How do people sell on eBay below cost?

Well, I've got to say I've always wondered this myself. There are constant calls and emails to us asking for price matches to eBay for items being sold as "Brand new" for far below our cost. But how do they go about doing this? Simple: Fraud.

But it's not the type of fraud that you first think of with eBay. This is a smarter fraud. One that we've had the pleasure recently of being on the wrong end of. We let our guard down and got nailed, so our internal policies are changing. They're having online merchants ship the products to whoever buys the item... but placing the order with a stolen credit card.

You see, online business isn't where credit card fraud originates. Sure, there are select cases where that's happened. But, for the most part, credit card fraud begins offline with someone getting a credit card via physical means, then moves to online to do the fraudulent transaction. Rand Fishkin says we're all going to have to figure out how to put an end to this soon (and he had a nifty credit card image that I borrowed for this post). I hope someone who can act on this is listening.

So, by selling a $700 item for $500 and using a stolen card to send the item to the buyer, the seller ends up having the buyer looked at as guilty of fraud and gets $500 in their pocket to boot. As I said, a smarter eBay fraud scheme, and one that we're going to make sure we don't get involved in any more.

On the brighter side of this incident, the guy that called us about it got one a week before from our biggest competitor as well, and they weren't sure how to handle it at all. We at least know what we're going to do about it.


NeO1 said…
I will also point out that the "real" wholesalers on eBay are buying Lots from liquidation outlets (shelf pulls, returns, etc...) from major distributors and selling for less... So not everyone below cost is a crook! But definitely worth looking into before you bid!


David Brown
Brian Mark said…
True... There are plenty of legitimate people on eBay. But retailers need to be watching for this now. The buyer isn't really out anything... but the retailer gets hosed in this deal.
Brian Mark said…
One other note here... since that particular retailer had done the Verified By Visa, and they ended up selling the item to the customer for a low price, they actually came out WAY ahead. Does that mean they were guilty of fraud? Hmmm... I leave that for some lawyers to figure out down the road.

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