The Decline of the PS3 Grey Market

Kotaku has a great piece up looking at trends over time in the PS3 grey market. Michael Fahey has been tracking the falling prices for Sony's new console, via sales on eBay and other markers. He called around to stores as well, getting a feel for the number of returns and current availability of the console. His conclusions: "As it turns out my gamer instincts and the threat of hordes of angry readers steered me clear of potential disaster. Aside from a couple brief spikes, there is no way I'd have been able to pull off the television, and I know damn well I would have waited for Christmas like so many others did, only to lose even more. The moral of this story? There's no such creature as a sure thing. The majority of eBay prospectors walked away from this experience with that lesson burned into the back of their brains. My suggestion for the future? If you want to gamble, go to Vegas. If you want to invest, try mutual funds. Leave the video game system buying to the gamers. We'll all be happier for it. "

Comments

Wii on Ebay

[LoverOfJoy]

Now if only the prices would drop for the wii and people started returning them to stores so I could find one.

Re:Wii on Ebay

[UbuntuDupe]

People aren't returning Wiis because a) people like them, and b) you can sell them for more than the refund.

Confession: I'm a failed PS3 scalper. I thought I struck gold when the store I was in announced they had three in stock and I got one (Dec 20). Yesterday I was able to return it (the PlayAlbatross 3 as I call it) for a full refund after price on resell sites plummeted to the point where it wouldn't be worth it. Also, amazon wouldn't take sales from new sellers, and craigslist had scalper hunters unjustly flagging scalpers.

Arbitrage isn't as risk-free as they like to make it sound.

Re:Wii on Ebay

[the dark hero]

...or the DS which is said to be grossly back-ordered till late january. :(

Re:Wii on Ebay

[RasputinAXP]

You say "unjustly" as if scalping is a good thing.

Re:Wii on Ebay

[UbuntuDupe]

You say "unjustly" as if scalping is a good thing.

I said "unjustly" in the sense that the PS3 listings that were being removed clearly met all of craigslist's rules.

But scalping is a good thing in that it makes it possible for people willing to pay more (rather than spend ages line) able to get one without getting line. If there were no scalpers, people would just hire placeholders. I don't think that would make anyone feel any better.

Re:Wii on Ebay

[Anonymous Coward]

scalping is a good thing in that it makes it possible for people willing to pay more (rather than spend ages line) able to get one without getting line.

The thing is, the fact that the market tanked so quickly means that the vast majority of the people in line WERE the scalpers. Scalpers manufactured the long lines and shortages they tried to profit from, only in this case, the only people to sell to were the other scalpers that were waiting in line to get one because there was no real shortage of units, only the demand created by the scalpers.

Re:Wii on Ebay

[Average_Joe_Sixpack]

Confession: I'm a failed PS3 scalper. I thought I struck gold when the store I was in announced they had three in stock and I got one (Dec 20).

Well, its actually a good lesson in investing and gambling ... no such thing as a sure thing.

Re:Wii on Ebay

[DragonWriter]

I said "unjustly" in the sense that the PS3 listings that were being removed clearly met all of craigslist's rules.

Aside from the "Prohibited" category, which applies to violations of rules, the other ways in which things can be flagged on craigslist aren't supposed to be "rules violations", per se, as much as subjective judgments of appropriateness by users.

But scalping is a good thing in that it makes it possible for people willing to pay more (rather than spend ages line) able to get one without getting line. If there were no scalpers, people would just hire placeholders. I don't think that would make anyone feel any better.

Apparently, from your description, it would make many craiglist users, for one thing, feel better.

Re:Wii on Ebay

[JFMulder]

But scalping is a good thing in that it makes it possible for people willing to pay more (rather than spend ages line) able to get one without getting line.

Actually, I disagree with this. It makes the weathly have a better chance than the regular folks. I thought the United States was the land of equal rights.

Re:Wii on Ebay

[Volante3192]

That would be socialism. This is capitalism, and wealth is seperate from rights.

Re:Wii on Ebay

[supabeast!]

It makes the weathly have a better chance than the regular folks.

What's wrong with that? If the wealthy lived the same lives as the lower classes, what would incentvize the lower classes to be more productive? I don't have a Wii because some loser sat around Best Buy all night waiting to buy me one. I have a Wii because a hardworking attorney busted his butt to earn a salary that allowed him to spend less time buying one on eBay than it would have taken just to drive to the nearest Best Buy. Exceptional people deserve to be rewarded for their talent, intelligence, and efforts, not brought down to the level of people who toil at menial work and still expect easy access to everything they want.

Re:Wii on Ebay

[Total_Wimp]

People aren't returning Wiis because a) people like them, and b) you can sell them for more than the refund.

a) Nothing in the article suggests people don't like their PS3s. In fact, the article suggests the opposite conclusion. From my reading of the article, scalpers are returning them not because they don't like them, but because they're entrepreneurs who are only interested in the PS3 as an investment and that investment didn't pan out. However, as soon as the boxes get back in the stores, they're being snapped up again as soon as they arrive. Even on eBay, people are still buying them, they're just not paying as much over list price. I don't blame people for not wanting to pay thousands of dollars for a PS3, but people seem quite willing to pay the price marked on the box or a little bit more.

b) I looked at the SmartBuyer link from the article and found the average selling point for Wii's last week was $301. That's about a 20% markup over retail. SmartBuyer is listing an average selling price for PS3s of $788 for the same time period. That's about a $30 percent markup over retail. To be fair, glancing down the numbers it doesn't look like this weeks average will be the same. The Wii is getting more expensive and the PS3 less, but it's a far cry from selling them on eBay for a loss.

The big picture here is that the Wii is in high demand and so is the PS3. Any talk right now of people generally not wanting PS3s or that the whole world wants to switch to Wiis is only coming from folks who let their emotions run wild instead of looking at the facts. Who knows what the future will hold. It's possible there will be Wii in every household by Christmas 2007. But we're not there yet.

TW

Re:Wii on Ebay

[0xdeadbeef]

Being an asshole in a self-policing community sure is a bitch, ain't it?

When people start modding you down because they're sick of your whining, are you going accuse them of censorship too?

Re:Wii on Ebay

[TheGavster]

The poor always kill off the successful in socialist revolutions. They then proceed to wonder why their infrastructure collapses and everyone stays poor (with the exception of the leaders of the revolution, who take to their stolen riches quite happily).

Re:Wii on Ebay

[gutnor]

"what would incentvize the lower classes to be more productive"

Successful not productive.
By being hardworking and very productive, you just increase the chance of being successful under the right circumstances.
Most of the time, you need an opportunity and be able to milk it.
If you father is CEO of a Fortune 500 company, you have plenty of possibilities and only need average effort to be successful.

"Exceptional people deserve to be rewarded for their talent, intelligence, and efforts, not brought down to the level of people who toil at menial work and still expect easy access to everything they want."

Unfortunatly that's not the case. People are rewarded for their success. A top-manager that made his way working 20 hours a day/7 days a week is rewarded the same than a top-manager with more luck and made his way only working 8 hours a day/5 days a week.

There are 6 billions people on earth. Since you compare your intelligence/talent/... to other human being, at least 1 billions people on earth should be worthy enough to have a WII...

Re:Wii on Ebay

[synaptik]

This is the problem with Capitalism in the Long Run, at least with respect to it's ultimate purpose as a method of deciding how to distribute goods. Whether its scalpers interfering with the supply of tickets, Enron turning power plants off, farmers dumping their produce in the trash, grocers allowing it to rot on the shelves, or any of many other examples, Capitalism is increasingly being used as an excuse to destroy goods rather than distribute them.

The problem here was not a failure of capitalism; the problem was Sony setting the launch price too low. At launch, demand exceeded supply. Whether that demand was from scalpers or legitimate end users is irrelevant. If Sony had said, "our launch price is $3X, but will reduce to $X by $FUTURE_DATE", then tere would be little-to-no scalper activity. Those people willing to pay a huge premium instead of standing in line would have their demand met, since the initial price would be so high as to eliminate the lines.

...farmers dumping their produce in the trash

That isn't the fault of capitalism, it's the fault of government interference in how the market prices goods. If the price of corn is too low for all the sugar farmers to turn a profit, then the problem is too many sugar farmers. And most certainly the solution is not to arbitrarily jack up the price of sugar.

And why not? As long as distribution of goods is tied to the money one can obtain for it, then artificially creating shortage through the systematic destruction of that good is an excellent idea.

There wasn't an artificial shortage of PS3s. There was an artificially low price, given the temporary supply constraints, and number of people who wanted to be early owners.

Perhaps by "artifically creating shortage through systematic destruction of that good" you really meant "artifically creating shortage by enabling scalpers to scalp." (I'm allowing you this, since no one was actually destroying PS3s, AFAIK.) In that case, a drastically higher launch price would have solved that problem.

Re:Wii on Ebay

[@madeus]

I said "unjustly" in the sense that the PS3 listings that were being removed clearly met all of craigslist's rules.

I think many here would argue it's still just, irrespective of it meeting craigslist rules or not.

But scalping is a good thing in that it makes it possible for people willing to pay more

Alternatively, it make it nigh on impossible for people willing to pay a reasonable price to get hold of one, and so the products (or tickets) go unused, ultimately satisfying very few people (and so being detrimental overall).

I've seen this both at events and with consoles (typically with loads of people then complaining they couldn't get tickets/consoles through offical channels and having witnessed myself items subsequently being withdrawn from eBay or failing to meet minimum bits, and in the case of tickets, loads of scalpers trying to sell tickets at the door to no avail, and the venue being only 3/4 full despite tickets having 'sold out' in the first hour). The 'empty seats' issue being one of the reasons why tickets for major sports events are often so heavily controlled and tied to a name on photo ID these days (due to unused tickets meaning less people attending the event, and so harming sales of food/drink/t-shirts, etc).

Loads of scalpers end up with excess goods (consoles, tickets, etc) - and potential customers (gamers, music fans, sports fans) end up pissed off and can't buy what they wanted. The summary is right, it's not a good way to make money, if it was I think it's likely event ticket scalpers would not resemble homeless people (as they invariably do). It's seems evident that most people who feel the need to result to gambling on being able to resell consoles as a way to make money are not comfortably off either (if they are, then they are irredeemably greedy).

It only makes money for a very select few, as we've simply seen that there are not tens of thousands of people willing to pay insane prices for consoles rather than wait two months, hell there are barely hundreds of people willing to pay significantly over the RRP, yet scalpers screw up by vastly overestimating demand. "Oh look, that one guy made 10,000 USD selling one on eBay! I should be able to get that too!" (and thinking they are hard done by and blaming others when it doesn't work for them).

e.g. Saying things like "The concert was promoted poorly", or "the team/band/console is no good" rather than thinking they were undone by their own greed.

I saw my I got my X-Box 360 bundle in a store in the middle of London for 380 UKP (IIRC) about a month after they came out. Even though there were no units in store anywhere else, it sat there for a week before I went 'Screw it, I'm thinking of getting an HDTV next month or so, may as well get one now if it's only 80 UKP more, it's not like I'm hard up'. The same story is repeating itself now with the Wii and PS3, in that people arn't willing to pay much over the RRP and would rather just wait.

There is currently a Wii in the same shop also for sale at 360 UKP (bizzarely enough). Normal RRP is 180 UKP, can't get them in any other shops, it has been there for two weeks just being ignored (frankly even I'm surprised, nearly bought it myself). This is a shop that scalps professionally, right in the middle of London (Zone 1, TCR) and people are not paying it much attention even at Christmas. Looks like people are waiting for more stock (which will invariably be around at the end of Jan). They also have a PS3, but it's an import version (no idea what crazy price it's selling at, or if it's even for sale).

If there were no scalpers, people would just hire placeholders.

I doubt that. Only the very wealthy (or incredibly determined and fiscally irresponsible ;-) could afford to have someone do that for a reasonable amount of money - or you'd have to give the job to a person who needed the money so badly most people would be worried about them doing something like scalping i

good article

[mgabrys_sf]

I liked the disclaimers on hard-numbers etc, but it did give an idea of what the retail action is as well as the charting of prices. For those who want to wait until prices fall on the PS3, I suggest checking the price curves on the PS2. Here's a hint: They didn't move for over a year. You've got a long - LONG wait. Sony after taking a loss on intitial units will take the profits on the hardware as long as they can when they emerge.

Still - cheaper than the Atari 2600 / VCS on an inflation adjusted dollar bla bla bla. All I know is it can knock 4000 dollars worth of computers I have sitting in front of me out of the ballpark graphicswise. Once some decent games emerge I'll be heading to the retailer myself to get one. Probably around the time I finish Zelda for the Wii (geez it's huge).

Re:good article

[Anonymous Coward]

"All I know is it can knock 4000 dollars worth of computers I have sitting in front of me out of the ballpark graphicswise."

That shouldn't be so, unless you spent those 4000 dollars several years ago. A $4000 PC nowadays has two graphics cards, each of which is a generation ahead of the one in the PS3. It also has 8 times as much system RAM and three times the video RAM (per card). It can display higher quality graphics than the PS3, and at higher resolutions.
If tech specs don't tell you then compare the two yourself. On the same screen a modern high-end PC should easily produce better looking graphics than Resistance or Motorstorm.

Not that I'm seriously suggesting that spending $4000 on a game box is a good idea. It's crazy. Even $600 or $400 is a hell of a lot for a game system. My favourite console at the moment is the DS. I'm writing this post because you're apparently misinformed.

Re:good article

[Pluvius]

Two reasons why the PS3 won't be like the PS2 in this regard:

1. $300 for the PS2 was thought of as a bit expensive. $600 for the PS3 is thought of as completely ridiculous. Sony's not going to be able to make money on the PS3 if no one is buying it.

2. While the PS2 was slightly expensive for a whole load of reasons, about a third of the cost of the PS3 is in one component, the BluRay drive. This is a new technology and like all new technologies, it will drop in cost very rapidly.

It's true that the price drop likely won't come until the next holiday season, but that's because of the way electronics sales work, not because Sony wants to hold off on it. And when it does come, it will likely be quite large.

Rob

Re:good article

[xero314]

First of all I never said you couldn't put together a resonable game machine for 3 times the cost of a PS3, just not a comparable one. Even the one you just mentioned has less media capacity, Slower bus speeds, less total processing cores, etc.

Interesting Idea using the Physics processor (which is basically a GPU dedicated to physics instead of graphics), but could you supply a list of games designed to use that physics processor?

Now what we need to do is take your cheap game rig (which looks like it will be around $1500 complete) hook it up to an HD TV and then in 5 years compare to quality of games that will run on it vs. the games that will run on the PS3. In 5 years modern games won't even run on the machine you are talking about building, yet PS3 games always will. Games will become more and more optimized for the PS3 hardware where as in the general purpose computer realm developers will expect more powerful machines to be purchased so no need to optimize.

Trying to get a Wii been fun...

[__aaclcg7560]

Last week Amazon had randomly selected interested people to buy a Wii and the odds of getting one was listed. Getting a Wii was 28 to 1. Getting hemorrhoids was 25 to 1. At that point, I wasn't getting a Wii since I knew what I would get first. Now where's that Preparation H?

Re:exaggerated

[UbuntuDupe]

But $100 is not the profit. It's the net over retail + sales tax. Figure in listing costs, risk (of scammers, paypal disputes), the fact that you have to front a big chunk of capital, and the time you'll have to put in (listing, taking pictures, shipping), and it's a losing proposition.

Re:exaggerated

[Guppy06]

"a 100 dollar profit is still a profit, this article makes it seem like these people are losing money on the system"

Even assuming they get to pocket all that $100 after eBay fees and the like, making that $100 required an investment of both $600 as well as a great deal of time and effort (standing in line, preparing the auction, relisting and revising the auction, etc.) that, when all is said and done, isn't looking all that much better than some minimum wage job. I can make $100 in one night delivering pizza, and it doesn't cost me $600 to do it.

From a retail standpoint...

[borderpatrol]

I work for a major electronics retailer, and we had originally sold our systems in bundles only for approx. $1200 each, with later bundles around the $900 range. We are getting approx. 10 of these bundles being returned a day. We started getting the majority of them after December 20th or so., which would be around the last day to ship from eBay. We are acepting these items back for return, but alot of the folks who bought them on the 17th are stuck with a $1200 store credit.

All the scalpers are mostly saying that "We didn't need it", "We got 2 for christmas", etc. One guy I talked to was honest and told me he bought it to flip on eBay, but the market fell out. Now he's waiting on a Wii to buy for himself.

We have lots of PS3s here at the store gathering dust (we got the largest shipment per store of any electronics retailer), people just aren't interested in them at all anymore.

Re:The Long Tail of speculation!

[harryk]

Well... just a couple of thoughts, but before I get into them, let me first say that I agree with you.

As a someone who was 'marginally' successful at scalping my 2 PS3's, I have to say that given it to do over, I would. I had a good time, and I cannot put a price tag on the 'event' itself. I still walked away with a profit.

and I to do not understand why Sony (and really anyone else) doesn't just sell the items themselves. But I believe it has alot to do with law than anything to do with business.

See, it kinda comes down to the same thing with automobiles, atleast here in the states. Technically speaking you, as a customer, cannot buy directly from the manufacturer, for nearly anything. In order for you to purchase item X, the seller has to pay certain fees within it's respective location, think sales-tax etc... . However, getting into a larger issue is that the states (individually) don't want you to be able to buy directly from the manufacturer, because it would cut out their 'inventory' taxes.

It really comes down to taxing the hell out of the product prior to the sale, as that is REALLY where they make there money. Continuing to take car dealerships as an example, the 'dealer' typically does not actually own the vehicle, oh they bought it from the manufacturer, but they don't have to report the buy until the end of the year. At which time any remaining vehicles (and sometimes this is done quarterly, but we'll continue to use annually) are then taxed an 'inventory' tax, and this is on EVERYTHING, not just the car, but parts as well. Its a ridiculous mess.

Now, thats for tangible items, talking about the concert is a little different.

Ticketmaster (again as example) has contracted with nearly every venue out there, to be the sole promoter of any event, which in addition to just about everything else, grants them the right to sale tickets. There use to be a competitor called Ticketron if I recall correctly that did basically the same thing, but at a much lower price. At any rate, a band's promotions and tour organizations are typically in cohoots with Ticketmaster as well, so it benefits everyone but the band who (as I understand it) get very little of the actual 'ticket cost' after all the fees have been added in.

There is nothing wrong with a band attempting to sale it's own tickets, but then it must also incur all marketing costs, venue rental (assuming one can be found that isn't under ticketmaster's thumb) etc... quite quickly becoming cost prohibitive.

Ticketmaster is a fucking rip-off! ... They charge you a 'convenience fee' for web-based or phone based orders, in addition to their already inflated ticket pricing. I hate ticketmaster

Sounds like a sure thing to me.

[GodInHell]

Well, its actually a good lesson in investing and gambling ... no such thing as a sure thing. So.. let me get this straight he (1) made an investment of 600$ +/- (2) attempted to capitalize on his investment, but failed and then (3) got a full refund.

Where is the risk in that again?

-GiH

Re:Sounds like a sure thing to me.

[poot_rootbeer]

But don't worry -- I have 50 times the retail price of a PS3 in a diversified array of index funds, taking advantage of the favorable tax-free and tax-deferred accounts, so I think I've got my investing in order...

Yeah, but how long is your dick? That's what you're actually trying to inform us all of, no?

Re:Sounds like a sure thing to me.

[Anonymous Coward]

30k? If you're going to brag about having 30k invested in various funds, I hope to god that you're under 20 years old.

That's not quite right.

[CyberLord Seven]

Manufacturers have the ability to sell to anyone they want. You are correct that if they do, they have to take on the role of tax-collector for the State; that's every state they sell product in. Not the kind of paperwork they really want to get involved with.

For instance, in California, If you are a manufacturer that does not sell to the public you get a tax exempt form that allows you to buy raw material without paying the state of California any tax on it. Without this document you pay the tax.

Another consideration is contract law. Sony has contracts with Best Buy, Circuit Shitty, Target, you name the company, to supply them with items. I suppose that each of those contracts has a clause that prohibits Sony from by-passing them and selling direct to the consumer. I could be wrong, but I wouldn't be surprised to find out that such a clause was standard.

Re:Same thing happened with XBox 360

[0kComputer]

We went through this with the XBox 360, but with more speculators. People were trying to unload those things on eBay for months, finally at prices below retail.

If I remember correctly the 360's were selling at a premium on e-bay well into the spring. I think that the point of this article is that we've barely passed X-Mas and the prices are already down around retail, which probably implies low demand. In other words, sony is screwed.

Retailers' lesson?

[lpangelrob]

So at some point, when will Best Buy, Circuit City, etc. figure it out and charge a 15% restocking fee for returned consoles so that I don't have to worry about nearly as many scalpers?

The fact people were able to just return the consoles free and clear means that there really isn't a cost associated with scalping, unlike with sporting events, where you have a time deadline. This shouldn't happen.

I work in retail...

[Cyno01]

And i just got home from work about an hour ago. We got 6 60GB PS3s in today. Some guy returned one, so we sold -1 PS3s. On the other hand, sometime between when i got there at noon and when i took my first break @ 2, a half dozen each Wiimotes, Nunchucks and Classic controllers made their way to the floor (i picked up another nunchuck and a classic controller as soon as i saw them). By the end of the day there was one wiimote left. I cover in the electronics dept sometimes, and i had a shift there about a week after both releases, 10:1 the number of calls about the Wii vs PS3. Sonys lost.

I normally work in the photo center, so i have a million other reasons to hate sony.

Wrong

[Travoltus]

If the Government didn't subsidize stuff like milk (prop up the price) it would be too expensive to make. That would result in an immediate monopoly, or worse, nobody making it at all.

But since we have milk on the shelves you haven't been a victim of such a shortage, so you probably think it couldn't happen.

Your black and white "Government bad, corporations good" doesn't even hold water in theory, which is why no civilized country bothers to follow that mentality.

Not even one.

In the world of survival of the fittest, laissez-faire is quite extinct and has been deemed not fit for survival. I wish to God that we could buy you all a nice big desert continent in the middle of the ocean and let you make your paradise. We'd dress up Mel Gibson in road warrior armor and let him emcee the reality show.

Call it "life in Libertaria".