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Alright, folks. Buckle your seatbelts because I’m about to lift the lid on a very popular online shopping scam that happening right now.
With Christmas right around the corner, everyone will be shopping online. Especially this year. In-store Black Friday specials and waiting in long lines is officially a thing of the past.
Instead, we will be visiting our favorite sites like Amazon, Wayfair, Overstock, Walmart, and Target just to name a few.
Unfortunately, with the new demand for e-commerce, a new type of hustle has emerged. It’s called online arbitrage.
What Is Online Arbitrage?
Online arbitrage is the process of listing items for sale on marketplace sites like Amazon and eBay at extreme markups. When sold, these items are then shipped to customers from another retailer who has listed the item for less. The arbitrator pockets the difference as his/her profit.
With this process, the arbitrator is not an authorized seller of the product. He or she will utilize the gifting feature on many retail sites to hide pricing information. The customer is left unaware of the extreme price hike and the true cost of the item.
Using this deceitful method, sellers engaging in online arbitrage may make hundreds of dollars on each transaction.
How Does It Work?
Very little work is required on the seller’s behalf to make this process work. They simply copy the product listing information from a site like Walmart, then list it for sale on eBay or Amazon for a significantly higher price.
Then, when the item sells, the unauthorized seller simply goes to Walmart’s website, buys the item for a lower price, ships it to the customer as a gift, and pockets the difference as profit.
Unfortunately, if you as the consumer have not done your due diligence and comparison shopped before buying, you are not aware of the predatory price hike.
In the end, you may find yourself paying hundreds of dollars more for an item then it’s actually worth.
Online Arbitrage Is Not Dropshipping
These sellers call themselves drop shippers. That’s bull!
They are unauthorized sellers who are scamming people out of their hard-earned money.
Let me back up a minute, I’m getting a little heated. You see I am an actual drop shipper. I am an authorized retailer who has been selling online for years.
This requires me to have a business license and to be approved for an account with a legitimate wholesaler.
While it is true that the business model of dropshipping involves you selling a product that is warehoused elsewhere; it is not a product that is available at a retail price from another merchant.
Dropshipped items come directly from the wholesaler or manufacturer. Moreover, the cost of warehousing and shipping of the item is worked into the price the retailer must pay for the product.
This is why I vehemently disapprove of the term dropshipping being applied to dishonest hustle.
Where Is This Online Shopping Scam Most Prevalent?
The biggest culprits are eBay and Amazon. However, you can find this practice happening on other sites as well including but not limited to Walmart, Overstock, and Houzz.
This is because these sites are actually marketplaces. While they may have started off offering only their products. They have all since opened their website to other retailers selling on their platform. Just like Amazon.
How To Spot This Online Shopping Scam
Let’s take a look at an example of online arbitrage in action on Amazon.
Example – Amazon Arbitrage
While reimagining my entryway decor, I found this listing for a Threshold bench on Amazon. It was priced at $149. It looks great and it’s selling well.
But, the thing that rang the alarm for me was the fact that Threshold is Target’s in-house brand. And Target does not sell on Amazon. I touched on this in my post “7 Affordable Home Decor Brands You Need To Know“. Several of the brands listed in the post were proprietary brands exclusive to certain retailers.
So I looked up the item on Target’s website and found that it was being sold for $75.
What makes Amazon arbitrage listing tricky to spot is how Amazon displays the assigned brand on its product listings page.
At first glance, I would assume that this item is being sold by Threshold because it is listed at the top of the page below the title. But, it isn’t.
The actual seller information is not listed at the top, it’s listed to the right-hand side below the buy now and add to cart buttons.
And upon further investigation, I noticed that several buyers of this bench figured out the scam. And they voiced their disapproval in the comments and the reviews of the product.
How To Comparison Shop
So, how do you combat online arbitrage at a time where you know you will likely be buying 90% of your Christmas presents online this year. And, you don’t have time to comb the internet comparing prices.
Well, in a pre-COVID time, I would have recommended that you download one of the price comparison apps to your phone. However, this may prove hard to use when you are not physically in-store and able to scan a product.
Instead, you will need to utilize a traditional online search for the product you wish to buy to see pricing comparisons.
There are a few places where you can do this, but I recommend Google shopping. And when I say this, I do not mean for you to put the title of your item into the Google search and look at the shopping feed.
What you need to do is go directly to the Google shopping homepage. It is located at google.com shopping.
This is where you want to search for your item.
Using Google Shopping to Price Check
Let’s work through an example together.
Right now I’m looking at the Safavieh Nunzio 4 Piece Outdoor Set with Accent Pillows on Walmart.com.
Since it’s late in the season, there are only a few colorways left available. One is from $587.50 and the other is $701.72.
Understanding Google Shopping Results
So, how do I know if Walmart has the best price for this item? I’ll go to google.com shopping to find out. All I’m going to do is copy and paste the name of the product into the Google shopping search and hit enter.
As the search results load, you will see the sponsored search results scroll across the top of the screen in the carousel.
There’s nothing wrong with these listings. Sponsored results just mean that the seller has paid to have their items featured at the top. However, this does not mean that they are the lowest price.
To determine that, you will have to scroll through the rest of the results below.
Just below the sponsored carousel I see is a photo of the item I searched, the Nunzio 4 Piece Outdoor Set with Accent Pillows at a price of $649. Next to the price, there is a little note that says from 25 + stores. This means that there are more than 25 different retailers listing this item for sale.
Note: That listing for $649 is being featured because you have the ability to buy it directly from Google’s platform. This also does not mean it is the lowest price.
Let’s continue on, and look at the prices in the search results. Be careful to pay attention to the titles of each product listed. Safavieh has a lot of different models, and sometimes a style that you did not search for gets mixed into the results.
Look very carefully at the titles and the images to make sure the price shown is for the item you want.
The very first listing that I see is from Walmart at $620.81.
Note: This listing is not from Walmart.com. It is from OJ Commerce an independent seller on Walmart.com.
Example – eBay Arbitrage
Red Flag #1 – Price
As I scroll down through the Google Shopping results I spot what appears to be the first online arbitrage listing. It is an eBay seller with the store Jaya99. They are listing this set for a whopping $895.94. Red flag number one.
Here’s a look at the listing on eBay.
Red Flag #2 – Seller Location
When I view the listing on eBay and click through to the seller’s profile I find that the seller is in Indonesia.
While their location does not necessarily exclude them from being an authorized reseller of the product, the shipping time and item location let you know that this item is dropshipped from the United States.
This set is not sitting in a warehouse in Indonesia and getting to your house in a matter of seven days.
Red Flag #3 – Copy and Paste Product Description
They have copied the product description word for word from walmart.com. How do I know this? Because the description of this product on Safavieh’s (the manufacturer) website is identical to Walmart’s up until a certain point.
Walmart has added an additional three bullet points with disclaimers. These are regarding the actual dimensions of the product, the fact that the pillows and cushions and accessories seen within the lifestyle photo are not included, and a note regarding cleaning.
These things are not found anywhere on Safavieh’s original listing. They are custom editions made by Walmart.com.
This makes it easy to spot the eBay seller’s blatant copying from Walmart’s website.
In conclusion, watch out for this online shopping scam this holiday season. Especially if you start your product searches on Amazon or eBay.
Use a price comparison tool like Google Shopping or PriceGrabber to do a quick comparison of the product price before you buy it.
I recommend doing this for any item over $100. Also, remember that most legitimate retailers will be within $25 – $50 of one another. If something is priced hundreds of dollars more than the others, it’s likely an online arbitrage seller hustling you out of money.
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