GamesBeat

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

A PlayStation 4 launch console sold on eBay as part of Kenny Irwin Jr.'s microwave art series

Above: A PlayStation 4 launch console sold on eBay as part of Kenny Irwin Jr.'s microwave art series

Image Credit: Kenny Irwin Jr.

The launch of the new PlayStation 4 and Xbox One consoles last month has seen demand outstripping supply. With a lack of consoles, a gray market has blossomed on websites like eBay and Craigslist, with systems selling for hundreds of dollars over retail price.

Here we take a look inside that gray economy at some of the people buying and selling — and at the big headlines that this market has inadvertently created.

The Craigslist seller

The Xbox One Day One edition controller

Above: The Xbox One Day One edition controller

Image Credit: Microsoft

For Steven Miori of Houston, picking up an Xbox One at launch represented a quick investment opportunity. “On release day, I figured all of the Xbox Ones would be sold out to people who waited in line all night,” he told me via email. “But when I went to Target around 11 a.m. that morning, they had two consoles left.”

Miori tried buying both, but the store would only sell him one. “After calling around town a little, I realized that by about noon that day everyone was sold out,” he said. “It was a no-risk purchase because Target has a 90-day return policy, so worst case scenario, if I didn’t sell it, I would just take it back.”

Miori originally planned to sell the console on eBay for $700 – a markup of $185 on the total (after tax) that he paid – but the 10 percent seller fee put him off. He ended up putting it on Craigslist for $640.

“I only got one call the first day,” said Miori. “A kid offering to trade me an iPhone 5S for it. I told him, ‘No, thanks.’

“I didn’t get another call on it for about five or six days and was getting a little discouraged and thought about lowering the price. But Thanksgiving Day, I got a call from a guy who offered $600 for it. We eventually agreed on a price of $620.

“I grabbed a friend and met him in front of a Starbucks. He was a nice guy and paid in cash, and we went our separate ways. [It was a] pretty easy way to make $100!”

The buyer

Scott Speed's Craigslist purchase went smoothly. Stalker notwithstanding.

One buyer caught up in the stock shortage was NASCAR Sprint Cup driver Scott Speed. He met a Craigslist seller in a gas station parking lot on the PlayStation 4’s release day to buy his console.

Speed posted a tweet while waiting, which read: “Waiting for my craigslist guy at the gas station…. Lmao first time I have ever done this.. Talk about awkward!!!! Lol.”

In the end, the deal went well.

“[It] ended up being super easy,” Speed told me via Twitter. “Just felt really weird and embarrassing,” he added, but said he wouldn’t hesitate to do it again.

Sales gone bad

The decision to trade in a public place is something all buyers and sellers should note, as not all transactions have gone as smoothly as Speed’s.

On Nov. 17, 25-year-old Emmanuel Johnson was shot and killed during what appears to be a PlayStation 4 sale that went wrong. The Orlando Sentinel reports that Johnson and an unnamed 23-year-old man were due to meet outside Orlando Police Headquarters to carry out the console sale but switched the meeting site. Both men were shot, Johnson fatally, in a subsequent exchange of gunfire at the rearranged venue.

Ikenna Uwakah, home from college for Thanksgiving weekend, was shot dead in San Francisco on Dec. 1 after agreeing to sell a PS4 console via an ad posted on photo-sharing site Instagram. Uwakah, who drove to the deal with his girlfriend, was then ambushed and shot in broad daylight. His killer took the device and fled, according to police reports.

Ikenna Uwakah was shot dead while attempting to sell a PlayStation 4 console

Above: Ikenna Uwakah was shot dead while attempting to sell a PlayStation 4 console.

Image Credit: YouTube/KRON 4

Even sales that seemed to go without hitch have proved problematic. A man in Colorado Springs answered a Craigslist ad to buy a PlayStation 4 for his son. What he actually bought, from the sale conducted in a motel lobby, was a PS4 box stuffed full of towels. By the time he had checked the box, the seller was already fleeing the scene.

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.

Beware the scammers

The seller I spoke to said he hadn’t encountered any buyers trying to scam him on eBay. He had, however, been approached by scammers via listings he ran in the local classifieds ads. “Usually, scammers say that they can have a ‘shipper’ pickup the item and use Western Union as a method of payment, even though I specifically say cash and local pickup only,” he told me.

“A scammer’s way of writing email also is a dead giveaway,” he added, “since the email is written as if the writer didn’t even read my previous email to him. This is probably because a bot or [automatic] script is writing the email, to a certain extent.”

One eBay buyer that did fall prey to a classic scam was 19-year-old Peter Clatworthy from Nottingham, U.K. He paid $730 for an eBay listing described as “Xbox One FIFA 14 Day One Edition, Photo Brand New UK 2013.”

He received just that in the mail: a badly printed photograph of an Xbox One console.

This photo of an Xbox One console cost $730 on eBay. Buyer beware.

Above: This photo of an Xbox One console cost $730 on eBay. Buyer beware.

Image Credit: Peter Clatworthy

“It said ‘photo,’ and I was in two minds,” Clatworthy told the Nottingham Post, “but I looked at the description and the fact it was in the right category made me think it was genuine. It’s obvious now I’ve been conned out of my money.”

EBay has promised to follow up the case, as misleading listings are not permitted, and Clatworthy has since been gifted a console by the CEX retail chain.

He noted, however, that he’s not alone in being scammed: “I’ve had other people contact me to say they have been stung, too, but have not reported it,” he told Yahoo News. “I don’t think I’ll be shopping online anymore.”

And from the far side of eBay …

Not everyone on eBay has sold consoles that actually work. And as strange as it seems, a resale market exists for next-gen consoles even after they’ve been destroyed.

Kenny Irwin, Jr., an artist based in Palm Springs, Calif., decided to cook both a launch Xbox One and PlayStation 4 as part of his microwave art series. Irwin used what he describes as “the most advanced microwaving robot the planet has ever seen” to fry the consoles while they were plugged in and running.

“There is no inspiration behind my microwave art, the same as much of my art,” Irwin told me. He’s been microwaving things that he probably shouldn’t have been since he was 6, and says he is the pioneer of the “‘smash, blend, and cook this’ trends that became big hits on the web.”

“My viewers not only get microwaving viewing pleasure from watching the microwaving process,” Irwin said. “They get to see what will result in the physical form of art.”

The process and result of this microwaving is certainly eye-catching, as you can see in the video below. But don’t try it at home, even if you do have a microwaving robot on hand.

Irwin’s microwaved PS4 console did actually sell for over $11,000, but unfortunately, it was to a “deadbeat bidder,” and the sale was never completed.

As for the roasted Xbox One, Irwin says: “Unlike the PS4, which fans are very loyal to, no one really cares about the Xbox One. I noticed their fans demonstrate [this] in terms of views and reactions in both videos.”

For any skeptics out there, Irwin says his microwave art does have a genuine market. He recently sold a signed and dated microwaved iPad for over $1,600. The buyers loved it.

Offering proof that people will buy anything on eBay comes YouTuber TechRax. His channel is about destroying high-end consumer electronics, and the Xbox One and PlayStation 4 launches didn’t pass him by.

TechRax took a new PS4 console on launch day and destroyed it outside a GameStop store. The resulting video (below) has received over 700,000 views. What’s more, the console itself sold on eBay for $128.

He also took an Xbox One console, threw it into a spa, and then fried an egg on it. Again, the console, while essentially useless, sold for $175 on eBay.

I asked TechRax if the buyers were happy with their purchases. “Both customers were satisfied,” he told me.

In case you’re wondering, TechRax funds his destruction through YouTube advertising revenue, which also leaves him with a slight profit margin.

So when you find you can no longer shift that Xbox One on eBay, you now know what to do with it. …

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