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
Comments on “The Weird Psychology Of People Fighting Those Who Resell Their Products”
Reminds me...
Reminds me of the story over “Pirate Joe’s” who resold Trader Joe’s products in Vancouver, BC. Since TJ has no presence in Canada, people would pay a premium to get stuff rather than drive a few hours and cross the most hostile border point between USA and Canada.
So TJ sued over trademark violation… and Pirate Joes dropped the “P” and became Irate Joe’s for a while.
BTW, he won… no likelihood of confusion.
A lot of bands hate that their concert tickets are resold because some of their best fans end up getting locked out by fast acting scalpers.
I like that I’m able to sell a ticket for a concert that I’m unable to use, but hate that I usually can’t afford tickets in the first place because the only availability is on the secondary market.
Is that weird psychology too?
Re: Re:
The difference is how limited the good are. Ticket scalpers can apparently significantly reduce the amount of available ‘stock’ whereas arbitrageurs will seldom do so.
Re: Re:
Don’t forget Yahoo. Hackers selling personal information on 500 million Yahoo users will severely devalue that data when Yahoo sells it.
The reaction in the experiment makes much more sense than the reaction by these cat toy sellers. In the experiment case, if the participants think or know that the experiment will be repeated, refusing the offer is a kind of communication and attempt at negotiation. It’s an attempt at imposing new rules on the game. If the first person understands that his offer will always be refused if it is too low, then the first person has every rational reason to raise the amount offered. It in effect turns the game into a new one where both player A and player B choose a way to divide the money and they both get nothing unless they can come to an agreement on what that division is except that rather than going through normal negotiation discussion, the only communication is the amount offered and the decision to accept or refuse.
But in the case of these cat toy makers, they may be thinking in the same kind of vein, but there does not exist the same potential for a compromise because as they see it, any amount of arbitrage is unfair. And if there’s no arbitrage, the arbitrators are gaining nothing.
Re: Re:
In the case of the experiment I agree fully and you have said it well, though I will emphasize that only works in an environment where it is repeated.
The cat toy sellers confuse me slightly more. They are getting exactly the amount of money they expected, even if it came from arbitrageurs rather than traditional customers.
Re: Re: Re:
They are getting exactly the amount of money they expected, even if it came from arbitrageurs rather than traditional customers.
They’re getting the money they expected minus the restocking fees and plus the hassle of constant returns. Some of the returns were of used goods that they couldn’t resell but for some reason had to take back anyway.
Re: Re: Re: Re:
I guess then they should put a $ cost on the hassle and restocking fees.
Then, compare that $ cost to the $ cost of losing 58% of their sales (60000 down to 25000).
Then, since they are selling less volume, the manufacturing cost of making 25k items vs 60k has probably increased on a per item basis. Therefore their profit per item may have gone down due to a possible manufacturing cost increase.
Only they can decide if the sums before and after are worth it to them. But did they actually do the sums, actually quantify it, or just leave it as an emotional decision?
Re: Re: Re:2 Re:
But did they actually do the sums, actually quantify it, or just leave it as an emotional decision?
It sounded to me like it was emotional.
Re: Re:
That was well put. Except in my mind it doesn’t matter if the experiment will be repeated because these people still exist in the same society and this sort of signalling matters outside the confines of the game.
Re: Re: Re:
To put this another way, the experiment will absolutely be repeated, it just may not be with that same person.
But this signal that in our society we reward those who treat people fairly will be in the back of their mind the next time a situation like this arises.
Could it be a similar mindset to that expressed by the movie/record industry, compelling them to think that if someone else is making money off my product then it has to be bad, even if it has no effect (or even a positive effect) on the money I’m making on it?
Re: Re:
Even worse, their way of doing business – region coding, windowed/delayed releases, exclusive to whatever platform, DRM, clunky proprietary client software, over-valued licensing demands, ad nauseum – seems to result in gaining nothing rather than something.
Which seems to be the mental mousetrap these toy sellers have waltzed into.
Forty dollar cat toy…glad mine are cheap dates. Bottle caps, paper balls, drinking straws over anything storebought.
Re: Re: Cheap date cats.
I’d recommend standard ping-pong balls. They’re about $4 for a half dozen and my cat prefers them way over the $4/per mods sold at the pet stores, largely because a light batting sends them flying.
Not as cheap as crumpled paper, but might still be worth the investment.
The (dream) business case of Copyright
This is as much true of a “microsoft” (in the 1990s) as it is of music.
They DON’T WANT to focus on something actually productive. The ideal is that you create something once. People buy it. You keep stamping out cheap copies. (Or better yet, make OEMs preinstall it for you so you do nothing.) And collect a never ending stream of income while you do nothing.
The problem is, you must create new works sooner or later. That stream of income from copyright does have a definite end to it somewhere down the line.
If you’re sending too many DMCA takedowns, maybe your asking price is too high?
If you’re upset that someone can buy your product at full price and sell it at a higher price, then either they are constraining the available supply (like scalpers of a new video game), or you just don’t like that people are willing to pay even more than you are charging. In the mind of the MPAA/RIAA this would mean that EVERYONE should now start paying the higher price. Of course, resulting in needing to send even more DMCA notices, because not everyone is willing to pay the higher price.
It gets even worse
One vendor I know personally went berserk that people were reselling his pet care product on eBay, and threatened lawsuits all around – when in actuality, his product was made by SOMEONE ELSE. He bought it wholesale, repackaged it, and sold it at triple the manufacturers price.
difference
Although I’m not a fan of DMCA, there is a difference with the arbitrageurs in this case: in this case, the products are sold at a higher price than the original; in most DMCA cases (the roughly legitimate ones at least) “products” are often shared much cheaper, if not downright for free.
At least in the case of digital goods, I can understand the point even if I don’t agree. This one makes no sense at all.
Re: difference
Most of the bad cases are counterfeit products. In this case, it’s the Real McCoy, they just tricked into overpaying for it. Which is unfortunately, but a problem with trusting EBay and not doing a web search on Amazon and finding it at the regular price.
I agree that he should just create a listing on Ebay and sell it there. Or multiple listings, and copy the text of the people that appear to be outselling him.
Re: Re: difference
Unfortunately, the ebay buyers tend to be pretty braindead themselves. My very small experience with it was selling a game that has a UV sensor (gameplay revolves around having direct sunlight, it even tells you as such) try to claim the cartridge didn’t work. Luckily they were honest (but dumb) people and figured it out once I told them that the gimmick is they have to have sunlight to get it to work, but I was pretty baffled.
Re: Re: Re: difference
Well, it requires post graduate education to drive home the lesson:-
When all else fails read the manual.
Re: Re: Re:2 difference
To be fair to them it was a cartridge-only used sale. That said, they had access to ebay so they had access to google.
Re: Re: difference
Not if they are paying restocking fees as customer return items when they find out they were scammed by the Ebay sellers. If there was a way for them to pass that cost on to the Ebay sellers, then you would be correct.
Re: Re: Re: difference
People also seem to think shipping and all are negligible costs, ignoring also the externalities and knock-on effects.
I have no idea what all is included in “integrity” for these particular sellers, and they may have worked up themselves way too much, and maybe i don’t agree fully with them on reasons or reactions, but bad behavior is bad. Some people will factor in restocking fees as a cost of business… when business is good, like for these people. Some people will just see it as idiotic and wasteful and they aren’t interested in supporting bad actors. (But then again they use Amazon so whatever.)
Re: Re: Re: difference
How were they scammed? They found a product they wanted at a price they thought was fine (otherwise they never would have bought it to begin with) and only got mad when they found they could have bought it cheaper. Something they could have done with a simple web search before purchasing. They weren’t scammed they were just lazy.
Actually it makes perfect sense...
If you know that human beings are hard-wired to detect whether they are being cheated, but not for classical logic. I have read about experiments done which show this quite clearly, but can’t currently find a reference.
Yelling @ the radio
I heard this podcast and I was constantly yelling at the radio — “Just set up your own eBay store and sell them at your own price!!!” Could it be that Amazon had some sort of no compete clause? I can’t imagine anyone wanting to sell product signing off on that.
The only reason I kind of understood the couple’s frustration was the loss in revenue due to people returning what they purchased on eBay when they found they could get the item cheaper from Amazon.
They should be saying “Thank you”.
These resellers have given them two very important pieces of information:
1) They are priced too low. If people keep paying more than your Amazon price buying it off eBay, perhaps it is time to adjust your pricing a little.
2) There is apparently a market for the product on eBay. I mean if you really cannot make a better ebay store than someone reselling your product, bit the bullet, call them, and ask them to be an official reseller because you can’t manage your eBay store as well as they can. Help them make a little more money, make sure the customer experience is good, and call it “good business”.
ebay
From his ebay listing.
Re: ebay
Consider this a preview.
Hillary vs. Donald is looking like a very close race. Imagine a repeat of the 2000 presidential election with Bush v. Gore decided by weeks of recounts and court battles. Imagine it with Hillary vs. Trump. Imagine the Supreme Court battle in the current environment, with Judge Scalia’s death and the fight to replace him. With a Tea Party and Trump movement that didn’t exist in 2000.
I AM THE TRUE PRESIDENT
ALL OTHER PRESIDENTS ARE FAKE. DON’T BE SCAMMED BY OTHER PRESIDENTS. ALL OTHER PRESIDENTS ARE ILLEGAL AND UNDER INVESTIGATION.
Re: ebay
Wow.
Now I understand why nobody wants to buy from that eBay listing. Anything with that much CAPITALIZED text would scare me away as a scam.
The Ripple Rug V2.0
It looks like I am the only one that needed to know exactly what these people are selling.
Yes, my wife & I have 3 cats & a dog. Any non-interactive pet toy gets my attention. I might even buy this one… but not off of eBay. It never ceases to amaze me how people can c&p a product from eBay, Craigslist, wherever, google it & find it someplace else cheaper(usually more legit).
I wish someone would do that to my product
I put a product on Amazon not long ago and it is hard getting noticed. I wish someone would find a way to get it selling, I would be happy for them to take their cut.
What the market will bear...
It seems to me the right response was to raise the price of their product.
Cleary the market could bear the $60 price, so they should raise their prices. The eBay sellers will need to up their price to still be profitable and at some point, the cost on eBay will exceed what the market will pay and the Owners will be the “best deal” on the item.
Not to mention the increased profit margin.
Re: What the market will bear...
No, that presumes that enough of their other ~60,000 customers per month would buy the product even if it is 50% more expensive. That’s a big assumption.
Humans evolved not just to play repeated games communities where they will have a lot of diverse interactions with all community members for a very long time, while being watched and evaluated by other members of that same community.
In such an environment, it makes sense to signal a desire to enforce community norms in general, and demonstrate a willingness to take costly action to do so. That strategy wins so often that it doesn’t even make sense to undertake the energy cost of identifying the cases where it doesn’t. And norms about distribution of benefits from effort are extremely important ones.
You may have identified a case where it doesn’t win. Maybe. And maybe things have changed enough from the ancestral environment that it wins less often than it used to in general. But I wouldn’t even bet on that.
I have some sympathy for the guy
I do have some sympathy for the guy in one respect. Since he is selling through Amazon, he is forced to take the returns when people find out they over paid. That affects his seller rating with Amazon and does cause him to incur expenses. Now if the eBay sellers were buying stock from him and were the ones forced to eat the return costs, it would be a different story.
Fairness is a social principle worth protecting
Mike, the behavior in the economics experiment you cite isn’t ridiculous. It’s only ridiculous because you refuse to learn what it demonstrates: that fairness is a social principle and people are willing to pay a cost to increase the chances that things are fair. You conclude by admitting you haven’t or don’t want to learn this, “I get that it happens, but it still confuses me to no end why anyone could possibly think it’s a good result.”
Ruckel went to extremes we might not agree with, especially as there were lower-cost ways (mentioned by you and others) to solve the problem, but this is not, “a weird attempt to insert a ‘fairness standard’ where it doesn’t make any sense”. Rather it is an attempt to insert a fairness standard where it makes total sense.
The only question here is a difference in opinion about about how much it’s worth to enforce this standard. This may be an extreme case, so you may find a lot of people agree that they went to far. But that they were willing to pay a cost to achieve a principle is not ridiculous in itself.
Fairness underlies much of our society’s norms. Much of the difference between conservatives and liberals comes down to how much they prioritize things like fairness. (See a TED talk on this: http://www.ted.com/talks/jonathan_haidt_on_the_moral_mind?language=en )
Take another example of this, but non-economic. People in the US stand in orderly queues. Cutting in line is very much frowned upon. You are very likely to get confronted if you cut in line, perhaps even violently confronted. That’s just the fairness principle: first come first served. The fairness principle helps avoid an outcome we’ve agreed as a society is worse: strongest come first served.
Other countries don’t enforce queues to the extent the US does. They don’t mind, and it doesn’t devolve into brawls. I can hardly stand it myself, but natives don’t seem to mind. It’s a matter of degree.
Re: Fairness is a social principle worth protecting
Other countries don’t enforce queues to the extent the US does.
The Freakonomics blog mentioned this in the context of World Cup matches. The game was between I think Germany and Poland. I might be remembering that wrong. The people from Germany and countries such as the US and the UK would get at the end of the line, while the Polish people (not to disparage them or anything) would go up to the front of the line at the sides, so rather than just getting longer with people added at the end, the line also got wider and wider, with the people following the German model hardly getting any closer to the front as time passed because of all the people coming in from the sides.
Re: Re: Fairness is a social principle worth protecting
…with the people following the German model hardly getting any closer to the front as time passed because of all the people coming in from the sides.
That sounds like most of the traffic lane closures I’ve encountered in my life while driving.
Apparently the social principle of fairness in America disappears once someone gets behind the wheel of an automobile.
Re: Re: Re: Fairness is a social principle worth protecting
Ohhh, line cutting while driving is one of my biggest pet peeves!
Being behind the wheel makes you relatively anonymous. Anonymity emboldens people to much higher levels of bad behavior!
But for some reason the people at the front of the line still let the line-cutters in! That I don’t understand.
Re: Re: Re: Fairness is a social principle worth protecting
There’s actually a debate between early and late mergers (late mergers argue they’re utilizing the most of the available lanes). What’s weird is that computer models with high late-merging frequency actually speeds up the traffic throughput slightly.
Fair doesn’t necessarily equate to efficiency when resources are dear (such as lane space before a closing lane). But then we want to make sure that everybody gets what they need.
That’s why we still let people merge, late in the ending lane.
The psychological study, yes, demonstrates a known human bias.
And it’s one of the explanations for why IP owners hate pirates more than they like the profits they make from pirate activity. It gets worse since people often don’t have a true idea of what is fair (e.g. often conflating legal for right) hence we even get gazillionaires believing they earned their wealth, IP trolls believing they deserve their profits and companies whose business model is exploiting legal loopholes being believed to provide a real service in proportion to their profits.
Golden Balls
Speaking of that game, Bruce Schneier had a blog post about the british game show “Golden Balls”, with youtube links to some very entertaining/illustrative episodes:
https://www.schneier.com/blog/archives/2012/04/amazing_round_o.html
Its a pity they are making that much less money, rhinoplasty is expensive and considering what they have done to spite their face….
Everyone makes money
I think the real reason these people are angry and stresses is that other sellers are selling their product for a higher price and getting away with it.
Let’s see if I have this right:
1) Seller A lists it on eBay for $50.
2) A customer buys it.
3) Seller A buys it from the Ruckels for $40.
4) The Ruckels make $40, the seller makes $10, and everyone makes money.
I completely understand how customers might feel ripped off if they paid $50 for an item that’s sold for $40 on Amazon, but shouldn’t the customer have shopped around first?
Downstream Control Destroying Secondary Markets
Another in a long list of sad stories about rights’ holders attempting to shut down competition in a free market to protect their distribution channels. In this case, as in all cases, the manufacturer set the price and got paid exactly what they asked. Why are they so upset if someone is selling it for more via another platform? If they believe they’re losing sales, then increase their price or decrease the amount of product in the stream of commerce (or both). Don’t turn around and blame others for reselling a product that you put into the market.
If you really wanted to stop the aribitrage...
Well you might need to set up your own store. I’m not sure how much control Amazon give you over these things. But you could:
1. Ban buyers who are clearly arbitragers
2. Require the shipping address to match the billing address (or other verified address) on the credit card
3. Require all shipments to addresses that are not the billing address to include a gift message that states clearly that the recipient should not have been charged any money for it.
There are probably others. This is just off the top of my head.
Is that really a good econ model analogy?
I disagree with the economic example, but on different grounds than fairness. I don’t think fairness really gets us anywhere useful. If you want to argue for a universal fairness principal, no one should ever buy anything because for any item that exists that can be bought, there is some element of the supply chain that is treating someone unfairly.
Think of an entirely different example of the experiment. Let’s say person A and person B are both members of the same dating website. The website itself is offering a value proposition such that if both people can come to an agreement to go on a date, they will both receive some value from the date that they did not have before.
I don’t know what that value is. Maybe it’s having the cost of a dinner paid for or substantially reduced if you split it. Maybe it’s sex. Maybe it’s not being alone at a wedding and being perceived as a loser. Maybe it’s a chance at the next big relationship. Whatever.
The point is that a third party says that if parties A and B make a deal, they both stand to benefit in at least some way, no matter how small. If they don’t make a deal, they both get nothing.
If the economic theory is as generally applicable as you are suggesting, you’re arguing that it never makes sense to turn down a date with someone a website has matched you well with.
To put it slightly differently, the only way to avoid your criticism here would be to go out with anyone who asked you who was also a high-percent change of a good time by (let’s pretend they are all equally good at actually making matches) website x.
I don’t think that’s really a strong position to take, and the reason I don’t think so is that there are two economic things in play: 1) perceived value comprises more than just financial gain and is not the same as monetary value, and 2) revenue is not the same as profit.
Back to the economic example, you can say it doesn’t make sense for a person to reject a free dollar. I can say that I don’t care about a dollar, I care about status, equality, friendship, not-being-perceived-as-submissive, or whatever. I can even say that I care about my brand. Particularly if I’m someone like Trump, whose name is his brand.
Whatever the situation, you have to keep that in mind. Individuals have brand and attach value to it. Companies even more so. If people find out that you are taking free dollars when you and someone else are constantly splitting 10-dollar-bills, that hurts your brand.
I don’t think that the economic example is really a good example of how much people are screwy as much as it is a psychological experiment in identifying that under many circumstances, people don’t perceive value as money all the time.
I do think that the rest of the criticisms are reasonable. And I also think that the people involved were being stupid.
On the other hand, I may have just written myself into a corner. Pardon me while I go start a dating website that forces every user to go on at least one date per month with that person’s highest-percentage match. And the date is paid for by the website.
In terms of fairness, I think that what we’re really talking about is perceived value. There’s not really any other way to quantify fairness in terms of an individual transaction. And it’s hard enough to quantify perceived value as it is, so I think we should leave that out of the discussion.
But I’m willing to see this in different ways. What I do is work for a data science team as a software engineer. A lot of what I do is build and model data warehouses.
There are different kinds of analyses that you can do at various different levels of data. At the lowest level, you can assess the profitability of any given transaction. That’s pretty much it. At a higher level, you can aggregate results over time and figure out if they meet the conceptual goals of a process. At the top level, you can evaluate whether the business as it is currently being conducted meets the goals of the organization as a whole.
In my experience, you can have the large portion of a profit on every individual transaction and still not meet the goals of the business. You can also do the opposite.
This test of human rationality is only a test that’s reasonable if the only thing you care about is at the lowest grain of transaction. It’s meaningless in terms of perceived value or net profit.