalpers are still buying consoles means they're still selling them. That means if the scalpers didn't exist consoles would still be sold out, it would just be individuals following twitter accounts to spam refresh for a single console instead of 10.
Keeping you from having to constantly try and ram through the checkout on a moments notice and still not get the product in the vast majority of attempts.
>They create the headache in the first place.
They would be completely sold out even without the scalpers. The scalpers are selling them to somebody -- that somebody would have just bought at MSRP and you would still have to do what I mentioned above.
>Do you also think a protection racket provides a service? If you pay them for protection, all the headache of your business being firebombed goes away!
This is a pretty ridiculous characterization, even if you don't like what scalpers do. You are not being forced to buy a PS5. You're not even being forced to buy a PS5 from them. You can pull up a restock stream and watch it like a hawk if you have the time. They're not engaging in violence against you because you didn't buy a PS5 from them.
They’re rent-seeking leeches that exacerbate supply issues.
They’re not providing a service; they’re interfering with our ability to engage in free exchange with retailers and manufacturers, and doing so through deceptive, dishonest, and immoral practices.
You're going on about how scalpers are abusive, deceptive, dishonest, immoral, rent-seeking leeches and are refusing to engage with the reality that their existence doesn't change anything other than giving you the option to pay $200 and skip the bullshit. I'm not asking you to like them, I'm just telling you that not much would be different if they were gone.
If I force my way to the front of the queue at every store in town, evade purchasing limits, buy all the baby formula before anyone else can, and then offer to sell it at a premium, I’m absolutely forcing my way in-between the retailer and the customer.
That’s not a service.
Now, nobody needs to buy a PS5, but the fact that a PS5 isn’t a required to sustain life doesn’t magically transmute scalping into a service.
> their existence doesn't change anything other than giving you the option to pay $200 and skip the bullshit
They are responsible for the bullshit. Of course it changes things.
How is it so hard to understand that someone creating an additional, artificial market barrier to extract rent is also making it harder for anyone else to buy the product in the first place?
I signed up with Sony to sit in the queue to buy one PS5. My signup is attached to my PSN account to help prevent scalping.
It cost Sony money to implement that queueing system and to fight scalpers.
Sony is losing licensing revenue on consoles because scalpers are eating into what would normally be spent purchasing games.
Sony is losing customer goodwill because scalpers are forcing themselves in-between Sony and their customers.
More of Sony’s customer base is frustrated and more likely to abandon purchasing the product altogether —- even when supply issues are resolved — because they have to compete with scalpers.
It’s not a fucking service, and we’d all be better off by extending existing ticket scalping laws and the CFAA to vigorously prosecute these absolute useless low-lifes that should be unceremoniously kicked back into whatever minimum wage gutter they crawled out of.
>these absolute useless low-lifes that should be unceremoniously kicked back into whatever minimum wage gutter they crawled out of.
If your perception of this situation is that minimum wage "useless low-lifes" should kicked back into the gutter because you have this logically unsound idea that it would be easier to buy a PS5 if scalpers didn't exist, you've lost the plot. Your understanding of the demographic that is doing this is wrong, and even if it wasn't, you have completely uncalled for contempt for a class of people who are trying to do better for themselves (or maybe even just trying to make rent and groceries).
If you're going to leave another comment hollering about rent seeking or how scalpers singlehandedly create this problem, but refuse to even acknowledge that you've already been told:
>The scalpers are selling them to somebody -- that somebody would have just bought at MSRP and you would still have to do what I mentioned above.
>because the scalpers definitionally need somebody to buy everything that they do. The demand isn't erased just because they don't exist.
>The fact that scalpers are still buying consoles means they're still selling them. That means if the scalpers didn't exist consoles would still be sold out, it would just be individuals following twitter accounts to spam refresh for a single console instead of 10.
I'm just going to ignore it, so you can save yourself the typing. I'm trying to give you the benefit of the doubt but it looks a hell of a lot like you don't have interest in a good faith discussion.
You’re purposefully ignoring that they actively create and exacerbate market inefficiencies by making it difficult for manufacturers and retailers to manage demand effectively, and by inserting themselves as a middleman to extract their rent.
> … completely uncalled for contempt for a class of people who are trying to do better for themselves (or maybe even just trying to make rent and groceries).
How is it uncalled for? They’re useless trash making money by virtue of being willing to take advantage of others, not because they’re contributing anything of any value in any form.
They produce nothing and provide nothing of value. The only skill required is a lack of moral scruples.
So yes, kick the useless trash — and their enablers — back to the gutter they crawled out of.
And for good measure, prosecute them under the CFAA once they’re there.
This doesn't add up.
Every person who buys a PS5 from a scalper for $700-$800 would also buy it for MSRP at $500, unless they are insane. Demand would outstrip supply even in the absence of scalpers, because one PS5 would be bought at MSRP from a retailer for every one that would have otherwise been bought and then sold by a scalper.
The only kink is that because PS5s immediately sell out at a price of $500, people who don't have the time to camp checkouts and/or want the item immediately are shit out of luck. However, they could pay a scalper an extra $200 to do that for them, because that's the value of the time they would lose acquiring the PS5, or the value they would miss out not having the PS5 immediately. In economics parlance, this is a service. You can call it something else if it makes your feel better. Either way, scalper activity cannot oversell the demand for a PS5 beyond not accurately modelling the sales you would lose from customers not wanting to deal with the effects of illiquidity on the market. The only thing scalper activity misrepresents if your MSRP is below what they're charging is the customers who won't buy your product at all if you're constantly sold out. Scalpers do not change forecasts.
The fact that scalpers can sell the consoles for a much higher price shows that there is no market equilibrium with respect to the prices that the console vendors set. To achieve this, console producers could choose two strategies:
a) increase production
b) increase prices
a is impossible because of chip shortages, so b would be the way to choose to achieve "supply = demand" (i.e. everybody who is willing to pay the market price will get a console). Since console producers are not willing to do this move (perhaps for "marketing reasons" à la "our console is this cheap"), scalpers will make use of this market inefficiency, and ensure that the prices are those where there is a market equilibrium.
So, scalpers change the situation from "there is more demand than supply" to "supply = demand", making the market balanced.
Thus, the existence of scalpers is rather are sign that the console producers chose a price that is too low. The existence of scalpers is thus a mere symptom of the bad pricing decision of the console producers.
I don't see how this solves the problem: what prevents the people who want their iGadget faster paying a larger price to a scalper?
> But being able to put your money down today and see that your new iShiny will be delivered in 6-8 weeks helps mitigate FOMO
As far as I am aware, there do exist (even quite some) vendors who offer the option of paying immediately and sending you the new XBox or PlayStation as soon as they get their delivery. This is a queuing system.
>> > But being able to put your money down today and see that your new iShiny will be delivered in 6-8 weeks helps mitigate FOMO
That is my answer.
> As far as I am aware, there do exist (even quite some) vendors who offer the option of paying immediately and sending you the new XBox or PlayStation as soon as they get their delivery. This is a queuing system.
The difference between those and what Apple is doing is that Apple gives you fairly accurate estimate on when your iShiny will ship, and Apple prioritizes their direct to consumer inventory to make sure those ship times remained reasonable even for their most in demand products at the height of the silicon shortage in 2021. Most of the online stores I've seen offering queues are smaller retailers without enough pull to get consistent inventory from manufacturers, and being the only sellers offering a queue at all meant they got flooded with more orders than their meager allotments from those manufacturers could ever hope to fulfill.
Alternate character interpretation: these companies understand that this is a reasonably sustainable price for their customer base, that moving away from those "bad pricing decisions" will alienate their customers, and that scalpers should be put in trash skips and rolled down steep hills.
Not every profit need be maximized immediately and without hesitation and scalpers need not exist. More than one thing is allowed to be true.
It's not sustainable. It's being sold for too low relative to demand, so they would all just be sold out at that price. The scalpers don't change the supply.
>that moving away from those "bad pricing decisions" will alienate their customers, and that
The customers can choose to be irrationally angry about whatever they want.
>scalpers should be put in trash skips and rolled down steep hills.
What is all this anger for? We're not talking about scalping food and water here. These are skinner's boxes. Time wasting machines. It's all just a locked-down waste of silicon that will not be reused and in another ten years everyone will be throwing their PS5s out for a newer console that does the exact same thing.
You want a PS5? You want an Xbox? Buy a PC with integrated graphics. it's the same damn thing, except it will actually be useful for something after you're done playing games on it.
>Not every profit need be maximized immediately and without hesitation and scalpers need not exist. More than one thing is allowed to be true.
It doesn't matter what your opinion of scalpers is. So long as people misvalue things on the open market, there will be traders ready to make a quick buck off of their ignorance.
> The scalpers don't change the supply.
They control it, they constrict it -- how would you describe it?
> So long as people misvalue things on the open market, there will be traders ready to make a quick buck off of their ignorance
It's not an open market -- it's been/being manipulated (trivially, apparently) by the scalpers to suit their ends.
What is the true value that the people are ignorant of? Why do you think there is such a discrepancy?
How is "making a quick buck" by conning the ignorant morally justifiable? How does it add value to society?
They buy an undervalued commodity and resell it at its "true" market value. They hardly restrict the supply: if they fail to get rid of their inventory, then that becomes a loss for them.
>It's not an open market
It is an open market, anyone is free to trade the commodity. When you have a centralized entity limiting who can trade and enforcing price controls, that's when the market is no longer free.
>it's been/being manipulated (trivially, apparently) by the scalpers to suit their ends.
How is it manipulation? They're just buying and reselling a commodity. Are you implying that the people buying from scalpers are being manipulated into making an uninformed business decision? I think the people buying from scalpers understand what they are doing, regardless of how it might anger you that you've been priced out of the market.
It's truly a free market. If the consumers decided that the value of the commodity is less than or equal to MSRP, then no one will buy from scalpers. The traders bear the costs of redistribution and the risk associated with keeping their inventory, so they would certainly lose money in that case.
It's ultimately the consumers that decide to enable scalping, the consumers decide for themselves how valuable the commodity is.
>What is the true value that the people are ignorant of? Why do you think there is such a discrepancy?
As the other commenters here have discussed, the price at which the manufacturer is selling at is misaligned with the supply/demand equilibrium for their commodity. Why? because the assumption is that a higher MSRP will anger their long-standing customers. So the manufacturer is forced to act ignorant to the forces at play (by people like you I suspect, who try to ascribe "morality" to the actions of individuals at the expense of the bigger picture).
This current environment creates a system of adverse incentives which profits the trader at the expense of the manufacturer. If the manufacturer increased prices, they could put some of that capital towards increasing production capacity, they could spend that capital on R&D, they could use that money to subsidize the entry cost for future consoles. Those are all things that and ultimately help the consumer as opposed to some weird third party who has to step in and stabilize the market.
>How is "making a quick buck" by conning the ignorant morally justifiable? How does it add value to society?
Traders propagate price signals and cushion volatility. They usually do so at a significant risk in return for razor-thin profits, because the value they add is usually low. It's only in cases of extraordinary mass ignorance that traders can profit so much by doing so little.
One might also ask how a fox "making a quick meal" out of a rabbit benefits the system of nature. The forces of nature care not of the woes of an individual, nor do the forces of the free market. Just as predators regulate the population of prey within nature, traders regulate the price signals of producers within society.
>What is all this anger for?
This is the type of reasoning that ultimately enables the dysfunctional forms of communism. It all goes back one's willingness to moralize over the actions of individuals without respect for the larger incentives at play.
It's nothing specific to recent supply chain disruptions. The problem is that manufacturers have relatively inflexible capacity. Scaling foundry capacity isn't as easy as scaling cloud resources; they can't just decide to produce 10x as much product in a given month. Simultaneously, these are status goods for which consumers place a high premium on having the latest and greatest. Even with perfectly functioning supply chains, the market price for such goods is always going to be high on release and taper off as supply increases.
This is lower than the XBox+bundle price, even if you wouldn't buy the subscription, because you do get the subscription, no one will pay the same price for just the XBox, my guess would be a small market for half the subscription price, which is barely worth scalping over.
And yeah, I'm pretty sure the sub was tied to the Xbox itself, so you'd have to resell everything.
Are you a programmer that wants some internet fame and name notoriety?
Write an open source bot that is free for everyone to use which duplicates these kinds of features, but is geared more towards the average person who just wants to score a single ps/5.
Flood the bot market with competition.
Because if they do this, the response will be "Sony is greedy charging people all this money for something that only costs them $x to make."
I am not accusing you of this, just linking this to statements and thoughts that often arise in this context. A very typical response to questions about why something costs what it does is, "It's just supply and demand. Econ 101." But it's not just Econ 101. Supply and Demand is covered in Econ 101, but economic activity is far more advanced than supply and demand. Brand perception, customer good will, supplier agreements, retailing agreements.. all of these are major factors in determine "what" the price of an item is when it appears on the shelf. This is the work of entire teams at companies as big as Sony.
"then stop buying it"
Sony will never actually say this. But this would be the 'cynical capitalist' response.
It's far better to let the scalpers take the reputational hit.
"This company is price-gouging me due to temporary circumstances" definitely impacts brand perception, customer goodwill, etc
If they make 50$ extra on the console, but the buyer buys no games, or buys a bad one and decides not to buy more on the console, that's a net loss right out, and an opportunity lost because the console didn't go to someone who would buy two, one of which they loved and caused them to buy three more.
It's the opposite of the iPhone situation - apple makes the majority of its money (on average) from the phone sale itself - people wait in line to give apple 30% off the top, even if they never buy an app or a song. So apple having a shortage slows down their profit this quarter, sony having a shortage slows down their loss this quarter and their profit 2023Q2.
It's short-term vs long term value of a customer, and the console makers are arguably making a better decision given the lifespan of a console.
If they want to milk it the best is focus on higher cost bundles etc until manufacturing catches up.
Every popular console has had issues like this, I remember the Wiifinders being a really big deal for two Christmases in a row.
But what of consumer goodwill? What of lost downstream profit from games and services sales if people decide to forgo a console due to the MSRP?
Some people may be willing to stomach the price from resellers, would they if it was Sony etc. pricing it at that level?
You might benefit from reading this article on Price Anchoring:
https://www.priceintelligently.com/blog/bid/181199/price-anc...
Consumers don't see it this way. They often latch on to completely "irrational" cues in forming opinions of a brand. See: "Apple Tax." Note: I put "irrational" in quotes to indicate that consumers exhibit un-intuitive behavior. It's not actually a value judgement about the behavior itself, only indicating that in a purely supply-and-demand driven market environment, these behaviors would not be exhibited.
If the PS5 equilibrium price is say... €800 (the buy it now price on ebay right now), and Sony raises prices to that level, some number of customers are going to throw in the towel and buy an xbox, with the loss of €120/yr PS plus revenue, 30% of their game purchases, etc. to MS.
Is this number of people and their spend higher than Sony will gain from pocketing what scalpers currently are? Clearly at Sony HQ they either suspect it will be or are too scared to find out.
Compare the GPU shortage where both major manufacturers were affected and hence retail prices did go up and per AIB card makers, at least part of that was nvidia and amd. Because their market didn't have an instock competitor to worry about, and a big chunk of their market (miners) were more economically focused on expected returns vs cost, while consumers for entertainment products may not look at it from such a calculating perspective.
I would think it means less disposable income for whoever gets the newer systems. Also, nobody will actively be playing them and spending money on microtransactions when they're in the scalpers' possession.
I'm baffled because it feels like this would instantaneously fix the scalping problem and it's not particularly difficult to implement.
As an example I lived in a building that had boxes for mail and unit numbers that differed (I think it was for privacy or something, but you could put both or just one and the mail would get there). So a package going to Unit 1A or Box 28 were going to the same place. Add in the fact that there are multiple ways to write this out: #1A, Apt. 1A, Apartment 1A, 1A, Suite 1A
Then you can game the box: PMB 28, #28, bx28.
Then you can start gaming the names: F Middle Last, First Middle, Last First. Make up a name, or use someone else’s.
Anything you assume about addresses probably has an exception.
And then, yes, there are private mailbox services that will just receive packages on your behalf.
The simpler way to get around scalping/arbitrage is to raise prices so that those who are producing the product are the beneficiaries of the higher price. They can then turn around and tell customers that they are taking that revenue and putting it back into producing more widgets.
However, there are certain industries where a lack of supply and rewarding middlemen is actually part of the business strategy. In fashion, entertainment, and luxury goods there is a certain cachet in obtaining items that other people cannot.
I have 4 credit cards. My dad has 23. I had a friend who had over 100 when he was loading up airline miles. Let's not forget anyone can go to walmart and pickup a visa/amex gift card for a unique identifier.
And I thought of this within 30 seconds of reading your post. Imagine a dedicated scalper..
If you want to buy a console off the shelf you have to compete with other buyers, but sometimes there's a separate pool of consoles reserved for Xbox All Access subscribers.
Subscribing to it isn't something you should really do if you're intending to flip the console and it's harder for scalpers to scale up. It requires a credit check and on-going payments, plus it includes Game Pass Ultimate which cannot be resold as it's part of the cost of the subscription which could eat into scalper profits. Attempting to scalp through Xbox All Access is probably a losing proposition unless you were to go down darker more illegal paths.
Let me buy my OLD Switch directly.
I actually tried writing a simple checkout bot for Bestbuy. After a couple of hours of fiddling around, I concluded that buying a bot would be much easier than figuring out how the BB API works and keeping up with any changes.
Disclaimer: I never ended up buying a bot - it was just a learning activity.
Not a bad deal when the market is irrational.
Cuts out the 15-30% cut your retailers are taking, boggles scalpers, guarantees your fans get what they want, without anyone getting ripped off.
I don't understand the problem. I've had everything from a spanner to a chair shipped directly from Chinese factories. What's stopping them doing the same with high end consumer electronics?
I’ve also noticed that the app prices are often higher than the store shelf prices … even if you order for pickup. So I have my eye on them.
"stop telling consumers to save energy when these companies pollute as much as ### people" (omitted: in the course of producing half the world's fertiliser or whatever)
You see it all the time