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eBay takes action on arbitrage says software provider

By Chris Dawson May 14, 2018 - 1:27 pm

Arbitrage is the process of finding a product at a low price from one supplier and selling it at a higher price to the customer. The difference from traditional online merchant operations is that instead of buying cheap in bulk, with arbitrage you’re often buying from a retailer and getting them to ship direct to your customer.

eBay doesn’t like arbitrage. We already know this from their decision to ban arbitrage on eBay Australia. eBay especially don’t like eBay buyers getting parcels arriving in Amazon packaging, but there are a number of other reason that they take a dim view of arbitrage schemes. If a consumer receives a package from an unknown retailer then that retailer could get support or returns requests from a customer they’ve never heard from. Also if the retailer sells on marketplaces and the product isn’t exactly as described and received on time they can receive negative feedback and reputational damage from a customer they’ve never heard of. eBay also suggest that a number of arbitrage sales are cancelled with the “cancellation at the buyer’s request” option to avoid impacting the arbitragers seller metrics.

Here at Tamebay we’ve also good reason to suspect that many arbitrage dealers outside the UK are avoiding VAT entirely and simply haven’t registered with HMRC. You may think on the surface that there’s no VAT liability as the retailer they source goods from will be paying VAT. However, if properly registered arbitrage dealers would reclaim VAT on purchases and pay VAT on their sale prices so VAT would be remitted to HMRC on the net profits. This doesn’t appear to happen in many instances. It’s tricky for HMRC to catch arbitragers as they see a sale and see the real merchant complete their VAT returns and as the item is shipped direct they don’t ever get to see the arbitrager in the middle.

Arbitrage dealers add no real value to the supply chain although it’s an interesting and innovative way to make money with no investment other than some software and no upfront costs. When the buyer pays you place an order for the goods but you never touch them and have them shipped direct to the buyer. Anyone could set up an arbitrage business from anywhere in the world and they could be scraping your marketplace listings or website and you’ll never know until one of their buyers has an issue with a transaction.

Now it appears eBay may have clamped down on the arbitrage world as Adi Reiss, CEO of Isreali based SaleFreaks (an arbitrage software solution) has gone public and joined forces with other dropshipping companies to go legal on eBay. They are claiming that, since mid April, eBay have started to lower listings from arbitrage dropshippers in search results and clients have seen between a 25% and 50% drop in search impressions and sales.

SalesFreaks say they admitted in court that a 30-day warning was sent to Isreali sellers, but claim it was ‘vague’.

We’ll be watching this case with interest as there are a large number of automated arbitrage software solutions on the market and an even larger number of arbitragers who use them. However we are pretty certain at Tamebay that eBay don’t like arbitrage and have resolved to stem the flow of sellers using the practise. Arbitrage dealers in reality add no real value but do add cost to the supply chain. eBay would prefer that gaps in inventory be filled by sellers with stock on hand but, all the time that there are gaps in their inventory, some technical wizard somewhere in the world will attempt to use stock feeds and arbitrage to fill the gap.

  • james
    5 months ago

    Good.

    previously reported hundreds of israeli sellers who are offering goods which are EXCLUSIVE to us, using our own descriptions and images.
    they don’t respond to our messages to cease and desist, don’t remove the items, ebay doesn’t do anything about it (until now), so we need to watch for them attempting to order, and then screw with them as much as possible.
    not the most mature approach i admit, but if nobody else is taking it seriously, then we have no choice but to do something ourselves.

    they offer absolutely nothing to the consumer, yet bastardise our brand with poorly copied text (often still has amazon headers on ebay listings) and low quality copies of our images, and believe they deserve to receive an inflated price for doing so.

    worst bit is, we’re the only people who actually have stock of these items, we own the brand name, yet someone halfway across the world copies my listing and offers it cheaper, so it’s obvious they’re going to try and scam us at some point in the future after stealing our sales.
    we’ve already caught several trying on INR claims, they’re nothing but thieves.

    even when you identify the ebay seller causing problems, half the time they’re buying from us via amazon, so it’s hardly an easy job to spot them.

    we’re more than happy to work with drop-shippers who abide by our reasonable drop-shipping terms, we have many happy sellers we drop-ship for, who don’t try to rip off our exclusive lines, but most of these arbitrage sellers are simply parasites, we’ll be glad to get rid of them.

    • Coronado
      5 months ago

      100% agree. We are also more than happy to work with drop shippers but the majority of these guys never bother to contact us, rather they butcher our images that would never pass our image standards, ship to customers mostly via FBA, and in the end, the customer is the one who loses out, since our product has been sold at a price that exceeds what we believe is the correct market price. We have about 1,000 drop shipper listings on eBay and while we welcome the business, we also would prefer that the order comes directly to us. One of the big differences between the drop shipper and the brand is how we view customers. The drop shipper sees dollar signs when they see the customer, while the brand sees an opportunity to build a lasting relationship. We are building a community and we want the business today and tomorrow, and I think this is only earned when the same level of support can be offered to the customer.

      I knew that eBay had something like this in mind when they required UPC Codes last year and perhaps now we are seeing the first wave of the drop shipper purge. As surely you will agree, for any given search on eBay, there are far too many results that display, in large part, because of these drop shippers, and I only see upside for the customer when these guys are gone. And for the drop shippers, the real problem here is the sell-through ratio. You can’t list 100,00 items and only make 50 sales a day. No business could carry this kind of inventory and sell so little, and crowding eBay with these marked-up listings is just not a positive for the buyer.

    • Carl
      5 months ago

      James, why would you care if somebody else sells your items? As a 500k per month Amazon seller I love people who list my items on other marketplaces because I don’t have to deal with the customers and I don’t have to worry about getting bad reviews. You are simply foolish and letting your ego get in the way of smart business.

      They are making you money and giving you extra sales. They are doing the work of selling + advertising the item FOR you.

      As far as you are concerned it should just be another customer. But hey ruin your own business and cause your self stress to save your ego, and let us smart folks take advantage of extra sales.

    • james
      5 months ago

      @carl.
      there are dozens of reasons, the same reason Armani don’t want car-booters being their customer-facing front, for one.
      their insistence upon completely ignoring our contact for another.
      failing to adhere to the terms our actual partners do.
      listing our products with inaccurate or missing information.
      showing our products with terrible images.
      sellers who have never even seen the product they sell.
      the increased returns.
      the risk of counterfeit goods.
      the number of scammers.
      the lack of control over brand identity.
      the loss of potentially using loss-leaders to attract store custom,
      and so on and so on and so on.

      “They are doing the work of selling + advertising the item FOR you.”
      if that were the case, i wouldnt mind, but fact is they’re not. not at all.
      if you count three seconds worth of copy/pasting other peoples labour as “work” deserving of credit, then maybe, but I don’t.
      thats the height of their “contribution”. they can’t even put in the effort to re-word the copied text.
      as for “Advertising”, i don’t consider a rival ebay listing against our own as “Advertising”, i consider it competition. especially when said competition has under-priced us.

      Can you explain how someone who would benefit my sales, is selling my product, cheaper than i am? it’s not possible without stealing from me, yet i’m to view these thieves as a blessing?
      Can you explain how i have a 30 day return policy, but these Israeli sellers advertise free returns within 90 days on my products? they sure aint taking the product over to Israel, what they’re doing is opening SNAD cases against us and damaging our seller ratings. claiming damage that doesnt exist and demanding discounts, with threats of neg feedback, and the marketplaces aren’t covering us when it happens.

      Like i said we have happy partnerships with many drop-shippers, they DO benefit us, we’re glad to have a 2-way relationship which benefits everyone, we are NOT happy to have someone irip off our listings, cost us sales, damage our brand and selller ratings, and try to rob us in the process.

    • John Mulaney
      5 months ago

      Bwahaha… I have to say… I highly doubt your products are exclusive to you unless you designed them and patented that design yourself. I keep reading this same line of crap on message board after message board and its getting ridiculous.

      Your brand? You’re comparing yourself to Armani? Care to state for us all what exactly it is that you sell? I’ll give you a clue – the people at Armani sure don’t come onto public message boards like this and bitch about people “stealing” their brand. If you had any legitimate claim, you would be suing those people and keeping your trap shut on here.

      Even many of those sellers you claim are hurting your brand may be providing better service and operating to higher standards than those you are purporting to have. How would you even know? Have you ordered from them?

      I don’t do arbitrage, BTW – profit margins are too slim. But, I could see the attraction if you can automate and scale and pull heavy volume. I don’t see a problem with this, either. Those in the arbitrage game are filling one important niche, and that is providing liquidity in public markets with products that have low availability.

      If you really have a problem with this, then sell your product on their market at your own price and knock them out. If you are upset that they are “undercutting” you on a product you sold below cost to begin with then the answer is simple – stop selling your product below cost!

  • Dion
    5 months ago

    Arbitrage dealers in reality add no real value ???
    Actually it’s excactly the oposite. People who are doing Online arbitrage or dropshipping or product sourcing are the one who are trying to add more and more value to the market for the obvious reason that this is the only task they have focus in order to be established and remain in the marketplace. Since they do not have other operations to care about like warehousing or dispatching parcels, they put all the efforts to add value with other ways, like excellent and fast customer support, quality products for their buyers (carefully selected suppliers). The bottom line is that the buyers of the marketplace will define if the seller worth to be part of it or not. Thats why there are seller metrics and feedback. The search ranking must be the same for every seller since we all pay the same eBay fees.

    • Coronado
      5 months ago

      Search ranking needs to be the same for all sellers? Do you think that eBay is some type of playground in which the rules need to be fair for all? Honestly, if you were running a marketplace, would you extend “same rank” to the brand selling at MSRP or to drop shippers that, 1) have no ties to the brand and likely cannot provide quality technical support, and 2) they are selling the product at a 30-40% mark-up? Be honest. While a drop shipper may be a top-rated seller and perform above and beyond standards, the real question here is: what value does the drop shipper provide to customers? The answer is NONE. Drop shippers are creating a middle man where one is not needed, and the consumer will benefit without this type of seller.

    • John Mulaney
      5 months ago

      Coronado,

      Care to explain what is wrong with a 30-40% markup? Is it that you are jealous that you are not getting the same markup on your direct sales?

      I can’t even believe that this is a question because anything I sell has a 400-500% markup or I wouldn’t even be in business to sell online.

  • Darren
    5 months ago

    The solution is simple eBay needs to introduce an address book that has restrictions on the number of times the shipping address can be changed in a given period.

  • 5 months ago

    How would eBay know that an item was being fulfilled from an Amazon fulfilment center?

    • Coronado
      5 months ago

      It’s more about the sell-through rate. If the seller is listing thousands of items and only making a few sales, this probably raises a red flag. I don’t think there is a way for eBay to know which shipments come from FBA, unless a buyer is reporting to eBay. There may also be other indicators, such as the time it takes to upload the tracking, but most likely, eBay views the sell-through rate as the key indicator of a drop shipper.

    • 5 months ago

      eBay would also likely be able to see through API calls what software a particular seller was using to list product and if said software was a known arbitrage program…

  • ifellow
    5 months ago

    Several People have been doing this to my listings for some time and the prices they have are around 20% more. They are just my listings copy pasted into a new very basic theme. (Images and description)

    A report button would be nice or at least a page as to what the policy is.

    Im not sure if i can do anything about it.

  • alex
    5 months ago

    The value OA sellers provide is the same with those in e.g. real estate business. If dropshippers offered no value they wouldnt exist. if wouldnt exist, the buyer would have greater chances of buying something they like less or wouldn’t buy at all.
    Also we should not confuse the pricing of a product with it’s “real” value. That’s an obvious joke.

  • 5 months ago

    We had the same issues with Israeli seller which do not respond to you nor has ebay responded too, it has resulted in a couple of calls from customers about problems with their orders (Which were not via us).
    However would this affect us as we have some stock with FBA (to save space) so will dispatch via FBA if it sells on ebay.

  • William
    5 months ago

    It’s confusing for customers on Ebay, you only have to look a little deeper into the negative feedback which reveals customers are furious when they get the item ordered in Amazon FBA packaging and realise it was marked up by 30%. That customer probably will never look at Ebay again. That said is an extra sale worth the future business of any customer.
    I have tried to get Ebay to react, I even mentioned it in an email to the new CEO when he invited small sellers to email him with ideas last year. He did reply and added a special team were on it but in the meantime I cannot even force two Salesfreak arbitragers to remove my Amazon seller id from “their” listing description (the manfacturer insists I display my id and a statement proclaiming that I am the only preferred Ebay or Amazon retailer)
    There is talk of small sales involved but a close look at completed listings for some of these sellers reveals that they are raking it in using these automated arbitrage systems and they need to be as the monthly charges to maintain these automated accounts applied by Salesfreaks are quite high.

    • John Mulaney
      5 months ago

      Why are they furious that they didn’t find the best price on their own? With all of the (ridiculous) requirements placed on us online sellers these days… whats next? Should we be required to do their shopping for them?

  • 5 months ago

    We were having conversations about Salefreaks with eBay Concierge several months ago when they had never heard of them. Over time I have kept up a dialogue as eBay platform is getting more and more diluted with Salefreaks listings to the point of becoming ridiculous.

    Keep your friends close and your enemies closer – so we signed up for Salefreaks just to see how the software actually worked in practice. We just took a basic package and had about 40 listings and made a handful of sales. We terminated after the first month and removed the listings.

    So, I read this article with real interest because our eBay sales fell off a cliff after midnight on April the 20th. Every single day prior to April 20th our sales were up on last year – every single day since April 21st our sales have been down by up to 50%.

    We are Top Rated sellers, with 180,000 feedback – with the exception of the handful of Salefreak sales we stock, pick, pack and dispatch every single item.

    I have been in contact with eBay Concierge extensively to try and find out what has gone on. Spreadsheets of underperforming listings they sent me DO NOT explain the drop in our sales. I said that something happened on midnight on April 20th that has affected our visibility on ebay. They were ‘looking into it’.

    This article explains everything. Because of our brief experiment with Salefreaks ebay have obviously decided we were a dropshipper and suppressed our listings. Talk about shooting yourself in the foot!!!

    Been onto eBay Concierge today – they deny that they suppress listings and tell me not to believe everything I read on this site!!

    This is costing us £1000+ in sales a day since April 20th so what this article says is true. We have accidently been caught up in it.

    At least I have an explanation for our problem now we have to try and rectify it.

    • Alan
      5 months ago

      Perhaps the drop in sales is not actually related.

      I note sales dropped in the UK around Thursday 19 April which was the same time we had the hottest April day, and have been lower since then on all platforms, not just ebay.

      Has the weather had a factor and are people going out to shop as opposed to shopping online, in the same way shoppers stayed at home when we had the freezing weather earlier in the year.

    • Alan Paterson
      5 months ago

      @ Alan, my experience is that we always experience a drop in sales during good weather. I have seen this in a variety of categories I have worked in. Generally speaking its caused by people not wanting to be sitting inside on ebay when its sunny outside. Drop in traffic equals drop in sales.

      I am sure that there are some categories that don’t experience this but I haven’t found them yet.

      We also experience drops when a major football match is on.

    • Coronado
      5 months ago

      We also contacted eBay Concierge to ask for insight as to why our impressions are down 20% compared to last month. As you can relate, it’s hit or miss with eBay Concierge and I got the “everything looks great with our account” type of rep that does not even understand the concept of impressions. The rep told me that impressions mean the times that users clicked on a listing…. Uh, yeah…

      We are not a drop shipper but there are over 1,000 listings on eBay for our product that are sold on eBay by drop shippers. My essential question to eBay was: if these drop shippers are dropping–no pun intended–in search results, shouldn’t we be able to pick up the slack / have more visibility for our brand? Unfortunately, they could not answer the question. The rep also seemed to be unaware of any recent changes to the algorithm. Perhaps they think that “algorithm” is a math class they took in college. Honestly, I wish that eBay Concierge could be a little more consistent with these types of inquiries.

      It sounds as if you are concerned that you are being penalized because of a brief experience with the software you mentioned, but we are also seeing a downward trend for our listings, and we have never used any software like this. But having said that, we do use inventory software that provides an MCF solution so that eBay sales can be automatically fulfilled through FBA, but we do not use this feature at all. My hope is that eBay is taking a calculated approach when they decide which listings to throttle. Sorry to hear that you are down.

    • John Mulaney
      5 months ago

      Coronado,

      What could you possibly be “branding” that you are also designing and producing yourself, that would cause you to have 1000 listings?

      Even Armani doesn’t have 1000 concurrent products.

      Could it be that you are simply re-branding cheap Chinese junk from Alibaba and eBay has caught on to it?

  • Sam
    5 months ago

    The eBay buy box will also slow down the process. As the cheapest listing will get the sales…not leaving any margin for dropshippers. The good dropshippers do provide value in that they make products more visible…they do not just copy and paste.. they use all resources to maximise their Cassini search rankings… so can be good….as with most markets their are bad apples…

    • james
      5 months ago

      I think we need to differentiate between drop-shippers and arbitrage sellers here.

      A drop-shipper will generally be a legitimate business operating with the consent of the company doing the shipping, often incorporating some sort of trade discount to reflect their repeat custom.
      Many companies specialise in supplying drop-shippers and can’t get enough of them.

      an arbitrage seller more often will be doing it without consent, acting like a regular consumer, buying a consumer offering and expecting consumer-level protections,
      often they use multiple buying accounts to try and hide ther business activity as legitimate consumer spending, while contributing little or nothing extra to the end consumer for their increased costs.
      Nobody actively seeks out arbitrage sellers.

    • 5 months ago

      I don’t think it is weather related. We have seen a few summers and nothing like this has ever happened to us. Listing Impressions down 58% since 14th April and listing page views down 49%!

      Agree the number of dropshippers on there, the ebay ‘buy box’ and the weather could all be contributory factors to a gradual decline – but down 50% virtually overnight?

      eBay Concierge cannot tell me that we have been blacklisted – because of our (brief) involvement in salefreaks as they would not even know. Decisions made much higher up obviously.

      For this just to be a massive co-incidence is stretching the imagination too far. I have friends who run similar online business’s to mine and none of them have had any issues at all. Just hope we can ride this thing out.

  • 5 months ago

    Something I see quite often (but not so much recently) is that the arbitrage sellers often appear high up search results with Promoted listings – I suspect they apply a high percentage in order to have the best chance of reaching the buyer first, even with a higher price, and factor in the extra costs.
    They must only make a very small amount per sale, but with thousands of listings it’s obviously enough to be profitable.

  • Charles
    5 months ago

    The eBay process is:

    Create a NEW eBay account – one you haven’t traded in before.

    Click on the ‘Report item’ link in any ‘arbitraged’ product listing. Fill in the complaint form – detailing the reasons, from the multiple choice codes, e.g 4.3 ‘stolen images and text’. Submit.

    Then you will be enrolled in VeRO and a new reporting and bulk reporting tool will be available at the very bottom of every item listing you browse to – reporting is then just a matter of a few clicks and eBay will remove the offending item in less than 24 hours.

    If the tool stops showing I find it comes back if you log out of the new account and back in again. The site will then display a banner saying which items you have reported – until such time as they disappear : )

    The bulk reporting tool involved scrolling ( no search facility incorporated yet eBay?) through a long list per supplier to find your own articles so one by one reporting seems the way to go.

    If I haven’t quite detailed the correct process search for VeRO on eBay and follow their instructions.

    Enjoy playing whack-a-mole!

    Good luck it works!

  • PayPalUser
    5 months ago

    If you think eBay drops shippers are bad – have a look at Amazon Australia, this seller has 10,000,000 (yes 10 million ) listings

    https://www.amazon.com.au/s?marketplaceID=A39IBJ37TRP1C6&me=A2N62VVHJVF9PO&merchant=A2N62VVHJVF9PO&redirect=true

    • John Mulaney
      5 months ago

      Good for him. He found a business model that doesn’t require him to carry any up-front costs, carry no inventory, no storage, no employees, etc, yet probably still nets him $10,000,000/mth.

      Are you saying you can’t compete with him, even though you “know” his costs must inherently be higher than yours(since he is buying from YOU in the first place)?

  • Disco Dave
    5 months ago

    On eBay’s community boards there are many non-dropshippers who’ve experienced a drop in sales since 20/04. So, is this SalesFreaks thing a red herring? Is there any actual proof of SalesFreaks doing as reported? There was also talk of search being ‘improved’, i.e., some searches returning a paltry sum of results.

  • 5 months ago

    @Chris Dawson – I do not understand why you think:

    “It’s tricky for HMRC to catch arbitragers as they see a sale and see the real merchant complete their VAT returns and as the item is shipped direct they don’t ever get to see the arbitrager in the middle.”

    Most of the arbitragers sell on eBay and ship from suppliers on Amazon, what is there that HMRC can not see?

  • John
    5 months ago

    There’s a community behind this business model. People making a part time or full time income. Thousands of people getting employed in countries like philphines.

    It’s a great way to do market research on a niche or range of products without much risk.

    It’s a good starting point for young entrepreneurs to build business experience and be innovative and creative.

    List goes on the positives