Scalping

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ANSWER

Scalping

Introduction

Most people around the world know scalping; therefore, it is not new. Scalpers are those individuals who purchase products that are highly demanded in the market, generally limited in quantity, and sell them at a higher price than the retail value (Brock and Steven, 2021). Bot technology has used this practice in the previous years, affecting this generation of gaming consoles. Scalping is an effective business strategy in 2022 used by people to make money. They earn a living from making quick flip scalps on limited products such as PS5 and trading crypto using bots and other methods. This enables them to be the first to purchase those items before the legitimate customers.

There has been a high demand for PS5 or Xbox Series X systems during the holidays. This has enabled most scalpers to take advantage of this period by charging high prices from these systems, making more money out of them. A particular group of scalpers from the UK has been bragging about how they bought approximately 3500 PS5 systems and sell them at a thrice retail value (Nissan, 2017). This group of discord sellers goes by Crep Chief Notify, and they sell the latest gaming consoles at higher prices. The manager of this group boasted on how they had around 2500 consoles for resale with more orders being made by customers.

Reports have shown that most preferred gaming consoles go for around $499 retail price, but scalpers have been selling them thrice the amount, with some quoting prices of tens of thousands for some consoles. Even though this scalping practice of buying a highly coveted product to sell it at an unreasonable price has been there for many years, it is not a legal act. Some states such as California, Kentucky, Wisconsin, Delaware, Arizona, and other states have banned this practice by imposing fines and jail terms on those who are found practicing it. For instance, in Arizona, ticket scalping is not allowed within 200 feet around the entrance venue (Lin et al., 2017). This is advantageous to scalpers as they can charge any price they want to abide by the above the law. The law is not practical due to the digital communication experienced today.

Ticket scalping is majorly practiced in the entertainment industry. A report shows that among those tickets sold in the primary market, approximately 10% of them are later re-sold to fans by scalpers (Nissan, 2017). Additionally, scalped tickets occupy around 30% of front seats. Ticket brokers typically offer many tickets for various events, concerts, and ball games. Ticket scalping is most commonly compared to other types of scalping because most people love going to concerts and watching sporting events hence the high demand for those tickets. Many fans are always willing to pay any amount for the tickets so long as they get the opportunity of attending concerts or ball games. Although the federal government illegalized ticket scalping in 2016, only a tiny percentage of scalping was regulated.

Ticket scalping has prevented some fans from attending various concerts performed by their artists. As a result of this, legislation has been drafted that would put restrictions on the buying and re-selling of tickets by scalpers (Lin et al., 2017). Ticket scalping negatively impacts producers in such a way that scalpers might be more perfect in price discrimination than them, resulting in less profit to producers. This, in return, will discourage the producers from entering or lead to their exit sooner from the market. Producers might also experience few shows due to the low level of investment in production because of the few profits they get. This practice also has some positive impacts despite its many negativities. It can improve efficiency since the transaction involves both parties and voluntary trading with a positive outcome. A secondary market usually occurs because some event producers charge ticket prices below the market-clearing levels (Revenue and Lost, 57). Secondary markets help consumers by re-selling their tickets or buying them last minute from other resellers.

Most professional sporting teams in the United States have supported ticket scalping because of the enormous profit. An approximation of 8NFL,4MLB, and 1 NBA team has been reported to partner with ticket resellers to sell gaming tickers online every season (Kaňuková and Nikola, 93-94). This, in return, enables both the companies and ticket resellers to get cuts of any profit. It has led to other clubs from these leagues threatening ticket holders that they would strip them of that opportunity if they tried to scalp the tickets. Customers are free to purchase scalped ticked with no fear of being arrested because they are innocent. However, they still should be careful of frauds while purchasing these tickets due to many scammers out there who usually sell fabricated tickets. These people typically sell ticket seats that might not even exist in the venues before customers’ money disappear. Another fraud experienced by buyers is when they are offered items bought with stolen credit cards.

With most states trying to fight against scalping, groups that oppose the banning of this practice argue that scalping should continue operating because it is like any other business venture. Most of them even question the existence of anti-scalping regulations. They suggest that the market should be allowed to control the price depending on how coveted items are sold since it is a free market economy. Scalping practice has been enhanced during the pandemic through online marketing. Scalpers have been able to use bots to buy products in bulk quickly. Scalping bots are automated methods used by scalpers to buy products in large quantities and finish the checkout process quicker than the time a legitimate customer would take to buy a product (Nissan, 2017). These methods have been applied to scalping gaming consoles and PC parts.

Scalpers are significant problems for gaming consoles and fans who only want to use the latest gaming systems for leisure. For instance, Sony has found it difficult to manage its inventories due to the high demand for its products, especially PS5. This has made some retailers try to fix this problem by seeking solutions to consumers making a profit simply off keeping in-demand products that are highly demanded. Scalping might lead to scarcity of products in the market when more people practice it because it involves purchasing products in vast quantities and re-selling them at a higher price than the retail value (Parry et al., 20-22). This is not good for consumers because they will be paying more for the items while the scalpers make more profit; hence measures should be taken to stop this practice

Even though the regulation of scalping is essential, we should also control the secondhand market, which might harm customers when it becomes too much. The best way of solving this problem is through public awareness and encouraging various organizations to self-regulate. Firms can control the amount of product to be purchased when in stock hence helping in reducing online scalping. They can also implement measures that prevent buying of products through bots. This technique has been used by Walmart successfully, with a report showing that the company has blocked the purchase of 20 million PlayStation 5 systems within 30 minutes through the use of bots (Lin et al., 2017).

Awareness is essential when fighting against scalping practices because organizations can be alerted about this issue, and customers can be persuaded to stop buying any product from scalpers. This will reduce scalping since scalpers usually exist because of high demand. The government has also intervened by implementing the BOTS Act of 2016 to fight against bolts in scalping (Brock and Steven, 2021). Even after the launch, there is still a scarcity of PS5 in stock. This means that scalpers are still purchasing products in bulk quickly before legitimate customers buy them, making them scarce in the market.

Conclusion

Conclusively, scalping is a standard business strategy that can only succeed when trading experts use it since it is risky. This is because of the competition from algorithmic trading. Traders who operate on long terms are more suitable for this practice because it is a challenging strategy and gets more demanding as time goes.

Work Cited

Brock, Steven. “Scalping in Ecommerce: Ethics and Impacts.” Available at SSRN 3793357 (2021). https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3793357

Kaňuková, Nikola. “Among Us: The Example of Current Digital Influencers’ Impact on the Digital Games’ Popularity.” Acta Ludologica 3.2 (2020): 93-94. https://www.ceeol.com/search/article-detail?id=920285

Lin, Chang-Cheng, and Hsu-Chun Hsiao. “Need Tickets? A Case Study of Bot-enabled Ticket Scalping.” https://www.csie.ntu.edu.tw/~hchsiao/pub/2017_eCrimeEU.pdf

Nissan, Ben. “An Arms Race On Broadway: Bot-Based Ticket Scalping Hounds Blockbuster Musicals.” (2017). https://www.cs.tufts.edu/comp/116/archive/fall2017/bnissan.pdf

Parry, Keith, Aila Khan, and Blair Hughes. “Taking on the scalpers.” Australasian Leisure Management 124 (2017): 20-22. https://search.informit.org/doi/abs/10.3316/informit.410626178623674

Revenue, Recapture Lost. “Tarning the Ticket Market.” Letter Frorn The Ed itor 36.2 (2020): 57. https://heinonline.org/HOL/LandingPage?handle=hein.journals/entspl36&div=20&id=&page=