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Why retail scalping is still big business – and what to do about it


Why retail scalping is still big business – and what to do about it

In the world of commerce, scalping has been an issue since long before the internet gave resellers a more anonymous, armchair-friendly, outlet for their goods.

The principle is simple: products which are released to market with a finite volume are bought early by scalpers – often in quantity – and sold on later at higher prices.

Concert tickets are the go-to product when we think of the practice, but are by no means the only place we see it happen – with special edition records, new technology items and fashionable clothing all being prime targets too.

The latest story in scalping has seen Nintendo’s reissue of their SNES console become the target of online resellers. Since the product announcement in late June, scalpers have been using bot technology to place pre-orders as soon as they hit the primary market (at Toys R Us, Argos et al.) and promptly advertising them at two or three times the price on auction sites such as eBay.

Those with their eyes on this still-unfolding story have seen eBay remove listings of the console [1], and a Nordic distributor come under fire for supposedly scalping itself [2].

But why is scalping still such big business in the world of digital goods and ecommerce? And what can retailers do to combat it?

Finite products on infinite shelves – it’s big business

Nintendo’s ongoing drive to re-release classic consoles in limited editions isn’t a lone endeavor. There’s a larger trend, which seems counterproductive in an era of retail where shelf space isn’t restricted by physical shop floors, at a time when it’s easier than ever to produce in line with demand (thanks to automated re-stocking etc.), and when digital versions of products are often replacing physical ones (books, albums and films).

But retailers and marketers are seeing great value in incorporating limited editions into their business plans. Just last year, Luth Research published Why Your Business Needs a Limited Edition Strategy [3] which highlighted the potential of such techniques to get results, including an “increase in first-time customers, a boost in summer sales, more buzz on social media”.

It’s not difficult to see how the SNES Classic may be achieving all those ends. And we can expect more manufacturers and stores to try it out – which will surely tempt more scalpers.

Problematic for consumers?

Of course, this can be frustrating for consumers – prices become inflated, and it becomes difficult for shoppers to simply acquire what they want. Retailers need to tread carefully with such practices lest they infuriate parts of their customer base who might become disheartened and spend their hard-earned cash elsewhere.

Like the products themselves, the desire to own something limited-edition is finite.

The law strives to keep up

Automated software – or bots – are becoming synonymous with online scalping. The rise of such techniques is seeing governments move to clamp down on the practice, as evidenced by recent proposals in March this year [4] from the UK’s Department of Culture, Media and Sport to impose heavy fines on anyone found to be using such software to bulk buy items ahead of legitimate shoppers.

With that said, at this stage these fines look to only affect ticket touting rather than tech products like the SNES. And there’s little evidence of any other moves to punish scalpers more comprehensively – even if they aren’t found to be using bots.

Combating scalping manually

The British government are, however, putting some pressure on resale websites. Where concert and theater tickets are concerned, sites such as Viagogo and GetMeIn need to show they are being more proactive in reporting scalping behavior. There will also be higher scrutiny on listings which look to be breaking the conditions under which original tickets are sold.

With the latest SNES scalping problem, eBay appeared quick to delist scalped consoles, in a seemingly manual attempt to ensure the items weren’t viewable to shoppers. It does seem feasible to be able to invest in administrative staff to hunt down scalped items and block them.

But a later interview with an eBay spokesman at Eurogamer [5] showed the reason for the removals was more to do with the release date of the console being more than 30 days away – rather than the items being resold for ridiculous mark-ups or for having been obviously scalped.

Combating scalping with data and automation

Amazon have been seen to be taking action too, retroactively limiting any orders of the SNES Classic to one per person even for shoppers who had already attempted to buy more than one. Presumably, future items will see this limit imposed from the outset.

There are other examples of automatic methods for stopping – or at least lessening the frequency of – scalping. Back in March, Ticketmaster introduced their Verified Fan [6] software which requests that those buying tickets input their personal information including their phone number, email and even links to social media profiles to ensure that they are human rather than a scalping bot.

The software then crawls your past ticket-buying habits, and pieces together your online behavior to verify whether you are a legitimate music fan buying this ticket for yourself, or a bot scalper looking to sell it on later.

The move by Ticketmaster points to a future where combating scalping happens at the source, rather than placing the onus on trying to delist scalped items after they’ve already been purchased.

While the government and secondary sites clearly have a role to play, it is perhaps the primary sites using data and automation to ensure buyers are human – beyond simple captchas – which will make the biggest impact.

Primary retail sites have the technology already. It is used across digital marketing to improve user experience, to target advertising, and to retarget marketing messages after cart abandonment.

There’s no reason it can’t also be used as the first line of defense against scalping in tech and other retail categories.

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