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The thing I never really understand about scalping is why the original retailer/supplier wouldn't simply raise their prices. If graphics cards are consistently

by mdasen 5y ago

The thing I never really understand about scalping is why the original retailer/supplier wouldn't simply raise their prices. If graphics cards are consistently out of stock, why not simply raise prices? We're seeing that with cars as many dealerships raise prices on their inventory rather than letting people buy them at MSRP and then re-sell them for a profit. If you're selling the items, why would you want to give that profit to scalpers? Is the issue that the seller doesn't know that demand so far exceeds supply? With something like Tickle Me Elmo, one could assume that they didn't know in advance, but could have quickly changed the price from $20 to $80 and dampened demand as the season went on. Could sites potentially predict demand by having some pre-registration for product sales and then predict the price better based on that? For products that are going to "drop", it could be beneficial to consumers (at least ones that have money) and sellers to have that. As one collects data, one could start predicting what price would leave you without too many scalpers based on pre-registration numbers. Maybe the issue is that many things might be more winner-take-most or winner-take-momentum/word-of-mouth/hype markets. If everyone saw Tickle Me Elmo at $80, some other toy would get all the hype as the hot-item of the year and they wouldn't sell any. Still, for something like graphics cards, that seems less likely to be the case. People don't buy graphics cards because it's a hot item. They buy them for practical purposes. I guess one could argue that if certain crypto markets saw graphics cards as having higher prices long-term, they might try and migrate off graphics cards which could lower the demand long-term, but it seems like graphics card companies are more interested in serving gamers. It's just always seemed odd that sellers would allow people to arbitrage their pricing like that - especially on known hot items.

deleted 5y ago
[deleted]
ceejayoz 5y ago
In the case of a band, openly pricing out a bunch of your loyal fans isn't a great idea.
hattmall 5y ago
Manufacturer sells to distributor who sells to retail. Retail is constrained by pricing agreements. They can't sell at a higher price because the manufacturer directs the retail price. Scalpers are really just improving market place efficiency, but manufacturers know that demand is variable so they don't want to strictly limit products to the wealthiest consumers because there is plenty of data that doing so slows wider adoption. It's all about marketing and we know that right now affordability and limited quantity is an ideal mix.
- Croftengea 5y ago
  > They can't sell at a higher price because the manufacturer directs the retail price. Maybe this is the case in the US but definitely not in the EU.
  - alisonkisk 5y ago
    It's illegal in USA.
acomjean 5y ago
I thinks some retailer don't want to irritate they're customers. Microcenter has signs all over the store indicating one video card per customer per month. They want to sell the other components. I'm always surprised that online sellers don't just set up a queue for people who wanted to buy. (thank you steam and steam deck) Best Buy is allocating PS5s to people in their Best Buy Club... which of course is $200/yr. https://arstechnica.com/gaming/2021/10/best-buy-offers-exclusive-access-to-ps5-stock-if-you-pay-extra-200-a-year/ https://arstechnica.com/gaming/2021/10/best-buy-offers-exclu...
- rdtwo 5y ago
  Yeah but you can get one per drop. Worth the money imo
kube-system 5y ago
People tend to shoot the messenger when market forces are not in their favor. Any more profit that a retailer gets from raising prices on this tiny part of their inventory could get them more than that amount of flak for raising their own prices. I think many retailers are happy moving 100% of their product at normal margins while letting scalpers take all the flak for price increases. Graphics cards are just one item of many on the shelf for most retailers.
- toomuchtodo 5y ago
  Didn’t Nvidia attempt to market silicon that would slow crypto mining to prioritize gaming customers? That doesn’t sound like they’re happy to be cleared out of inventory, but would rather cater to a specific demo that is more price sensitive. Good will has tangible value. https://blogs.nvidia.com/blog/2021/02/18/geforce-cmp/ https://blogs.nvidia.com/blog/2021/02/18/geforce-cmp/
  - kube-system 5y ago
    I was referring to retailers, not manufacturers. Obviously, to Nvidia, the economics of GPUs and the market placement of those products is of utmost interest -- it's their whole business.
snarf21 5y ago
I think you are missing the risk. The supplier could raise prices but there comes a point when demand slows and now the retailer is stuck with inventory. If every one else is selling below MSRP and you are selling for double, you won't get business until everyone else is sold out. Most retailers and wholesalers want a certain amount of basis points. They simply want to sell everything for X% more than they paid. They don't want to be in the speculation game. Graphics cards is mostly a function of re-purposing the supply for something it wasn't really intended for. Look back at beanie babies when they were a craze. As a retailer, you wouldn't want to get stuck with inventory you couldn't even move at a loss. I do agree that they could be a little more aggressive with selling at MSRP if demand is high and drop back to "sale" prices if demand slows. I think there are probably some legal things for some products that you can't sell for over MSVP or for less than some minimum advertised price. Additionally, some of these products can be seen as "loss leaders" in the sense that they become a trusted source for "good deals".
- alisonkisk 5y ago
  They can lower the price if sales slow.
kmeisthax 5y ago
The problem with just raising MSRP is that their pricing is far too transparent to do that. The brand damage caused by getting ahead of scalpers would be higher than the consumer surplus taken. Not to mention that, for at least some classes of goods, raising prices in response to demand is considered gouging and prohibited by law. Furthermore, for at least some of these goods[0], using a market-clearing price would actively harm other business goals. In the example of game consoles, Sony and Microsoft aren't trying to sell you a PS5 or Xbox Series X because it makes them money. In fact, they take a loss on them even in "normal" market conditions. The point of the console is to lock you into a software ecosystem that they can charge developers a 30% tax in order to access. Most of the money made from selling graphics cards is not by selling individual cards in retail packaging. The DIY and upgrade card markets are actually quite small. Most of the money comes from OEM design wins, system-integrator sales, and so on - markets in which the consumer is buying a fully-functional computer rather than parts. What seems to have ultimately happened is that companies have used the introduction of new products to set new, higher prices. For example, Apple's 2021 product launches have consistently increased pricing over their replacements from prior years. [0] notably game consoles, though merchandise like the Tickle Me Elmo would also qualify
- nybble41 5y ago
  > In the example of game consoles, Sony and Microsoft aren't trying to sell you a PS5 or Xbox Series X because it makes them money. In fact, they take a loss on them even in "normal" market conditions. The point of the console is to lock you into a software ecosystem that they can charge developers a 30% tax in order to access. This is a good argument for producing more consoles, but if there isn't enough supply to clear demand then getting more of the limited stock of consoles into the hands of consumers with less money to spend on gaming is not likely to increase overall spending on the related software.
- brodock 5y ago
  > Sony and Microsoft aren't trying to sell you a PS5 or Xbox Series X because it makes them money. In fact, they take a loss on them even in "normal" market conditions. And yet, they dont seem to care, as they could have implemented a system to limit one console per account sort of solution. I would bet someone is just "working their KPI" at some level.
deltree7 5y ago
There is also Customer Lifetime Value. By raising prices, you may lose some of your customers, who unfairly penalizes the retail/manufacturer especially when politicians (and reddit and HN) happily side with sub-optimal fixed price solutions. Pitchforking is real and very dangerous in the modern era. So, retail / manufacturer have to let true marketplace like scalpers to provide the needed correction (albeit inefficiently).
- notahacker 5y ago
  The correction isn't "needed"; the same inventory gets sold to the same number of consumers, the scalpers just take a bit more money from front running them, reducing the net benefit of owning of the final product. And Nintendo is more worried about ensuring there's a healthy market for games than "pitchforking" when it sets its RRP. Scalpers mean they sell less.

by mdasen 5y ago

deleted 5y ago

[deleted]

ceejayoz 5y ago

In the case of a band, openly pricing out a bunch of your loyal fans isn't a great idea.

hattmall 5y ago

Manufacturer sells to distributor who sells to retail. Retail is constrained by pricing agreements. They can't sell at a higher price because the manufacturer directs the retail price. Scalpers are really just improving market place efficiency, but manufacturers know that demand is variable so they don't want to strictly limit products to the wealthiest consumers because there is plenty of data that doing so slows wider adoption. It's all about marketing and we know that right now affordability and limited quantity is an ideal mix.

Croftengea 5y ago
> They can't sell at a higher price because the manufacturer directs the retail price. Maybe this is the case in the US but definitely not in the EU.
- alisonkisk 5y ago
  It's illegal in USA.

acomjean 5y ago

I thinks some retailer don't want to irritate they're customers. Microcenter has signs all over the store indicating one video card per customer per month. They want to sell the other components. I'm always surprised that online sellers don't just set up a queue for people who wanted to buy. (thank you steam and steam deck) Best Buy is allocating PS5s to people in their Best Buy Club... which of course is $200/yr. https://arstechnica.com/gaming/2021/10/best-buy-offers-exclusive-access-to-ps5-stock-if-you-pay-extra-200-a-year/ https://arstechnica.com/gaming/2021/10/best-buy-offers-exclu...

rdtwo 5y ago
Yeah but you can get one per drop. Worth the money imo

kube-system 5y ago

People tend to shoot the messenger when market forces are not in their favor. Any more profit that a retailer gets from raising prices on this tiny part of their inventory could get them more than that amount of flak for raising their own prices. I think many retailers are happy moving 100% of their product at normal margins while letting scalpers take all the flak for price increases. Graphics cards are just one item of many on the shelf for most retailers.

toomuchtodo 5y ago
Didn’t Nvidia attempt to market silicon that would slow crypto mining to prioritize gaming customers? That doesn’t sound like they’re happy to be cleared out of inventory, but would rather cater to a specific demo that is more price sensitive. Good will has tangible value. https://blogs.nvidia.com/blog/2021/02/18/geforce-cmp/ https://blogs.nvidia.com/blog/2021/02/18/geforce-cmp/
- kube-system 5y ago
  I was referring to retailers, not manufacturers. Obviously, to Nvidia, the economics of GPUs and the market placement of those products is of utmost interest -- it's their whole business.

snarf21 5y ago

I think you are missing the risk. The supplier could raise prices but there comes a point when demand slows and now the retailer is stuck with inventory. If every one else is selling below MSRP and you are selling for double, you won't get business until everyone else is sold out. Most retailers and wholesalers want a certain amount of basis points. They simply want to sell everything for X% more than they paid. They don't want to be in the speculation game. Graphics cards is mostly a function of re-purposing the supply for something it wasn't really intended for. Look back at beanie babies when they were a craze. As a retailer, you wouldn't want to get stuck with inventory you couldn't even move at a loss. I do agree that they could be a little more aggressive with selling at MSRP if demand is high and drop back to "sale" prices if demand slows. I think there are probably some legal things for some products that you can't sell for over MSVP or for less than some minimum advertised price. Additionally, some of these products can be seen as "loss leaders" in the sense that they become a trusted source for "good deals".

alisonkisk 5y ago
They can lower the price if sales slow.

kmeisthax 5y ago

The problem with just raising MSRP is that their pricing is far too transparent to do that. The brand damage caused by getting ahead of scalpers would be higher than the consumer surplus taken. Not to mention that, for at least some classes of goods, raising prices in response to demand is considered gouging and prohibited by law. Furthermore, for at least some of these goods[0], using a market-clearing price would actively harm other business goals. In the example of game consoles, Sony and Microsoft aren't trying to sell you a PS5 or Xbox Series X because it makes them money. In fact, they take a loss on them even in "normal" market conditions. The point of the console is to lock you into a software ecosystem that they can charge developers a 30% tax in order to access. Most of the money made from selling graphics cards is not by selling individual cards in retail packaging. The DIY and upgrade card markets are actually quite small. Most of the money comes from OEM design wins, system-integrator sales, and so on - markets in which the consumer is buying a fully-functional computer rather than parts. What seems to have ultimately happened is that companies have used the introduction of new products to set new, higher prices. For example, Apple's 2021 product launches have consistently increased pricing over their replacements from prior years. [0] notably game consoles, though merchandise like the Tickle Me Elmo would also qualify

nybble41 5y ago
> In the example of game consoles, Sony and Microsoft aren't trying to sell you a PS5 or Xbox Series X because it makes them money. In fact, they take a loss on them even in "normal" market conditions. The point of the console is to lock you into a software ecosystem that they can charge developers a 30% tax in order to access. This is a good argument for producing more consoles, but if there isn't enough supply to clear demand then getting more of the limited stock of consoles into the hands of consumers with less money to spend on gaming is not likely to increase overall spending on the related software.
brodock 5y ago
> Sony and Microsoft aren't trying to sell you a PS5 or Xbox Series X because it makes them money. In fact, they take a loss on them even in "normal" market conditions. And yet, they dont seem to care, as they could have implemented a system to limit one console per account sort of solution. I would bet someone is just "working their KPI" at some level.

deltree7 5y ago

There is also Customer Lifetime Value. By raising prices, you may lose some of your customers, who unfairly penalizes the retail/manufacturer especially when politicians (and reddit and HN) happily side with sub-optimal fixed price solutions. Pitchforking is real and very dangerous in the modern era. So, retail / manufacturer have to let true marketplace like scalpers to provide the needed correction (albeit inefficiently).

notahacker 5y ago
The correction isn't "needed"; the same inventory gets sold to the same number of consumers, the scalpers just take a bit more money from front running them, reducing the net benefit of owning of the final product. And Nintendo is more worried about ensuring there's a healthy market for games than "pitchforking" when it sets its RRP. Scalpers mean they sell less.