The Weird Psychology Of People Fighting Those Who Resell Their Products

from the why-do-this? dept

Every so often, we hear a story about actions taken by someone who is just so upset about someone else doing something that it seems to border on obsessive. For example, when we hear about copyright holders who spend all their time sending DMCA takedowns -- while whining about how they're unable to produce new content and aren't making any money from sending all those takedowns. The obvious response is: maybe stop sending all those takedowns and focus on something that's actually productive, like creating new works and building a fan base willing to support you.

Recently, the Planet Money podcast had an episode with a similar story but in a different realm -- but it was just as stupid and wasteful. It was about this entrepreneurial couple who had created a cat toy product, which was becoming fairly successful through selling it on Amazon. And yet, they were completely freaked out by arbitrageurs. These weren't pirates or counterfeiters. Rather, they discovered that people were posting their cat toy to eBay (for a lot more money), and if someone bought, they'd just order it from Amazon, and have it ship directly to the buyer. I've heard of people having this happen to them -- where they'd order from one place and receive a shipment from Amazon instead (sometimes with the actual invoice price included...).

This is all perfectly legal. There's no law against reselling products. It's just arbitrage. But the couple, Fred and Natasha Ruckel, freaked out about this and spent a ton of time every day sending cease-and-desist letters to these eBay sellers.

First thing in the morning, check for arbitrageurs. Last thing at night, check for arbitrageurs, send out any cease and desists before or after. It was taking up an inordinate amount of time, and it was super stressful.

Ruckel does make a few valid points: the eBay arbitrageurs provide a less satisfying experience -- their sales pages don't look great and Ruckel wishes to have a better experience for the customers to boost brand loyalty. On top of that, the even more valid concern is that when people order via eBay for $60 and receive a box from Amazon showing the price was $40... they get pissed off. And often they return the product, and that leads to restocking fees that Ruckel has to pay -- plus just general hassle. That part is a valid concern, but from all indications this was still making them money.

And if it was really taking up so much time to send out these cease and desist letters -- and it was "super stressful" why not just drop it altogether? Why bother? Just focus on selling your products. Or, hell, just put your own product up on eBay. To be fair, while this is not mentioned in the podcast, in an article in Entrepreneur Magazine about this same story, it does note that he tried, briefly, to put the product up on eBay too, but whines that people still copied him:

This summer, Ruckel tried a new approach: He put his own product on eBay and titled it “All other eBay sellers are fake.” A few weeks later, he stumbled upon an eBay listing with a familiar title. “All other eBay sellers are fake,” it said. It wasn’t his, of course.

Someone had copied that, too.

But, uh, so what? Assuming that he posted them to eBay with the same price as his Amazon sales, then there shouldn't be a problem. All the arbitrageurs should be driven out of business, since his would be priced lower than the arbitrageurs. So who cares if they claim to be the legit provider, when people would likely flock to the cheapest one anyway? Nothing in this story makes sense.

Especially this last part. Ruckel apparently got so frustrated with the "stress" of dealing with arbitrageurs, that he yanked his stuff off of Amazon entirely... and saw his sales drop drastically.

We pulled out of the whole Prime shipping thing in May. And at that point, we were over 60,000 a month in sales. And in a blink, 60,000 went down to 25,000.

Planet Money asks them if it was worth it -- and they said that it was. Because "integrity."

F RUCKEL: Integrity is important to us.

N RUCKEL: And the stress factor...

F RUCKEL: And the stress...

N RUCKEL: ...Was completely removed.

F RUCKEL: So we removed all the stress.

Yeah, and you also removed more than half your business. Again, this reminds me of the person who claimed they were "wasting" half of their royalties sending DMCA takedown notices that weren't effective. Why do that? Why kill your sales just because someone else figured out a way to resell your product better than you have?

There's some weird psychology going on here. It reminds me of the classic economics class game, whereby two students (Student A and Student B) are selected by the professor, and Student A is given $10 and told to share some of it with Student B -- but if Student B rejects Student A's offer, then no one gets any money. Under such conditions, even if Student A offers Student B just $1 (keeping $9), Student B should take it. Both of them are better off than getting nothing. And yet, time and time again, Student B rejects offers that are seen as "too small." Basically, they feel insulted, cheated or ripped off -- even though that's ridiculous. It's a weird attempt to insert a "fairness standard" where it doesn't make any sense, and where "punishing" Student A is more "valuable" to Student B than the small payout.

It feels like something similar must be happening here. People like the Ruckels would prefer to punish others, making their own product harder to find and more difficult to buy, than to allow anyone else to possibly benefit from it. I get that it happens, but it still confuses me to no end why anyone could possibly think it's a good result.

Filed Under: arbitrage, arbitrageurs, e-commerce, online sales, reselling, strategy
Companies: amazon, ebay

Girl Scouts Teaching The Wrong Lesson By Banning Online Sales

from the unfair-competition? dept

Way back in 2002 and 2003 we discussed how the Girl Scouts of America prohibit selling their infamous cookies online. It seemed strange back then, as the entire purpose of the program is (supposedly) to teach the girls entrepreneurship skills, including "personal responsibility and how to manage money." I hadn't heard much about it since then, but here we are in 2009, and once again, business-savvy Girl Scouts are running into trouble selling cookies online.

Some have argued that since it's supposed to be about doing something in your community, selling online goes beyond that -- though, I'd argue that an online community can be just as much of a community as a local one. Anyway, in the case described in this article, the sales were limited to local residents anyway -- but the Girl Scouts are still upset about it. Mainly, the argument seems to be that it's somehow "not fair" for the other girls, but if the goal is to teach kids entrepreneurship skills, telling them that some big organization is going to make sure to keep others out of your market isn't exactly sending the right message.

Filed Under: cookies, girl scouts, online sales

Is The Physical Bookstore A Thing Of The Past?

from the may-finally-be-getting-there dept

It's been talked about for over a decade now, but are we finally reaching the tipping point for physical bookstores? Some are pointing out that Amazon's continued success in online sales represents an element of "creative destruction" for physical retailers, and a NY Times piece notes that plenty of bookstores are shutting down -- including some of the big name brands, such as Borders and Barnes & Noble.

What may be most interesting in the NY Times article, though, is that the blame isn't necessarily placed at online retailers directly -- but on the fact that online sites have made it much easier to resell used books. Thus, the argument goes, the market is now flooded with used books that individuals are selling out of their bedrooms, meaning that it rarely makes sense for anyone to pay full price for a new book anymore. It's an interesting argument -- and it's the type of argument we've seen made against used book sales in the past, and more recently that video game makers have been making concerning used video game sales.

However, it's not clear if this is really true. Past studies have shown that an active second hand market helps to boost the sales of new goods, because it makes those goods more valuable to folks who recognize they'll be able to resell them on the second hand market later. That may not be helpful to physical bookstore retailers, but those retailers have to learn to adjust with the times as well. Obviously, just selling books is going to make less and less sense, but we've seen retailers that have worked hard to turn their stores into destinations, where there were good reasons to go and buy stuff, rather than just being a physical version of what you could get online. If bookstores are unwilling to make those changes then is it really a huge loss?

Filed Under: online sales, retail stores, used books
Companies: amazon