How can something sell out when nobody is buying it?
This isn’t a Zen koan, like “what is the sound of one hand clapping?” It’s a real problem for consumers and retailers of limited edition luxury goods. Expensive items, such as celebrity-endorsed sneakers go up for sale online at an advertised time—and instantly sell out. This is to be expected, given the high demand. But the challenge is, it’s not the legions of hardcore sneaker fans buying the limited edition stock, instead, an army of bots has swung into action, checking out with the goods at a speed that no human can match.
Of course, there’s a real person behind the bots, who will sell on the sneakers for a mark-up. The online store sells the goods at the price expected and sells out in record time. The bot user gets to make a profit selling to the highest bidder on a third-party site. The loser is the consumer, who has to pay extra for an unnecessary middleman.
Why sneakers? There are other ways bots are used to buy goods and services online and sell them on at a profit, such as “seat spinning”, the practice of keeping airline seats in an online basket, only buying once a sale is guaranteed on a third-party site. But sneakers have the advantage of keeping their value for a long time, being small enough to ship easily, and demand outstripping supply. The prices can be shocking for anyone more accustomed to buying brogues from the high street. A collaboration between Pharrell, Chanel and Adidas is, at the time of writing, being sold on one of the most popular marketplaces for a shade under £8,000. Sneakers selling for a five figure price tag is not uncommon.
How do sneakerbots work?
We’ve all had to click on traffic lights, solve puzzles, or simply tick a box online to prove that we’re real. Unfortunately, ever-more sophisticated sneaker bots are designed to bypass these checks.
Sneakerbots start by monitoring sites for new releases and re-stocks of the goods they want. This searching and re-searching puts a load on sites that doesn’t need to be there. This can cost businesses in more ways than one—even a short delay of a second can mean a drop in sales of 12 percent for ecommerce sites. This monitoring activity is often sold as part of a sneakerbot package.
When the stock is found, the main sneakerbot kicks in, completing the checkout process without any human intervention. These bots can also work as a service—the person operating the bot is not the one buying the goods, but instead is selling “slots” so that dedicated customers or resellers can secure the items they want.
Some retailers have tried to sidestep this problem by creating lotteries that determine who is eligible to buy a limited edition product, and make the system fairer. Unfortunately, these are subverted by “account creation bots” that create thousands of entries to these lotteries. This makes the lottery, if anything, less fair than the first-come-first-served process that it replaces.
Overall, it’s important to remember that sneakerbots are not kludges of code put together in a darkened basement. They are sophisticated pieces of software sold by profitable businesses. Whole teams of coders are behind this work, spending hours on the research and development of software, reacting to new security measures and bot prevention techniques. Like other types of security threat actors, these are professionals running a business. They need to be taken seriously.
Putting a stop to the sneakerbots?
Online retail may have its detractors, particularly on the high street, but it has benefits too. Consumers are no longer limited by geography when it comes to accessing their desired goods. Previously, a “sneakerhead”—the name for a sneaker enthusiast that sounds a little insulting—would need to live near a store to pick up the latest designs, or travel far. Those who weren’t able to queue outside a store for hours beforehand would never be able to own the most sought-after sneakers available.
Sneaker bots are an easy problem for retailers to ignore. After all, who actually buys the sneakers doesn’t matter, the retailers sell out and make their required sales and profit as expected. But the effect can be long-term and insidious. A report into another reseller market, gig and festival tickets, found that a majority of consumers would attend fewer gigs, spend less on merchandise, and less on music overall because they were spending so much more on tickets through secondary resellers.
Luxury limited edition goods carry a premium cost, but that doesn’t mean that consumers are happy to pay well above their original price. It’s also a zero-sum game: consumers have a limited amount of discretionary spending, and those who buy sneakers as an investment won’t see the value in doing so if they are paying inflated prices. Limited edition goods only work as a concept if demand outstrips supply.
If retailers continue to let bots buy goods and third parties sell them at a mark-up, they risk losing business in the long-term to disillusionment. Much of the concern around bot activity has been directed at social media disinformation campaigns—but other businesses need to keep a very careful eye on what bots are doing on their sites to manipulate the system. Selling out instantly might not be the good news it seems to be.
Andy Still, Chief Technology Officer, Netacea