eBay takes action on arbitrage says software provider

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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.

32 Responses

  1. 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.

  2. 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.

  3. 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.

  4. 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.

  5. 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.

  6. 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.

  7. 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.

  8. 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.

  9. 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…

  10. 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.

  11. 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!

  12. 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.

  13. @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?

  14. 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

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