The Decline of the PS3 Grey Market By: Michael Fahey
The rise and fall of the PlayStation 3 on eBay is one of the most talked about gaming stories of the year. In order to paint a broader picture, I've tracked pricing trends from preorders to Christmas Eve and surveyed retailers to determine just how hard the PS3 grey market has crashed.
In the days leading up to the PlayStation 3 launch in mid-November, people all over the country lined up with dollar signs in their eyes, hoping to cash in on what was sure to be the most sought after gift this holiday season. I talked to many people planning on financing college, cars, vacations, and countless other dream items with the fruits of their labor. A week later those hopes and dreams were crushed, as reports of plummeting eBay prices poured in. Just how fast did the PS3 grey market crash? Take a look for yourself, and feel free to click the graph for a larger version.
Within two days of the system's launch the going price dropped by over $1000. eBay prospectors across the country were stunned at the rapid depreciation of their investment. While they were still looking at $600 profit on average, it was a far cry from the windfall everyone had been expecting.
The smart thing to do in that situation would be to wait, right? Several enterprising folks I talked to during the launch festivities predicted a glut early on, and planned on holding their systems until Christmas, when demand would be at its highest. As the graph indicates, that wasn't the wisest move. Four days before Christmas PS3 auctions hit the lowest point ever, bottoming out at just $724. Figuring in sales tax, that's less than $100 profit on a 60GB system.
Clearly the way to go for the PS3 prospector was preorders. On November 16th, as the reality of the system shortages began to sink in, buyers spent an average of $2,367 to secure themselves on of the 600 or so preorders sold that day, and from the point eBay started allowing receipt-verified presales prices maintained a steady average of around $1500.
How are retail stores being affected?
With the prices dropping so low, many eBay hopefuls have been returning their purchases to the stores they procured them from. Between packing, shipping, and taxes, it's much less of a hassle just to get a refund and forget the whole thing ever happened. I decided to survey several popular retail 'superstores' to get a feel for just how big a trend grey market returns were.
Here's how this worked. I called a random selection of stores across the country from each of the four retailers listed below. I asked to speak to their electronics department first, and then called back to speak with customer service. I made sure to specify intact, boxed returns to avoid clouding data with random defective units. Interestingly enough, not one store I spoke to mentioned any defective returns. If anything the PS3 is a solid machine. Bear in mind that these are not hard numbers. I spoke to whoever was staffing the departments at the time I called, and only counted the answers applying directly to those people. While I'd like to say you could safely double the returned system numbers below, there are far too many factors involved to make it an accurate estimate.
I picked the four below for various reasons. Fry's because of its unique bundling policy, Best Buy because of its huge initial allotments, Target as a major retailer that isn't focused on electronics, and Wal-Mart because I am apparently a glutton for punishment. All four stores had people wait in line for the consoles...one of the reasons you don't see GameStop represented, another reason being that many GameStop systems went to either employees or regulars to the store tipped off by employees. "But GameStop wasn't allowed to sell to employees!" Where do you think I got mine?
Store Findings:
Fry's Electronics
Number Called: 10 - Called double what I had planned for Fry's because the first five all reported having systems in stock.
Average Returns: two per store
Systems Available? Yes
Fry's stands out from the other retailers I've surveyed in that they still insist on selling their PS3 systems in ridiculous bundle packs with eight or so games. Every single store I called reported having plenty of bundles available for purchase. On average each store had received two returns, with the Alpharetta Georgia location, a favorite of mine, reporting four. Systems at Fry's can only be returned with the full bundle intact, and are resold the same way.
Conclusion: Nothing too surprising here. When I was working at GameStop on Christmas Eve I had countless customers tell me that Fry's had PlayStation 3s just sitting there, with no one buying. The only thing harder than trying to turn a profit off of a PS3 on eBay is trying to turn a profit off an $1100 bundle filled with games no one wants to play.
Target
Number Called: five - they're a major retailer, but they weren't exactly a big launch location.
Average Returns: two
Systems Available? No, though two out of five stores did tell me I had "just missed one."
Conclusion: Target doesn't get many systems in, and when they do they generally last a day tops. One electronics rep I spoke to in Colorado told me they had gotten two returns earlier in the week, which didn't last more that 24 hours on the shelf. Low volume, relatively quick turnaround.
Best Buy
Number Called: 15 - Best Buy had the greatest launch allocations, so I gave them a bit more attention while conducting the survey.
Average Returns: Four - One customer service rep said she had seen as many as eight returned, though she worked at a midnight launch store with a much larger console allocation than the rest.
Systems Available? Not a one, at any store. Most likely a corporate sponsored lie, however, as we've been getting several reports on Best Buy holding systems until New Year's Eve.
Conclusion: A much larger allocation equals a slightly higher number of returns. This whole sitting on items for big holiday sales severely screws up survey data. As well as forcing their employees to lie, they also forced me to lie. When I mentioned I was writing a story, I was told they couldn't comment to the press. I had to tell them I was a father looking in to buying one for his son, trying to figure out if the system was reliable. If anyone asks, my son's name is Rufus, and he has a glandular disorder.
Wal-Mart
Number called: Five before I gave up out of sheer frustration
Average Returns: Inconclusive. While I did have one store tell me they'd seen a couple come back, most of them couldn't figure out how to transfer me to customer service.
Systems Available? Possibly. They might not even know what it is.
Conclusion: While I've known some very helpful and intelligent Wal-Mart employees in my time, all of them must have been off over the past two days. I got through to one customer service rep and one electronics department out of five stores, the rest of the time spent either waiting endlessly on hold or being accidentally hung up on.
While return numbers seem to be relatively low, when you figure in the transactions the employees I spoke to weren't privy to, and then multiply the number by even a fraction of the stores these retailers have scattered across the country, and things start adding up. In an ironic twist to the whole story, it seems as though your best bet for securing a PlayStation 3 console, unless you want to shell out $1100 for a bundle at Fry's, is eBay. As of this writing there are over 7,000 up for auction, looking for a good home.
The Grand Conclusion, with a Personal Note
To be completely honest, when I first secured my PS3 preorder with GameStop the first thought in my head was the massive amount of money I could make from selling it. That's how I got approval from my girlfriend to put down the $100. The TMX Elmo had just been released and was selling for ten times retail price. I figured I could triple my money, pick myself up a nice flat panel HDTV...hell, I might even have enough left over for another PS3 once the dust cleared.
What changed? Well the more I thought about the PS3, the more articles I read, and the more videos I watched, until the gamer in me basically slapped the profiteer silly. The PlayStation 3 has real potential. Lair. Motorstorm. Resistance. Soon dreams of a giant TV faded away, replaced by the gnawing anticipation I'm prone to get whenever something big is going to happen in the gaming industry. That, and I got this gig at Kotaku. If you guys ever got wind of me eBaying a PS3 I'd never hear the end of it.
As it turns out my gamer instincts and the threat of hordes of angry readers steered me clear of potential disaster. Aside from a couple brief spikes, there is no way I'd have been able to pull off the television, and I know damn well I would have waited for Christmas like so many others did, only to lose even more.
The moral of this story? There's no such creature as a sure thing. The majority of eBay prospectors walked away from this experience with that lesson burned into the back of their brains. My suggestion for the future? If you want to gamble, go to Vegas. If you want to invest, try mutual funds. Leave the video game system buying to the gamers. We'll all be happier for it.
How I collected the graph data:
To track eBay sales I used a website called Terapeak, which is of of the most trusted eBay market research tools available. I looked at data for the US eBay site each day utilizing the keyword "PlayStation 3" in the Video Games/Systems category. I set the price range for $200 through $10,000 to weed out any artificially inflated auctions as well as any bogus "PS3 Buying Guide" type offerings. Keep in mind that the statistics provided are for both the 60GB and 20GB models combined. Many sellers neglected to specify which version they were auctioning, so weeding out one from the other was nigh impossible. Counterbalancing that slightly are auctions including games and extra controllers, which are also figured into the statistics.
While certainly not a completely infallible system, I believe it led to a more accurate overview of the eBay PlayStation 3 market than simply searching for PlayStation 3 and leaving it at that.
Using the same guidelines outlined above, I poked about for a few more interesting tidbits regarding system demand. For instance, auctions ending on or before November 16th, meaning preorders, had a 96.5% success rate. In the period after the system was released the figure dropped to 73%. Hazarding a guess I would say those figures are due largely in part to unrealistic reserve price auctions
![[maszz]](/images/smilies/nuevos2/dormido.gif "otro q duerme")
![[+risas]](/images/smilies/nuevos/risa_ani3.gif "más risas")
, que catabron!!! 
![[666]](/images/smilies/nuevos2/masmalo.gif "maloso")
(aunque seguramente en otros sitios por mas pasta jeje) pero el tema es que se ha conseguido primero la de ps3 cuando se ha asegurado por activa y por pasiva por muchos de los que por aquí escriben que volarían todas las del lanzamiento (¿podemos considerar que aun estamos en lanzamiento tanto de ps3 como de wii no?)
![[qmparto]](/images/smilies/net_quemeparto.gif "Que me parto!")
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¿o no? ![[chulito]](/images/smilies/nuevos/sonrisa_ani2.gif "risa con gafas")
![[angelito]](/images/smilies/nuevos/angelito.gif "angelito")
![[inlove]](/images/smilies/nuevos2/enamoraos.gif "enamorados")
