As our sister site PCMag detailed, online resellers took to forums to crow, with one individual claiming to have purchased 18 cards, while another purchased 42. All of these GPUs are ending up on eBay at extremely high prices. I’m not claiming Newegg and Nvidia had no measures in place to defeat bot attacks, but their measures just as clearly aren’t working. The Xbox Series X and PlayStation 5 launches are going to be real exciting in a few weeks.
This is a new, entirely unwelcome development in product distribution. Previously, shoppers only had to battle the vagaries of shipping schedules, unhelpful clerks, and general low availability. Now, you may literally be competing for product against a computer running scripts that can monitor websites faster than you can click and place orders without even loading a webpage. COVID-19 may be playing a role, but bots are becoming a scourge.
Why Bots Are Bad
Scalping and gray-market distribution have always been problems in any market, but the advent of bots pushes this from an inconvenience to a serious problem. The Switch vanished from store shelves in April thanks to bots. Today, at the end of October, you can order one on Amazon with an expected delivery date of November 19, or you can buy one on Newegg for nearly $400, but neither outlet has a Switch available at MSRP for delivery within a reasonable time frame. Bots are not the entirety of the problem — production problems have snarled factories across the globe this year — but they’re certainly part of it.
To see how this could play out over time, consider how OEMs are likely to react to repeated instances of bots snapping up the entirety of launch-day stock before reselling it on eBay.
From the OEM’s perspective, this is wasted profit. When graphics cards became hard to find during the cryptocurrency boom a few years back, it wasn’t AMD and Nvidia earning buckets of cash on the inflated prices — it was Asus, MSI, Gigabyte, and the other manufacturers. From the perspective of these companies, there is absolutely zero value in selling a GPU for $700 only to see it pop up on eBay at $1500. That’s value the OEM itself is going to be interested in capturing.
If this problem persists, OEMs are going to start ignoring launch pricing and setting their prices higher, to capture more of what people are obviously willing to pay for the product. This, however, will drastically distort the competitive market. Back in 2013, after AMD released Hawaii, the performance data significantly favored Team Red. The ongoing cryptocurrency boom at that time, however, drove prices on AMD GPUs through the stratosphere for months. In the short term, this was good for AMD’s profits. In the long term, it was catastrophic for AMD’s market share.
AMD currently holds around 20 percent of the GPU market. It took the company 6-7 years to reverse the impact of the Hawaii cryptocurrency disaster.
High prices on AMD GPUs made them terrible choices against equivalently-priced Nvidia hardware. Hawaii was supposed to be AMD’s triumphant return to competitive standing against Nvidia. Instead, it was one of the worst refreshes AMD ever launched.
No reputable manufacturer wants its customer relationships to be mitigated by scalpers. You might be willing to pay $1500 for an RTX 3080, but the general assumption from the company is that you probably aren’t happy about it, and aren’t going to be as interested in Nvidia products in the future if you have to mentally jack up their prices by a factor of 2-3x when considering your purchase.
Bots also screw with things on the reviewer side as well. Reviewers tend to give manufacturers the benefit of the doubt in terms of launch-week pricing and availability, and this honeymoon period can last a few months depending on the circumstances. Eventually, however, we have to acknowledge that regardless of how good GPU A might be over GPU B on paper, it doesn’t matter if GPU B is available for $500 and GPU A is running $1200+. Nvidia attempted to avoid having its GPUs collide in-market by drawing down Turing manufacturing before Ampere’s launch, but all that’s done is raise the price of the 2080 Super to $750, while the RTX 3080 starts at $700 and cannot be found anywhere.
A sufficiently large supply of bots could keep high-end cards from being sold at MSRP for months. While I do not expect that this will happen, imagine that low yields keep top-end GPU supplies relatively small. Bots are therefore able to keep up with demand, buying GPUs from Newegg, Amazon, and other sellers, before selling them on eBay. While we know this would eventually stop working as all the people willing to pay 2-3x for the GPU acquire one, bots could keep cards out of the hands of most gamers for months. Nvidia would need to be able to flood the market with more GPUs than the bot army could purchase and distribute on a weekly basis before breaking their hold over pricing and driving them out of the market.
If you’ve ever played a popular MMO on a well-populated server, you may know what I mean. There was a time in World of Warcraft when Chinese bot farmers so outnumbered players, they were able to effectively lock up the market for rare crafting goods. Say that a fair price for a Black Lotus was 20g each. You ran around gathering a handful, put them on the AH for 20g, and get paid. Lucky you. Unfortunately, your 20g Black Lotus was purchased by a gold farmer who is now reselling it for 50g.
If all you do is collect Black Lotuses, this is great. Your guildies and friends who craft the potions you rely on for raiding need those flowers, however, and if you sell at 50g, you’re literally making life harder for them. No individual player could drive the price back down, because a cabal of organized individuals had decided the price was going to be what it was. Attempt to flood the market with cheap flowers, and the only thing you ensured was that gold farmers would be reselling your hard work within the hour, possibly making more gold than you did. Set your pricing equivalent with theirs, and you’re participating in the market-warping problem making peoples’ lives miserable. Buy their product, and you encourage them to sell it at the highest price they can get.
Blizzard’s partial solution to this problem was to merge the auction houses of multiple servers to make rare items easier to find and less subject to this kind of price-jacking. That can only work in tech if companies can ship more hardware than bots can purchase collectively, week after week.
How Do We Solve It?
One potential solution, though I don’t like it much, would be a system for verifying pre-orders. I haven’t been able to think of a method that doesn’t result in Sony or another third-party processor juggling a lot of personal information that would make its database a tempting target for hackers. Theoretically, Sony would open the PS5 for pre-order, but your ability to place an order would be dependent on sending in a photograph of an ID like one’s drivers’ license. Alternate forms of verification that are less draconian might include giving the company your physical mailing address, with the understanding that no more than 1-2 consoles would be sold to any given address. Obviously this information would have to be centralized, and every platform allowed to sell pre-orders would have to be capable of accessing the information.
These systems would still be game-able, but with careful implementation, the gaming could be reduced to the level of years past, where it represented an annoyance but not much more. The downside is that this requires Sony and Microsoft to overhaul their distribution networks and policies. Companies would have to explicitly work to shift online sales to pre-orders because that would become the only way to guarantee you could buy a launch console for anything like launch pricing.
Another option — one that customers have moved away from, but might be willing to embrace under the circumstances — is a return to physical, retail console hardware sales. It will still be possible for scalpers to hit retail stores the way they have in previous launches, but again, the need to physically travel to multiple stores, stand in line, and hope you can find a console available in the first place will help limit scalping. We wouldn’t get rid of the problem this way, but we’d be reducing its impact. Customers might choose to return to retail shopping if it was the only way to secure a console or graphics card at anything approaching launch price. GameStop would undoubtedly be thrilled. Yes, these systems are also still abusable, but at that point, we’re talking about a group of people with an organized plan to hit all the stores in the area at once, and that kind of strategy can’t really be stopped. It’s also much harder to pull off.
One way or another, the existing situation needs to change. 2020 represents a perfect storm as far as manufacturing problems are concerned, but bot use was growing rapidly before COVID-19, and it won’t stop growing afterward. Gray marketers have more ways than ever to soak up store inventory. We’re going to need new strategies to stop them if we ever want to return to a world where products are widely available at MSRP within a month or two of launch.
Going to a Best Buy to buy a console or a GPU is inconvenient. Paying the higher prices retail outlets sometimes demand is inconvenient. Neither is more inconvenient than waiting 3-6 months for prices and availability to settle down. It may be that post-COVID, we’ll see this be less of a problem, but given how rapidly these tools are spreading, I suspect it’ll remain even once manufacturing and shipping facilities are fully online.
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