Have you ever had your eye on a limited-edition item from your favorite brand? Occasionally, brands will advertise special releases on items like sneakers or jackets, other times it can be furniture or a once-in-a-lifetime experience like VIP tickets to meet your favorite artist. Last Crumb even drops limited amounts of special-flavored cookies.
All of these retailers succeed by building hype around the launch, priming their loyal customers to place their order as soon as the product or service is released. However, when the moment arrives, the site often sells out in a matter of seconds. The only option now is to pay a premium to purchase the items from a reseller. Consumers are left disappointed, feeling cheated and let down.
This scenario has become common in recent years, with individuals getting creative to be first in line to resell at an inflated price. To put this into perspective, Cowen Equity Research has predicted that the sneaker resale market will be worth $30 billion globally by 2030. In 2021, face coverings and masks from stars like Kanye West saw a 154% average resell price increase from $82 to $208. These figures illustrate that resell markups are here to stay and have the potential for scammers to earn huge profit margins.
This surge of reseller abuse can have a negative impact on the business-consumer relationship. Below, we examine reseller tactics and their potential damage to merchants.
How Resellers Use Bots to Their Advantage
Resellers are informed of limited-edition product drops or special events by bot-powered monitoring systems and cooperation among resellers in online groups. The moment the product becomes live or tickets go on sale, bots make mass purchases. By entering numerous emails and shipping addresses, the bots can get around traditional fraud detection systems. Legacy systems cannot tell that orders are coming from the same IP address since they are configured to employ proxies. Anti-bot defenses like CAPTCHA are disregarded.
Once the reseller receives the bot-bought goods, they set their marked-up price and promote the availability of the product on marketplace sites. It’s a simple and efficient way for them to make a significant profit on an exclusive item.
In some cases, bots can even eliminate the need for resellers to physically handle and store products by providing buyers with login details for the shopping cart. After the reseller has sold the cart, the buyer is given login information and a window of 10 to 15 minutes to log in to the retailer’s website and finish the checkout process.
The tools themselves are commoditized, showcasing the sophistication of the reseller market. Bots are available to rent. How-to tutorials offer step-by-step guides on making a success of a resale operation. This is excellent news for scammers, but bad news for retailers.
Resellers Prey on Loyal Customers
The merchant-consumer relationship is built on trust. Reseller abuse effectively erodes that trust and leaves customers disappointed and potentially vulnerable to fraud.
When a loyal customer attempts to buy a product that immediately goes out of stock, there is initial disappointment. The insult is compounded when they see the product offered for sale by third parties at an inflated price. Plus, if they have to outsource their search, they may be vulnerable to counterfeit fraud.
To make matters worse, retailers lose out on customer lifetime value, brand loyalty and take a reputation hit.
Resellers’ Operations Slow Retailers’ Progress
Customers expect speed and ease of use. A mere one-second delay in loading a website can affect conversion rates. Unfortunately, bot traffic can impact website performance. In severe cases, bot activity can have an effect akin to that of a distributed denial-of-service (DDoS) attack, slowing down or even taking down websites, resulting in an immediate loss of revenue.
Additionally, reseller activity can make it harder for retailers to accurately gauge demand for products and manage their supply chain. The result is excess inventory that puts a strain on operations and increases environmental impact.
Using Automated Fraud Detection to Thwart Bots
Unfortunately, retailers with basic fraud and abuse detection are left with more problems than solutions. This is because legacy technology weeds out bots by adding unnecessary friction to the customer journey, often leading to cart abandonment and revenue loss.
Instead, retailers should invest in dynamic, AI-powered fraud decisioning tools that analyze user behavior across the customer journey, and machine learning to link this to a global network of data in real time. With a fully automated end-to-end fraud platform, retailers can identify subtle, but very important, account details and behavioral trends such as common IP addresses, modified shipping addresses and multiple email accounts.
When a brand makes bulk purchases harder to automate by blocking serial offenders, reselling is less profitable and bad actors are deterred from targeting their brand.
Diana Edmonds is a Senior Product Marketing Manager at Forter, focused on go-to-market strategy for Forter’s payment and policy solutions. Prior to working at Forter, she held product marketing positions at Sprout Social and Salesforce.