Every online seller, entrepreneur, and inventor should read this story on Entrepreneur.com
, which captures some of the drama of selling on eBay and Amazon caused by something called retail arbitrage.
We first wrote about the phenomenon of retail arbitrage in 2012
, explaining how it allowed eBay sellers to carry zero inventory and make their business virtually risk-free by piggy-backing on Amazon and its Prime free 2-day shipping program.
Entrepreneur Magazine makes it personal, telling the tale from the point of view of a small entrepreneur Fred Ruckel, inventor of a cat toy called the Ripple Rug, and delving into the repercussions retail arbitrage has on other businesses.
The title implies it's a scam, though it stops short with the title, "Why It's Nearly Impossible To Stop This Amazon and eBay Scheme." The article refers to eBay sellers conducting Amazon arbitrage as "uninvited middlemen," a form of reseller, and even a parasite.
Entrepreneur explains why people like Ruckel are so upset over the practice of retail arbitrage, including some loss of control over their brand - and also because returns are higher than they experience with their own direct sales.
"They steal brands' marketing materials and make money off their products, creating all sorts of consequences for small retailers like Ruckel," the article alleges.
When customers return Ruckel's product sold by an eBay arbitrageur (possibly because they've realized they spent more on eBay than they could get it on Amazon), the customer may be out almost $10 thanks to the re-stocking fee the eBay seller charges, along with a shipping fee; Ruckel loses almost $20 in Amazon fees; and, just as we noted in 2012, the eBay seller still makes money on the return thanks to the restocking fee.
Have you ever found yourself in a position similar to Ruckel's? Has eBay's VeRO program or the Amazon Exclusives program
been helpful (or harmful) to you?
Let us know what you think of Entrepreneur's take on retail arbitrage - is it a fair assessment?