Yeeeee!!! (Scalpers beware)

[gatearray]

Apple's HALO EFFECT and the scalpers

Just to piggyback on mcdj's excellent and well written post, the scalper issue takes away another benefit to Apple and that is the halo effect of selling these iPad 2s here in the US.

As mcdj said, Apple is not in it for a short term buck, but they are investors.

Now, what happens when the US launch iPads do not stay in the US, and get smuggled back to China instead?

Apple misses out on the halo effect, which is usually when one customer buys an Apple product, likes it, and comes back to buy another one, and then another one, and then finally switches from a PC to a Mac. When this final stage happens, they have a customer for life.

When the original iPad launched, it sold 300,000 to those die hard early adopters and Apple fanatics. But then what happened? Those buyers brought their new iPads home and their family and friends got to see it, too. This led to many more sales, because as we iPad fans know, to play with an iPad for a half hour or so is to have to have one.

So for every one of those iPads sold on launch weekend in 2010, many more sales were generated from impressed family, friends, and work colleagues. How many stories did we read about people seeing someone at work with an iPad, trying it out, and heading to the Apple Store on their lunch break to buy one? It happened all the time.

By smuggling these iPads out of the country to sell them to disparately wealthy individuals in Hong Kong, all those halo sales to Americans that would have been exposed to the iPad and had the chance to see and touch one outside of an Apple store are lost. And all the future iPhone and Mac sales to these potential iPad users would be lost as well. As it's been said, there is no easy answer for this problem, but we can be quite sure that Apple is none too happy about it.

 

[Bartman01]

What would you rather do? Stand in a line for four hours and pay retail price or get one in a few minutes from a sclaper for 100 percent markup?

I would rather just buy online and pay retail or less. Unless you are a developer, you gain nothing by having one 'right now'.

 

[Bartman01]

Actually is it legal for a company to refuse serving a customer (in this case, selling iPads to someone whom they have sold to before) without any particular reason given?

Yes. You can only sue if you can demonstrate that they are refusing in general to sell to a legally protected class. It is also VERY common to restrict or limit quantities sold to either individuals or even households.

 

[deeddawg]

Now, what happens when the US launch iPads do not stay in the US, and get smuggled back to China instead?

Apple misses out on the halo effect, which is usually when one customer buys an Apple product, likes it, and comes back to buy another one, and then another one, and then finally switches from a PC to a Mac..

You act like Apple has no presence in China. I wouldn't be so sure that there wouldn't be halo effect sales in China, or that they'd be unhappy for units to start showing up in China.

(I'm ignoring the claim that the majority of resold ipads are going to China since I have no idea whether that's based on fact or just racial profiling assumptions)

 

[nightfly13]

One area Apple can do better..

I don't know the precise product launch gap between North America and China, but I do know that India only got the iPad 1(!) in the past two months. I think it was around 2 weeks before the iPad 2 announcement. I know India isn't a huge market for Apple (despite having more millionaires than like 90% of the countries on the world) for lack of a western-level upper-middle class, but the gray market is huge. I think this is a circular problem - Apple has a meager retail market because the gray market is flourishing - and the gray market flourishes because the retail market is 30% more expensive than US retail (as it is in most countries) and 8-9 months late in getting hot new products!

So I don't claim to understand all of the international product launch/rollout implications, but I think if International buyers had a confidence that they'd get the products in a reasonable time (say 2-3 months after launch) then international demand wouldn't be so massive. I think most of these huge jacked up prices are for 2nd and 3rd world elite, who have little hope of the product arriving any time soon locally and have cash to burn.

Apple has created this scalping problem by neglecting the wealthy elite in otherwise mediocre markets. It wouldn't hurt to keep prices more competitive internationally. If it's going to cost 30% more locally anyway, why not pay 50% more now to get it 8 months sooner?

 

[Mattstkc]

I hope they would start doing that at all their stores, but i doubt they would. It adds extra work on their part that im sure theyd rather not deal with.

if they take the time to turn away douchebags who are buying their 3rd or 4th iPad they can take less time explaining to customers who actually want the device that the nice foreign guy with $20k in his pocket bought them all.

 

[joesegh]

You act like Apple has no presence in China. I wouldn't be so sure that there wouldn't be halo effect sales in China, or that they'd be unhappy for units to start showing up in China.

(I'm ignoring the claim that the majority of resold ipads are going to China since I have no idea whether that's based on fact or just racial profiling assumptions)

Apple wants to sell those units directly in China and not have anyone else involved in their import.

 

[deeddawg]

Apple wants to sell those units directly in China and not have anyone else involved in their import.

Yeah, they're working really hard to ensure that they're the only ones doing so.

Yet since I don't have a direct line to senior Apple management and thus I cannot know exactly what Apple does or doesn't want in regards to China, I won't refute your statement. I am curious as to how you know this information? Did you get an email from Steve?

 

[djf881]

What's going on is that manufacturing capacity for electronic devices is allocated to meet the average demand over the life of the product. When the product first launches, there's a demand bulge, and that causes scarcity.

It doesn't make sense to build extra factories to satisfy a one-month demand bulge, and it doesn't make sense to delay the product launch while warehousing stock to launch with enough supply to meet the initial demand.

It arguably makes sense to sell the initially-scarce limited supply at a higher price, and then cut the price later, so Apple would capture the excess value that scalpers are currently harvesting. But this would be seen as burning early adopters. Scalpers pretty much buy up all the product and then resell it to customers who aren't willing to tolerate the lines.

Apple is probably gun-shy about requiring credit cards, because the office of the NY State attorney general opened an investigation last year about whether Apple stores were discriminating against Asian purchasers.

What Apple really should do is cut the per-customer limit down to one, which cuts the yield of a line-wait by half for a scalper, but won't impact most legitimate buyers. They should also consider routing stock to fill online orders rather than sending daily shipments to stores, given that those shipments will be largely captured by scalpers.

It's ridiculous that they're sending 400 ipads to NYC apple stores to be immediately bought up by scalpers and shipped to China while the wait to buy one online is 5 weeks. If store shipments were less sporadic, these people couldn't camp out for them. I don't really think there's a PR benefit for Apple in these lines anymore. Long lines of hipsters one day are good PR. 200 very obvious and slightly-scary scalpers sleeping outside the store every night is not.

 

[nightcap965]

Scalpers and the Apple Experience

I don't care if the scalper is offering the very model I want for $50 LESS than Apple retail. I'm never buying from a scalper.

I want to go to the Apple store. I want to walk in and be greeted by a friendly Apple employee. I want to enjoy the sales process, that little bit of pampering and ego-boo that tells me that Apple appreciates my custom, supports their product, and looks forward to serving me again. I want to be able to tell my friends and relations who've never bought an Apple product before to go to the Apple Store, knowing that they'll get the same care and attention I received.

Last year, I sent my 76-year-old mother to her local Apple store to buy an iMac. She still enthuses about the helpful attention she got there, and it still enhances her enjoyment of her computer. She's confident that if anything goes wrong, they'll be only too happy to help her.

That's worth something to me. That's worth waiting for.

 

[benhollberg]

It was very uncomfortable listening to it and the kind of thing that I wish I had taken some video with my cell phone.

Man that would have been great.

 

[joesegh]

Yeah, they're working really hard to ensure that they're the only ones doing so.

Yet since I don't have a direct line to senior Apple management and thus I cannot know exactly what Apple does or doesn't want in regards to China, I won't refute your statement. I am curious as to how you know this information? Did you get an email from Steve?

No, but they definitely recognize more revenue by selling through direct channels in-country than selling them at US prices for the Chinese market. The problem is that there is not really a good way to police this as of right now without imposing the types of limits which can be construed as discriminatory.

 

[iPad2Reseller]

lol herp derp

Guess I'll just list it under iPad 2 accessories category... works like a charm!
financing my education.

 

[KittyKatta]

They are waiting JUST as long as everybody else, buying the EXACT same 2 everybody else is allotted, paying the EXACT same price... Banning them is not fair or logical.

When its the exact same 10 people in line claiming the low shipment of 14 iPads per day, EVERY day then the store has every right to deny them service.

These resellers arent coming back to buy accessories or an unpopular Macbook, but think of all the new and potential customers who simply gave up and now consider the "Apple Experience" to be a pain in the butt? Apple should care that these resellers are taking away from the "Experience" of buying an iPad and can likely push them away.

 

[ehoui]

Guess I'll just list it under iPad 2 accessories category... works like a charm!
financing my education.

What is your profit per day? How much cost in making that profit -- i.e., how many hours do you work to get it? I'm guessing there is much better ways to finance your education.

 

[gglockner]

I don't know which is worse - scalpers that are buying iPads to resell on eBay, or the fools who are buying them on ebay from these scalpers.

 

[logandzwon]

So if scalpers are not allowed, then can I pay by buddy to stand in line for 10 hours, $10 an hour to get me one?

Can I run a creiglist add and pay a stranger to do so?


Of course Apple should enact and enforce rules to protect their buying experience. But that does not require stopping all scalpers.

 

[ravenas]

When its the exact same 10 people in line claiming the low shipment of 14 iPads per day, EVERY day then the store has every right to deny them service.

These resellers arent coming back to buy accessories or an unpopular Macbook, but think of all the new and potential customers who simply gave up and now consider the "Apple Experience" to be a pain in the butt? Apple should care that these resellers are taking away from the "Experience" of buying an iPad and can likely push them away.

Some reselling is acceptable. What we're seeing is the growth of a vibrant grey market where there is hoarding, profiteering and smuggling. That never bodes well for the consumer.

I just wonder what will happen as the market floods with Android tablets next month. will enough frustrated potential iPad2 buyers get so fed up with the dismal buying experience they jump ship?

Keep in mind the buying experience is more than being able to find one in the store. There have been far too many reports of defective units and long delays for exchanges.

 

[iPad2Reseller]

What is your profit per day? How much cost in making that profit -- i.e., how many hours do you work to get it? I'm guessing there is much better ways to finance your education.

I've bought and flipped 3. I only buy AT&T versions, and I only buy from Target. I use inventory tracker whenever I have free time to snipe them. Everyone who's bought from me has been international; 2 from Hong Kong and one from Singapore. The real profit is in the 64GB AT&T, not only do they fetch the highest markup value, but eBay's commission is capped for auctions at $50 and tiered for fixed price listings 8% ($50) then 5% ($1000) then 2% ($1000+). So for higher priced items with equal or greater percent markup you're keeping more of the final value fee.

I was joking about financing my education. I've probably made ~$900 so far. But, since my school just decided to increase tuition by $2000, I'll use this to balance that out.

 

[Sketchr]

I don't get how this will quell the cash wielding PadGangs unless they start requiring IDs again, even then, it wil be a very time consuming operation to log every name of every cash paying buyer. If they revert back to credit cards only, I could see it working.

Yeah, but even then one could use a different card each time. Lots of people have a plethora of credit cards...

 

[Rafterman]

Yeah, but even then one could use a different card each time. Lots of people have a plethora of credit cards...

These scammers are not going to use credit cards or anything traceable.

 

[benhollberg]

These scammers are not going to use credit cards or anything traceable.

Scammers? I don't think so.

 

[Rumanji]

What would you rather do? Stand in a line for four hours and pay retail price or get one in a few minutes from a sclaper for 100 percent markup?

Oh please.... scalpers are not getting 100% markup! Averaged out, the VERY best they are getting is ONLY a 98.5% markup!

 

[mcdj]

Yeah, but even then one could use a different card each time. Lots of people have a plethora of credit cards...

In NYC the PadGangs are a cash operation. Many if not most of the foot soldiers are likely illegal immigrants. These people do not have multiple credit cards if they have even one. Nor do they have matching IDs. Nor could they easily obtain multiple other's credit cards with matching IDs.

A reinstated credit card/ID - no cash rule would put the PadGangs out of business for the most part.

 

[jacque000]

..nice post you have here!..