Tales from the gray market: The highs and lows of flipping next-gen consoles

The eBay seller

While buying and selling on eBay generally avoids the issue of meeting face-to-face, it also brings its own set of problems.

One eBay seller, who asked to remain anonymous, told me that 30 percent of his PS4 and Xbox One sales have resulted in nonpaying bidders. “This is made worse by the fact that eBay place limits on how many PS4s and Xbox Ones I can list per week,” he said. “So if a listing is to a nonpaying buyer, then I have to call eBay and go through the hassle of getting it relisted.”

Still, it hasn’t been frustrating enough to stop him selling 18 PlayStation 4 and nine Xbox One consoles since launch.

Making over $100 per sale, after shipping costs and eBay and PayPal fees, he’s pleased he anticipated the demand for these consoles. “I saw the same thing when the PlayStation 3 was released,” he told me. “Given that consoles only come out once every six or seven years, and that this will probably be the last generation of them, and that it is the Christmas season, all [these factors] point to high demand.”

He didn’t preorder the consoles early on, although he now wishes he did. Instead, he’s been getting his stock from retail and online stores, using tracker websites for online stock alerts and calling around stores to check availability.

Selling launch consoles on eBay has provided many sellers with a decent revenue stream

Above: Although sale prices have dropped since launch, you can still make a profit from selling a next-gen console on eBay.

Image Credit: eBay

I asked if he had any truck with the argument that buying these consoles to resell is unfair to other potential customers. “It would be unfair if I were to go in and buy up the entire stock at a store and leave nothing for people behind me,“ he told me. “But that’s not the case.”

“All the stores I’ve dealt with only allow me one unit at a time, so for me to amass the inventory that I have took a bit of work and shopping around. I look at it this way: The people who buy from me on eBay are just paying me for the effort and time that I had to [invest]. Otherwise, these eBay buyers would have to be in line for hours on Black Friday or launch day, or scouring the Internet constantly to get them at retail price.”

Xbox One vs. PlayStation 4 prices

Xbox One versus PlayStation 4

Above: Xbox One versus PlayStation 4

Image Credit: tandemsystemsltd/Flickr

A week ago, the eBay seller I spoke to told me that Xbox One consoles were dropping in price fast. At the time, he said this could have been down to either better supply in stores or lower demand for the system.

Whatever the reason, this trend has continued, and he told me yesterday that he’s started returning his Xbox One units to stores as they are no longer profitable.

He still has three PS4 units to sell, and his margin on these is also decreasing, partly due to large eBay sellers dumping up to 100 units on single listings with low “Buy it now” prices and free shipping. “It sorta hurts the smaller guys like me,” he said.

A quick scout of eBay backs up this broad analysis.

At the time of report, the last 30 Xbox One consoles (with no extras) that sold on eBay went for an average of $530, just $30 over list price. Taking into account eBay fees, that amounts to an average loss of around $23 per sale. Adding on PayPal fees would compound this loss.

Comparatively, the last 30 PlayStation 4 consoles (again with no extras) fared better. They sold for an average price of $542, which is $142 over the list price of Sony’s console and would still bring a profit of around $87 per unit sold (before any PayPal fees). But this is a long way from the $600-$800 they were fetching at launch.

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More information:

eBay Inc. connects millions of buyers and sellers globally on a daily basis through eBay, the world's largest online marketplace, and PayPal, which enables individuals and businesses to securely, easily and quickly send and receive onl... read more »

Instagram is a free photo sharing application designed for use on Apple iOS devices developed by Kevin Systrom and Mike Krieger. The application, which is compatible with any iPhone or iPod Touch running iOS 3.1.2 or above, allows user... read more »

Sony Computer Entertainment, Inc. is a major video game company specializing in a variety of areas in the video game industry, and is a wholly owned subsidiary and part of the Consumer Products & Services Group of Sony. The company was... read more »

Craigslist is a supremely popular listings site. Craigslist was founded by Craig Newmark in March, 1995, as an email list site for San Francisco and Bay Area events. In June 2000, it added its second city, Boston, and then expanded to ... read more »

Microsoft Studios is the video game production wing for Microsoft, responsible for the development and publishing of games for the Xbox, Xbox 360, Xbox One, Games for Windows and Windows Phone platforms. They were established in 2002 a... read more »

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