21st Century Customers
The first signs of trouble began when the PS5 suddenly became available for pre-order at different retailers, despite Sony promising that the pre-order date wouldn’t be a surprise. Notifications that PS5s were sold out quickly followed. Even the Xbox Series X, which announced its pre-order date weeks in advance, faced similar shortages. It seemed that anyone who couldn’t get a pre-order was suddenly facing the reality that they might not be able to procure a new system, even by the end of this year. In the void of any official retail listings, scalpers have moved in, selling PS5s for sometimes triple the retail cost on sites like eBay and Craigslist. [caption id="attachment_244314" align="aligncenter" width="930"]
A snapshot of going PS5 prices on eBay. Captured by IGN.[/caption] “We know there’s going to be an abundance of PlayStation 5s around the holiday season. But entrepreneurs are capitalizing on the pacemaking culture, the pick-me culture, the ‘I have and you don’t’ culture. It’s the same marketing,” Professor King explains. He likens it succinctly by saying the second-hand console market is “the same offense in a different sport” to the sneaker market. [poilib element="quoteBox" parameters="excerpt=%E2%80%9CIf%20people%20continue%20to%20buy%20products%20off%20these%20scalpers%20that%20are%20gouging%20the%20living%20heck%20out%20of%20the%20average%20consumer%2C%20then%20they%20will%20continue%20to%20gouge%20the%20living%20heck%20out%20of%20the%20average%20consumer.%20Do%20NOT%20buy%20a%20marked%20up%20console%20from%20these%20scumbags.%E2%80%9D%20-%20eBay%20reviewer"]Even the official retailers are imitating the marketing strategies pioneered by streetwear fashion. Sony announced it would open up a limited number of PS5 orders directly to its most loyal PlayStation customers, and other retailers have created digital queues for the next batch of PS5 or Xbox Series X sales, with a precise date and time for when the sale goes live. This is otherwise known as a “drop,” a term that began simply by referring to a product release, but became synonymous with the streetwear industry thanks to brands like Supreme, whose product drops have led many zealous fans to camp outside stores for days to score items emblazoned with the red Supreme logo. The digitization of the drop is already well underway with sneaker brands. Nike’s SNKRS app features a calendar of upcoming releases that customers can sign up to be notified of when they go up for sale. Valued customers are allowed early pre-order privileges, not unlike how Sony sent unique invites to PS5 pre-orders for loyal PlayStation players. [widget path="global/article/imagegallery" parameters="albumSlug=confirmed-playstation-5-games&captions=true"]
Supply and Demand
Earlier in the year, analysts wondered if the new consoles would be delayed due to the ongoing Covid-19 pandemic but Sony and Microsoft repeatedly assured customers that these systems would be available in time for the holidays. What the two manufacturers cautioned — repeatedly, in fact — is that there could be shortages. That there might not be enough consoles in 2020 for everyone. But a PS5 and Xbox Series X aren’t like limited sneaker drops. Some shoes, once they’re sold out, no longer go into production, driving up their collector resale value. PS5s and Xbox Series X are consumer goods and will be in production for years. And yet the language from console manufacturers has broadly been to shine a light on shortages: Microsoft CFO Tim Stuart says that Xbox Series X and S demand is huge and thinks “we’ll continue to see supply shortages as we head into the post-holiday quarter, so Microsoft’s Q3, calendar Q1 [the period ending March 31, 2021].” Sony Interactive Entertainment CEO Jim Ryan said in a recent interview that, “Everything is sold. Absolutely everything is sold. I’ve spent much of the last year trying to be sure that we can generate enough demand for the product. And now in terms of my executive bandwidth I’m spending a lot more time on trying to increase supply to meet that demand.” [poilib element="quoteBox" parameters="excerpt=%E2%80%9CNow%20confirmed%20sold%20out%20everywhere%20until%20Black%20Friday.%20With%20Covid%20going%20to%20hit%20again%2C%20I%20don%E2%80%99t%20see%20production%20meeting%20supply.%20Glad%20I%20got%20mine%20below%20a%20grand!%E2%80%9D%20-%20eBay%20Reviewer"]When even the heads of the companies making them are telling us that they don’t have enough consoles to go around, it’s probably no wonder that every deal chaser on social media is blasting links to digital stores that may have a drop of PS5 or Xbox Series X stock. I myself acquired a PS5 pre-order, not from any traditional retail channel, but through a sneaker deals Twitter account. Professor King doesn’t see those company announcements as an apology — he sees a tactic: “That particular strategy is to build — and it happens in everything — you want to build anticipation. And there’s a false pretense. You know — I know that these units are going to be readily available, but to make money in advance you create the illusion that there are not going to be that many of them. You just don’t acknowledge the fact that we’re going to have more pretty soon.” Creating a narrative of scarcity has been good business for sneakers, and it may well be good business for console makers as well. There certainly appears to be an enhanced fervor to acquire a new console driven in part by their scarcity. [widget path="global/article/imagegallery" parameters="albumSlug=confirmed-xbox-series-x-games&captions=true"] That scarcity is exacerbated by factors outside of Sony and Microsoft’s control. While there could be elements of marketing engineering at work, driving up hype and in turn demand, we’ve also seen scalpers utilizing tools like bots to pick scan retail sites and buy up PS5 and Xbox Series X stock before customers can get a chance to order one at retail price. Shopping bots have been around for years now, and are used to purchase all different kinds of items online, such as concert tickets. But they’ve become particularly aggressive when it comes to sneakers and streetwear. Bird Bot, a retail bot used to buy up Nintendo Switch stock, was originally developed by a sneakerhead who learned how to program bots trying to purchase sneakers. Reports have emerged that one Europe-based reseller group purchased nearly 3,500 PS5 consoles through bots, ensuring in some cases that resellers are the only place some customers can acquire the sought-after console. [poilib element="quoteBox" parameters="excerpt=%E2%80%9CIf%20I%20could%20have%20gotten%20one%20at%20the%20regular%20selling%20price%20it%20would%20have%20been%20a%20good%20value%20but%20I%20knew%20I%20was%20paying%20way%20too%20much%2C%20but%20my%20grandson%20wanted%20it%20for%20Christmas%20and%20he%E2%80%99s%20a%20great%20kid.%E2%80%9D%20-%20eBay%20Reviewer"]Making matters worse is how the Bots Act of 2016 only outlaws the use of bots when purchasing digital tickets. Bots for shoes and popular holiday gifts are still technically legal, though they are against individual stores’ terms of service. What has emerged is a perfect storm where the video game console market and the trends of 21st-century consumerism collide. Whereas in the past the barrier to acquiring a new console or shoe may have been strictly financial, i.e. not having the funds to purchase the desired item; it’s no longer enough to just have the money. Customers are expected to be first, whether they’re competing against digital bots, or other customers who have more available time to queue up in line — physical or digital — for the same item. While Covid-19 may have had a unique impact on availability — something we won’t fully understand until concrete sales and production figures is released — it’s also not unfair to say that some of these conditions have been created by retailers who want to drive up demand. The console marketing cycle effectively began in 2019, pre-COVID, and anticipation for the PS5 and Xbox Series X has been building ever since. Stoked by a chaotic pre-order experience, official company communication that stock remains rare, and bots that remain legally dubious, we have a situation where hype and rarity are funneling customers to an unfair gray market that has had plenty of experience charging desperate customers a premium. [caption id="attachment_244314" align="aligncenter" width="926"]
A snapshot of going Xbox Series X prices on eBay. Captured by IGN.[/caption] While writing this article, I scoured retailers like eBay to find the going price of a PS5 on the second-hand market. While there are listings that go as high as $2,000, searching through sold listings reveals customers typically purchase second-hand PS5s at around $950 but can go as high as $1,200. This is a staggering price compared to the suggested $499 retail price for the PS5. But Professor King says these rates of increase are typical in the sneaker market. “How much is a sneaker worth? A sneaker is worth however much someone is willing to pay for it. How much is a console worth? Well, a console is worth whatever someone is willing to pay for it, and typically someone is willing to pay retail plus half of what it costs.” At the time of writing this story, one retailer on eBay is selling a PS5 disc version for $1,699.99. eBay’s website says this seller has already sold 33 units, and a notification below the listing says in bright bold red, “Almost gone.” [poilib element="accentDivider"] Matt T.M. Kim is a reporter for IGN.source https://www.ign.com/articles/ps5-xbox-series-x-scalpers-sneaker-culture
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