A Canadian Guy With A Closet Full of Unsold PS3s: A Cautionary Tale

Derek O’Brien wanted to buy his girlfriend an engagement ring. What better way to do it, he thought, than by buying PS3s and selling them for a profit on Ebay. Whoops.

From the Globe and Mail:

On Nov. 16, a day before the system’s launch, Mr. O’Brien left his construction job and began driving on Highway 401 toward Toronto. His plan was simple: pick up one or two PlayStation 3 systems, advertise them online and sit back as the sure-to-be hot — and scarce — commodity gathered steam in the chug toward Christmas.

Instead, the first-time scalper learned an expensive lesson about consumer demand and when to take a profit. Now that the dust has temporarily settled in the busy gaming marketplace, another lesson is coming into focus: Mr. O’Brien might have backed the wrong box.

O’Brien stood in line all night and in the morning bought two machines, one for regular price and one for $1,800 from a scalper.

“I just kept thinking, ‘keep it until Christmas,’ ” he said. “And that was a mistake. A huge mistake.” Now the boxes are sitting in his closet. He’s looking at selling them on craigslist for a loss. —MEGHANN MARCO

How a PlayStation speculator misread the market and lost [Globe and Mail]

Comments

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  1. VG10 says:

    wow, holding a hot item for a few weeks, why didnt he off some of them at once, then sell some more later?

    I sold my first one on a 3day auction and only got $1200 for it, I then found 2 PS3 later at Target and bought them both, sold one for $700, and I returned the other.

    I don’t buy this story at all. Most stores will give you 90 days return if you keep the box unopened and bring back a receipt. atleast return them for store credit then sell the store credit gift cards on ebay for nearly what they are worth….

  2. nweaver says:

    You know, THIS part was the problem: “one for $1,800 from a scalper.”

    This is classic bubble-buying mentality, knowing you are buing something overpriced but buying it because you think there is a greater sucker you can then sell it to.

    And then there was the failing to sell when it was obvious prices are dropping “Just wait until Christmas, it will come back up”….

    Sucker/L00z3R/1AMRZ

  3. averdade says:

    Hah. I’m sorry, but its hard to feel any sympathy for the guy.

  4. kcskater says:

    Greed will take anyone and everyone down at some point. Hopefully this guy realizes it permanently.

    One of Murphy’s laws: “Everyone has a scheme for getting rich that will not work.”

  5. Kornkob says:

    *shrug* Seems like a hard lesson to learn but one that will probably be valuable for him in later years.

    I’m sure that at least part of his risk assessment process was this thought:

    “This can’t fail!”

    Now that he has learned, the hard way, that ‘sure things’ usually come with hidden risks (like a bad turn in the market …or the clap) he’ll probably be a wiser investor for the future.

    He should probably look into a different person to marry, however, as his wife-to-be will be able to lord this over him for the rest of his days. “Honey, I know you think this is a good idea but remember that scheme you came up with to buy my engagement ring? You thought that would work too.”

  6. etinterrapax says:

    At least he’s now prevented from making an offer of marriage to the poor girl, although if he does anyhow and she accepts, she’ll have stared down an enormous red flag: he’ll risk for a quick buck to impress her instead of saving for what he can honestly afford to give.

  7. WindowSeat says:

    The guy had $2359 to spend on the PS3s, wasn’t that enough for a decent engagement ring? I hope he didn’t use a credit card for this scheme.

  8. latemodel says:

    Why is ebay helping Sony with the denial of sales in the UK?

  9. JohnOB1 says:

    Remember, Homer try didn’t sell his pumpkin shares until AFTER Halloween… and he lost everything.

    The PS3 is that rotten pumpkin.

    The Simpsons teaches us everything.

  10. Falconfire says:

    WindowSeat you said it, 2359 bucks is about half what I paid for a engagement ring and I spent a lot more than people advised me on by getting her a full caret and a platinum setting that was custom made from sketches I provided.

    If your so hard up you couldnt save another 2-3k (if you even wanted to SPEND that much) you could have borrowed it from a parent or something (I did, but only because I wanted to propose before christmas so she could show everyone Christmas eve/day, otherwise it would have been March)

    Seriously this was a very dumb move. Even before the PS3 came out, all the signs where there that no one wanted to buy one.

  11. csnoke says:

    The photo of the pallet of ps3′s is misleading.. he bought just 2 units. For one of which his head was WAY up his ass… $1800 from a scalper.

    The logic that “the price will come back up” what an ass.

  12. canuckistan says:

    I did the same thing With Pumpkins. I figured the way prices were going in October they’d peak around Christmas. Man was I wrong!

  13. FLConsumer says:

    If this guy still thinks the price will come back up, I’ve got some great Enron shares I’d like to sell him.

  14. bartinpc says:

    Nelson from the Simpsons said it best:

    “Ha ha!”

  15. Josh Smith says:

    Why would you pay a scalper 1,800, did you really think you were going to make that money back?

  16. troublz says:

    Maybe it’s just me..but describing this story with the word “a closet full” in the title coupled with the picture of a pallet full of PS3′s is bit misleading. The guy in the story only had 2 of them. If the story was about some schmuck who had managed to get a true ‘closet full” then it’s interesting reading. I’m sure he’s one of MANY people who tried to profit and have been stuck with one or two units.

    The cautionary tale is not necessarily that you shouldn’t gamble on the demand for new products — the lesson to learn is NOT to buy one from an individual unless it’s at or slightly higher than the retail price. No too much risk involved there.

  17. br549 says:

    I don’t feel bad for the guy. He would have taken the reward, he has to take the downside too.

    But here’s the real lesson:
    When he decided to scalp PS3s, he was competing against Sony. So he’s one guy with a few units up against Sony, who has a lot of units. If Sony actually gets their crap together and manages to ship a lot of units (as they did, 1M in the US, 1.6M worldwide in 2006), then they can flood the market with units and destroy your profits.

    Too many people looked at MS’ 360 launch where MS never got full production going during the holidays and learned the wrong lessons.

    Short version:
    You’re dependent on not only the demand, but the supply by the primary provider (manufacturer). So when you’re going to scalp something, scalp something where the supply is restricted, or even a fixed number. This is why pro scalpers deal in things like concert and sports tickets. There’s a fixed number of seats.

  18. denki says:

    If the guy was at all intelligent, he would have bought a few dozen Wii for investment purposes. Even though they only sell for about 400$+ on ebay, that is still 150$ more than retail. I was once standing in line for one and some guy looking to buy one for his son offered people 200$ just for the ticket to buy one. And everyone turned him down, which is kinda weird.

  19. 1800 Canadian dollars?

    no big loss then, might as well be monopoly money right?

    I keed. I keed.

  20. faust1200 says:

    Since when does the value of electronics ever go UP anyway? If this guy were a consumerist he would know the value of diamonds are artificially bloated by the DeBeers Company and while shiny and hard not very rare. So skip the ring and play some Playstation.

  21. Moral of the story:
    Whether re-selling PS3s, investing in the stock market, or opening your own business you need information about the market, and a plan based upon that good information. It’s the best way to improve your odds of success. Lastly, sometimes good businesses fail.

    Unfortunately for Mr. PS3, his business was not very well thought out, and a monkey could have predicted his failure.

  22. NeoteriX says:

    A fool and his money are soon parted.

  23. Tonguetied says:

    Mmmm, for some reason I thought of Beanie Babies while reading this post…

  24. godai says:

    The $2359 could of been done on credit.
    And he was looking to flip the ps3s, pay off the credit and then use the profit on the ring.

    I’m sure now he just wishes he had bought the ring instead but thats hind sight.

  25. Sorenso says:

    Sorry about saying this, but good. I am happy he learned a good hard lesson on scalping.

    He should just pop em open and play them now. Or donate them.

  26. John Stracke says:

    The guy had $2359 to spend on the PS3s, wasn’t that enough for a decent engagement ring?

    Yeah, my wife and spent only about $2000 for both our wedding rings together; and they were custom-made. ‘Course, they’ve got sapphires instead of that colorless crap that De Beers pushes.

  27. ElizabethD says:

    This reminds me of the sad Craigslist postings I see occasionally: “200 Beanie Babies including rarities! MINT in Ziploc bags with tag protectors! $100 or best offer.” Yeah, *that* was a good investment.

    • ludwigk says:

      @ElizabethD: When I was 16, right before I went off to summer camp, my Mom bought me a beanie baby doll she saw at a “Ty” kiosk at the mall. It was a little stuffed mouse that she thought was cute. This was *highly* unusual because my mom has never gotten me a stuffed animal ever (Since, I’m a guy, and I had transformers and legos and such).

      I took it camp with me, and it mostly sat on my desk, and was used occasionally to toss about like a bean bag. It ended up coming along to college, and it sat on top of my monitor most of the time. When I came home for christmas, I was at a bookstore and saw a “beanie baby price guide”. This was near the height of beanie baby madness.

      As it turned out, my beanie baby was “Trap”, which had some ludicrous price of $1800 in the guide. I thought that was both pathetic and hilarious. Also, I had already removed the tag long ago, so it’s value was much lower. As a joke, I bought him a $5 acrylic collector’s case to protect his fine whiskers. He’s still sitting on a shelf somewhere at my parent’s place now.

      To this day, Trap still sells for far more than a bag of polyester beads should (check out ebay, etc.). If only my mom had picked up a few more…

  28. adamondi says:

    I love seeing scalper punks get what is coming to them. Even more satisfying: a smarter scalper took him to the cleaners even though this guy already had one PS3 bought at retail.

  29. mathew says:

    I just hope something like this happens to a few of the Wii scalpers who have been preventing me from buying one.

  30. Jesse in Japan says:

    In retrospect, the first PS3 at retail wasn’t such a bad investment. He bet on the demand for the PS3 peaking around Christmas. It turns out he bet wrong, but it’s not an unreasonable idea (assuming Sony couldn’t ship enough units, which seemed likely at the time). But to pay 300% of retail on the hope that the price would rise further is just beyond stupid.

  31. Grrrrrrr, now with two buns made of bacon. says:

    If you play the market and gamble, sometimes you lose. If it was a sure thing and there was no risk, everyone would be doing it.

    I honestly just don’t have any sympathy for people who get burned when their own greed backfires on them and bites them square in the butt.

    “Let that be a lesson to you, young man!” (grumpy old man voice)

  32. d0x says:

    “Too many people looked at MS’ 360 launch where MS never got full production going during the holidays and learned the wrong lessons.”

    Thats not the issue here. The reason PS3 prices dropped like rocks isnt because there was big supply, in fact there wasnt. The real reason is the PS3 is an expensive POS with no games, Sony has tarnished there name this last year, and people arent putting up with it.

  33. superbmtsub says:

    Confucious say “Profit is like sweet n sour chicken for risk.”

    Consumerist says “Unfortunately, you’re not always rewarded.”

    xD

    PS: I feel sorry for him. We’re all tryin to live by making a buck or two but buyin one at an already inflated price … mmm

  34. superbmtsub says:

    Confucious say “Profit is General Tso’s chicken for risk”

    Consumerist says “Unfortunately, we’re not always rewarded”

    Feel sorry for the kid. After all, we’re all tryin to make a buck or two for a living. But buyin something at an already overinflated value? Mmmm

  35. superbmtsub says:

    Hate double posts. had to remember what I wrote. Fak!

  36. RapperMC says:

    man, these engagement ring stories make me feel pretty lucky. my wife’s choice was a $300 estate ring that was just really cute and ornate, and then our wedding bands were about $180 total. that information is for those unmarried guys out there that got really scared reading the story and the posts above.

  37. dayjayvw says:

    Though I share in other disappointments that this story is meatier as it advertised a closet full, and showed a pallet full.

    I enjoyed reading it as scalping is an art form, you really have to be select, and know the supply and demand chain. This person probably made some real money had he sold them as soon as he got home. Instead waiting……..waiting…..waiting..etc.
    I’m glad he got burned as it takes one more reseller of a commodity off the street, making more “rare products” available for people who know how to scalp.

    Everything I know I learned from Homer J.

  38. TWinter says:

    I’m not so sure about this guy really learning his lesson from this. One of my friends used to date a guy who was obsessed with finding ways of making extra money – he just went from one failed scheme to the next and he always managed to rationalize each of the failures, mostly involving how whatever the recent scheme was was set up to help the “big guys” while the “little guys” like him were shut out. He would have been far better off if he had just put his money into simple straightforward investments (stocks, bonds, savings accounts) instead of cotton futures, dog breeding schemes, and small businesses he knew little about.

  39. TurgidDahlia says:

    Serves him right. How much did he want to spend on an engagement ring for this woman of his? Four, five thousand dollars? Is he insane?

  40. medalian1 says:

    2 is hardly a closet full

  41. I_have_something_to_say says:

    I hate these middle-man assholes that do nothing but screw up the supply for people. I hope he fails miserably at life.