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When people charge 10-20X more for something that could have been purchased in a local store before the “arbitrage” businesses purchased all the inventory, that

When people charge 10-20X more for something that could have been purchased in a local store before the “arbitrage” businesses purchased all the inventory, that is clearly price gouging.

ikeboy 7y ago
It depends on the details. The recent NYT article about buying in stores and selling online mentioned that more than 50% of the sale price could be eaten up in shipping and other fees.
- Erikun 7y ago
  It also mentioned them making tens of thousands of dollars in profit in a short time.
  - ikeboy 7y ago
    And tens of thousands in losses for products that were stuck. As I mentioned in my comment on the original article, the required margin goes up to account for risk. https://news.ycombinator.com/item?id=22576051 https://news.ycombinator.com/item?id=22576051
- Dangeranger 7y ago
  That’s because his business is inefficient. If he had left the products in place there wouldn’t be a scarcity in his local region that he then could profit from. He helped create the scarcity, and then profited from it.
  - ikeboy 7y ago
    He's not necessarily selling to the same region as it was bought from, as the original article mentions.
- rickyc091 7y ago
  "A nearby liquidation firm was selling 2,000 “pandemic packs,” leftovers from a defunct company. Each came with 50 face masks, four small bottles of hand sanitizer and a thermometer. The price was $5 a pack. Mr. Colvin haggled it to $3.50 and bought them all." "He quickly sold all 2,000 of the 50-packs of masks on eBay, pricing them from $40 to $50 each, and sometimes higher. He declined to disclose his profit on the record but said it was substantial." $100,000 gross revenue ($50 each), let's say shipping, fees, and price variance were 25%. That's still $75,000 for a $7,000 investment. 10x returns.
  - ikeboy 7y ago
    Have you subtracted all the losses on the products that didn't sell? When I sold on Amazon, every so often I'd be able to 10X my money on a product, but it was rare and balanced out by the many more times that I would lose money on a product or have to write off completely because it didn't sell.
    - geofft 7y ago
      So, from a "does the market optimize for good outcomes" perspective, that seems even worse - goods (that are already produced) get hoarded and sometimes they don't even sell. This seems like it's not accomplishing the goals very well.
      - ikeboy 7y ago
        To be specific, the market+price gouging laws+Amazon blocking listings because of those laws is suboptimal. If Amazon hadn't blocked the listings, and more to the point, if Amazon had been known to act reasonably in prior instances, then there'd be more investment and people would accept lower returns. I know firsthand people told me they weren't buying these stuff wholesale to sell on Amazon because they expected Amazon to cause issues, and they were right. I think if there'd be no price gouging laws and everyone expected to be allowed to sell on Amazon, people would end up pricing lower and there'd be more supply and competition. There's also uncertainty because when Amazon was banning for price gouging they never made it clear what price level counted as gouging. Wholesale prices shot up, and it was unclear whether selling at a reasonable margin, but based on a higher cost, would be considered gouging.
- deleted 7y ago
  [deleted]

When people charge 10-20X more for something that could have been purchased in a local store before the “arbitrage” businesses purchased all the inventory, that is clearly price gouging.

ikeboy 7y ago

It depends on the details. The recent NYT article about buying in stores and selling online mentioned that more than 50% of the sale price could be eaten up in shipping and other fees.

Erikun 7y ago
It also mentioned them making tens of thousands of dollars in profit in a short time.
- ikeboy 7y ago
  And tens of thousands in losses for products that were stuck. As I mentioned in my comment on the original article, the required margin goes up to account for risk. https://news.ycombinator.com/item?id=22576051 https://news.ycombinator.com/item?id=22576051
Dangeranger 7y ago
That’s because his business is inefficient. If he had left the products in place there wouldn’t be a scarcity in his local region that he then could profit from. He helped create the scarcity, and then profited from it.
- ikeboy 7y ago
  He's not necessarily selling to the same region as it was bought from, as the original article mentions.
rickyc091 7y ago
"A nearby liquidation firm was selling 2,000 “pandemic packs,” leftovers from a defunct company. Each came with 50 face masks, four small bottles of hand sanitizer and a thermometer. The price was $5 a pack. Mr. Colvin haggled it to $3.50 and bought them all." "He quickly sold all 2,000 of the 50-packs of masks on eBay, pricing them from $40 to $50 each, and sometimes higher. He declined to disclose his profit on the record but said it was substantial." $100,000 gross revenue ($50 each), let's say shipping, fees, and price variance were 25%. That's still $75,000 for a $7,000 investment. 10x returns.
- ikeboy 7y ago
  Have you subtracted all the losses on the products that didn't sell? When I sold on Amazon, every so often I'd be able to 10X my money on a product, but it was rare and balanced out by the many more times that I would lose money on a product or have to write off completely because it didn't sell.
  - geofft 7y ago
    So, from a "does the market optimize for good outcomes" perspective, that seems even worse - goods (that are already produced) get hoarded and sometimes they don't even sell. This seems like it's not accomplishing the goals very well.
    - ikeboy 7y ago
      To be specific, the market+price gouging laws+Amazon blocking listings because of those laws is suboptimal. If Amazon hadn't blocked the listings, and more to the point, if Amazon had been known to act reasonably in prior instances, then there'd be more investment and people would accept lower returns. I know firsthand people told me they weren't buying these stuff wholesale to sell on Amazon because they expected Amazon to cause issues, and they were right. I think if there'd be no price gouging laws and everyone expected to be allowed to sell on Amazon, people would end up pricing lower and there'd be more supply and competition. There's also uncertainty because when Amazon was banning for price gouging they never made it clear what price level counted as gouging. Wholesale prices shot up, and it was unclear whether selling at a reasonable margin, but based on a higher cost, would be considered gouging.
deleted 7y ago
[deleted]