They probably have limits to avoid scalping. Some guy repeatedly coming in buying iPads 2 at a time fits the profile of a scalper, so they cut him off. There's probably an economics paper waiting to be written somewhere about how consumer electronics manufacturers and retailers handle these types of supply shortages.
Bingo! Not probably, it is very much the reason. They underestimated the demand and are attempting to prevent people like him from being a middle man. This isn't a big story.
If it's an underestimate of demand, that seems like a very common mistake--most gaming consoles and new Apple products have this exact same problem. Either they're systemically "underestimating" demand to mitigate risk or increase the prestige of the product (by making it rare and hard to get), or the peak demand for something like an iPad or Wii within the first month is just completely beyond any reasonable manufacturing capacity.
In an idealized market, of course, manufacturing capacity would ramp up with demand, but that's because price does, too. In reality, while the market price will go up enough for scalpers to play arbitrage, the producer doesn't capture this surplus and has no incentive to increase quantity supplied.
That's the risk mitigation part, and in the 90's Apple had a lot of problems like that (too much inventory of unwanted products) but then you start to wonder how, for instance, the Nintendo Wii went a whole year understocked.
It costs money to retool a factory to produce something different. If the cost of lost sales due to undersupply is lower than the cost of setting up another factory, it makes sense to undersupply.
I'm wondering if Apple could pull off the continuous auction approach with new products?
It would have worked like this for some period of time after the announcement but before the official release dates Apple would sell you a numbered product at a multiple of the announced retail price, the earlier the date, the higher the multiple. So the very first iThingy would go for say $100,000 and the next batch might go for $50,000 each, and the third batch would be priced at $25,000 and so on. This would let them practice almost perfect price discrimination; most customers would pay what the product was worth to them...
There are of course very good reasons Apple does not do this.
What are the reasons in your opinion? I can see that it might give them a bad reputation, but that could be mitigated by parting with most of the profits for charity.
Or are they trying to create an image of scarcity and desirability?
Or I didn't want to talk about pre-production. I meant to talk about the begin of the normal production run, where demand for hyped devices (say: Wii, Nintendo DS, iPhone, iPad) far outstrips supply.
By the way, it may be rational for companies to let this happen, since mass production facilities cost a lot of money to set up, and they have to aim at the longer term demand instead of the spike at the beginning.
Right, ok that explains a bit about the stores actions, but still the guy at least says he did not profit from this, in fact it took him time and all he did was recover his expenses.
"hoarders who were unloading iPads on eBay to cash in on the $150+ markup. Instead, my asking prices were very reasonable, just enough to cover all the tax, international express shipping, and Paypal fees with a little left over for unexpected costs"
Notice how he specifically mentions a price for the "eBay hoarders", but avoids mentioning his markup. I wouldn't be surprised if his markup was close to $150 as well without actually ever being over. Like somewhere around $140.
His story is contrived in a way to give you a good impression of him and a negative one of the Apple store employees. Another couple of telling parts in the story are: "reservations are limited to one per iTunes account. Luckily I have a second account so I used that to place the reservation" and "Ok, so the gig is up" followed by a whole unnecessary conversation.
The first quote shows that he knows that what he is doing isn't exactly kosher with Apple. He is willingly and knowingly flaunting their policies.
The second quote shows that he realizes he's been had. He already knows why he was busted, but he persists in trying to troll the employees into saying something slanderous, like euphemisms for the fact that he's an unauthorized reseller.
I call into question the morals and ethics of the author of the post.
For every noble minded person who, out of the goodness of their own heart, runs other people's errands to the Apple Store, there's probably >1 scalper, on average.
Traditionally, yes. Scalpers constituted a small fraction of the market and were largely doing temporal arbitrage: there will be a certain number of people willing to pay a higher price on Day N than on Day N-X (where Day N-X is when tickets originally went on sale).
Modern scalping constitutes a far larger fraction of the market, and consists entirely of artificially limiting supply. You don't think those pop teen idol concerts would really naturally sell out in 30 seconds, do you? That happens because somebody's running an automated system that hammers the online purchase form.
Scalpers are the people you'd see standing outside of a sporting event selling tickets at a markup. It works out because if you don't care about the beginning, you can often times score them for very cheap.
There was a beer tasting event I went to a few months ago where tickets were ~$60. I showed up really really late (I was the designated driver anyhow) and got mine for something like $15 (which was cheaper than what the promoter was offering the "designated driver" tickets [which don't allow you to drink the beer] for).
June 5th, 1999: The New York Knicks are playing the Indiana Pacers in the NBA playoffs. At the time, I'm living in New Jersey, and I'm heading into Penn Station to go home. A scalper walks up to me (and everyone else, I suppose) and offers me a ticket to the game. The ticket's stamped price is $100 (maybe $125). The scalper wants $450. I think about it, think about it, think about it. I pass.
Hours later, with just over 6 seconds left in the game, Larry Johnson wins it for the Knicks with an amazing, once in a decade 4-point play. I'm at home, jumping up and down, screaming. (Links below for the play.)
So, yeah, that's a service charge, but not quite like Ticket Master.
Damn but that was a good game. That was the one and only time I've ever listened to a sports event of any nature on the radio, and I managed to get to a TV just in time for that play of Johnson's - fantastic even though I was in Indiana and rooting for the Pacers!
I think most retailers have policies to prevent scalping. I'd be more mad at Ticketmaster if I was you. (Most people already are, but not because their prices are too low!)
And to hell with the Green Bay Packers, if only their season tickets were more expensive, all those middle class people in rural Wisconsin wouldn't be able to afford them and the decades-long waiting list would just dry up! Stupid corporatists and their 3-4 defense.
Scalpers are a market-making phenomenon that occurs in free markets when a product has a set price that is artificially low for high demand; e.g. concert tickets, sports games tickets, etc.
Sometimes people want to sell things for below their cost, to let more people enjoy them than otherwise would. A scalper takes advantage of this incorrectly low price, buys the item, and resells it for it's true market value.
Except that scalpers are also a part of the market. When a large percentage of original purchases are by scalpers, they artificially up the market value.
Nope they can artificially increase the price by hoarding and making it less available.
Think about any commodity... everyone needs sugar/salt, what if somebody starts buying all the sugar from the market and hoards it... some people will start consuming less but the prices will increase due to lack of supply and more or less constant demand.. and then the person can open floodgates and make some dough in the process... Pretty common in Third world countries (and hence illegal)
Yes apple could have made the launch price higher - but then they would have to lower it after the launch to get the rest of the customers.
But the last time they did that, there was a firestorm as all the early customers were very mad at the very quick price reduction.
So apple chose to start at the more longterm price.
The correct way for them to handle it would be a premium or collectors or limited time edition. AKA the first ### buyers get a special dodad, or a signed shirt or some item to make them feel important. Then they pay extra, and don't feel cheated when it goes on sale at the regular market price.
> resells it at a price far above the initial cost
This is often what happens but it isn't a necessary condition to be a scalper. You can sell tickets for at or even below the initial cost and still be considered a scalper.
Indeed many scalpers often unload tickets for less than face value if they can't find a buyer at the price they want.
