The Socioeconomic Impact of Shopping Bots

The existence of automated bots in eCommerce is nothing new. Many people, including myself, rely on online shopping to purchase essential and non-essential items. However, if you desire a product that’s in high demand, you can probably forget about it because thousands of bots have likely wiped out all the inventory. So, where does that leave us? Well, at the mercy of the resale market, where you’re now confronted with paying exorbitant prices for what used to be an affordable item. 

However, the issue of shopping bots extends beyond the next hottest apparel or electronic device. It can also impact the goods and resources we depend on for survival, further exacerbating the digital divide between the wealthy, and basically, everyone else. For instance, let’s take a look at the PlayStation 5 game console. 

The PlayStation 5 was released on November 12, 2020, costing $500 and $400 for a digital edition. Today, due to a combination of high demand and an international chip shortage, consumers can expect to pay $1,000 or more on StockX, including other reseller sites. Similarly, seconds after the launch of Nvidia’s PC gaming system, the entire stock “was sniped by bots, with a sprinkling of the odd lucky person,” according to BBC. 

HOW DO SHOPPING BOTS WORK? 

The Business Insider defines a bot as a software application that expedites the online checkout process and helps resellers nab hyped-up sneakers in seconds – including limited edition drops and collaborations. Most bots require a proxy or a primary server that disguises itself as a different browser on the internet. 

According to the BBC, the most advanced shopping bots are all-in-one solutions that spot the deals and automatically check out. In other words, you don’t have to camp outside or wait patiently online for companies to drop their Black Friday deals because a bot will do that for you. 

How Do you acquire a bot?

The Business Insider explains that most bot makers release their products online via a Twitter announcement. Some private groups specialize in helping their members nab bots when they drop at retail. These private groups will use other bots to access more advanced bots that cost a few hundred dollars after the release. 

How much does it cost to be a member of these private groups? The BBC shares that membership to these exclusive groups can cost tens to hundreds of dollars. Currently, there are bots on sale for thousands of dollars. The article poignantly points out that bots have become so expensive and limited that most people have to rent them now. 

GROWTH OF THE RESALE MARKET

For those in the resale market, the future has never looked brighter. The secondhand apparel market is currently valued at $28 billion and will reach $64 billion in five years. The resale market grew 25 times faster than the overall retail market last year, with an estimated 64 million people buying secondhand products in 2019. 

Essentially, you can quit your job and live well by purchasing products at retail prices and reselling them for some astronomical amount. And if people are desperate enough for an item, they will buy it from you regardless of the cost. 

The Socioeconomic Impact of Shopping Bots

The issue of shopping bots is much bigger than buying a new pair of Jordan’s, a handbag, or a new game console. At the beginning of the pandemic, we witnessed basic human survival instincts, and many people bought more than needed to prepare for the unexpected. As a result, we saw empty shelves inside brick-and-mortar stores and sold-out notifications online. Personally, I could not find a bottle of Clorox to save my life. The chart below illustrates a surge in interest in shopping bots or Amazon bots in the past year. 

The high demand for shopping bots combined with an unregulated resale market can become an enormous problem that could deepen inequality in the US. In a Harvard Business Review article, nearly half of Americans without at-home internet were in Black and Hispanic households. Additionally, 40% of disconnected K-12 students from Black, Latino, and Indigenous communities struggle with insufficient digital literacy, language obstacles, and other disincentives to use the internet. Unfortunately, this reality provides little motivation for companies to end shopping bots despite the potential adverse impact on our economy. 

In closing, the presence of bots is becoming increasingly more sophisticated. The insidious and malicious nature of bots on social media alone calls for companies to do more to block bot operators. But until consumers and congressional leaders apply more pressure on these companies, the presence of harmful bots across our digital ecosystem will accelerate and permanently damage the social fabric of our society. 


References:

  1. https://www.businessinsider.com/playstation-5-resale-website-stockx-sales-2021-5
  2. https://hbr.org/2021/07/how-to-close-the-digital-divide-in-the-u-s
  3. https://www.bbc.com/news/technology-55074383

10 comments

  1. Interesting read and definitely puts in perspective how quickly an unregulated resale market puts people at a disadvantage. I also didn’t realize that this was an automated systematic process to wipe out stock and high demand items. I’m sure these bots in addition to data analytics can predict buying habits and buy strategically so then the reseller can make the most profit.

  2. Wow – this was truly an eye-opening blog! I remember at the onset of the pandemic the issue of amazon resellers jacking up the price of basic necessities like your much-sought-after clorox, but I hadn’t realized this was more of a prevailing issue with the automated systems specifically designed to wipe out stock. It reminds me of scalpers and other resellers wiping out concert or sports tickets and marking up the price. I agree that the effects of this on increasing inequality is incredibly worrisome. This also made me think about how access to not only the internet, but the FASTEST internet, will only deepen this divide. In a stock market example, the big banks and traders/investors have their own dedicated computing capabilities and private networks linked directly so as to access stocks instantaneously and beat out competition. Will this become the norm for the purchase of regular goods at cost, squeezing out those without internet or with unreliable/slow connections and thereby forcing them to purchase higher-priced goods?

    You touched on some classic economics principles here! Supply & demand, trade/marginal worth and the idea of the ‘middleman’ at work here – wonder what Prof Cliff Holderness would think of this modern day example: “Essentially, you can quit your job and live well by purchasing products at retail prices and reselling them for some astronomical amount. And if people are desperate enough for an item, they will buy it from you regardless of the cost.”

  3. This made me think of a business insider piece I watch where a younger guy was making millions every year by ‘hacking’ amazon and competing with the top sold products. I wish I could find and share it, but essentially he found top selling products with little to no competition and not a lot of reviews and then reached out to overseas manufacturers to make a slightly better (or even the same) product and then paid for 5 star reviews to boost his product and become the top seller. It blew me away that (as Christina mentioned) there are people who are enjoying successful careers by essentially doing nothing more than being a better online middleman then the last!

  4. It’s impossible to get a pari of sneakers on Nike’s SNRKS app: https://www.inputmag.com/style/nike-air-jordan-1-trophy-room-snkrs-resell-backdoor-bots

    It’s amazingly simple to set up a bot to do anything you want, but man it’s so frustrating to keep getting a “sorry you didn’t win” from Nike. There have been some steps to help eradicate the usage of bots, for instance, to scrape Twitter now you need a developer profile. However, I received a developer profile in about 15 minutes, so I’m not sure how large of a barrier that created.

    Great blog to give some recognition to bots and what they are capable of. There are some good usages of bots, but definitely agree that used in the wrong way can become very frustrating.

  5. I’m curious if there are any efforts to stop or prohibit shopping bots from grabbing items? For example, if you were able to skirt rationing during the pandemic or in WWII you would have what’s considered an unfair advantage over the average consumer. Perhaps legal implications? A more recent example is the Redsox student tickets program. On Tuesday’s wildcard game vs. the yankees these tickets sold out immediately and I’m sure were available for resale at a much higher price.

  6. Like Christina mentioned above one of the first thing that comes to mind for me is sports tickets or really any entertainment event. I could definitely see bots being utilized for popular shows or sporting events and unfortunately all it does is drive the price up for the consumer. Nothing is more frustrating that hoping online to purchase tickets to then end up not getting them and seeing them all listed on secondary sites for 3x face value. I think the question then becomes is this a good thing for the market to exclude folks via high resell values. My perspective is that it’s not a good thing. I’d like to see better protection for consumers from these kinds of practices.

  7. Really interesting topic…. I was actually part of a group in Blockchain class and we pitched a “DropBot” idea to eliminate just this – malicious bots in limited release events and similar timebound scenarios. I think blockchain could be an interesting fix for this, as sort of a stand-in for what Christina talked about in her comment, the middle man. If each user needed to authenticate their own, one, unique identity, to participate in such events and groups, such that the process becomes trustless, and by default, fair. It would create that shared, public ledger to ensure users hold one another accountable and compliant with the rules, such as limitations like one-per-customer, while on the back side, blockchains authentication methodology could prevent bots from gaining access to the site. I wonder if we’ll ever see something like this.

  8. Great topic! I learned a lot from your blog. I wasn’t aware of how expensive and exclusive private bot groups were. Resale bots are a great example of how technology (algorithms, really) can be used against ourselves, especially in an unregulated environment. It’s sad, but true..Just like the Clorox example you provided.

    A follow-up blog idea may be current or potential litigation to regulate bot performance. I know I would be very interested!

  9. This has been an issue I’ve run into a lot recently, just with how limited supply has been for things like my PS5 and some other tech purchases. It’s been almost a year since the gaming systems were released and you can still rarely get an online order through a major retailer, due to how many bots flood the site seconds after the information is published. Luckily I have been able to put some research time in to find out when and where I will most likely be able to buy something online, and have usually been able to find it available somewhere. But the more bots flood the system, the harder it becomes even with a lot of time invested in finding that online stock. I think retailers should put more of a focus on in-store releases for these hot purchases, to cut down on as much bot-hacking as possible. By actually requiring people to pickup the package in person, the ridiculous resale market prices will at least take a small hit.

  10. I agree with Brian here, bots are loosely regulated at the moment so if retailers focus on in store releases, it would eliminate the hight resale price. My only concern with that is what incentive do these retailers have to do such a thing? As long as the sale is made they don’t care. Their main goal is to sell the product irrespective of the medium. Super interesting blog post!

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