The Weird Psychology Of People Fighting Those Who Resell Their Products (original) (raw)

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 60andreceiveaboxfromAmazonshowingthepricewas60 and receive a box from Amazon showing the price was 60andreceiveaboxfromAmazonshowingthepricewas40… 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 10andtoldtosharesomeofitwithStudentB—butifStudentBrejectsStudentA’soffer,thennoonegetsanymoney.Undersuchconditions,evenifStudentAoffersStudentBjust10 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 10andtoldtosharesomeofitwithStudentB—butifStudentBrejectsStudentA’soffer,thennoonegetsanymoney.Undersuchconditions,evenifStudentAoffersStudentBjust1 (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