COVID-19: Price gouging rampant as platforms struggle to keep up
 

COVID-19: Price gouging rampant as platforms struggle to keep up

Consumer Goods • Health & Pharma • Online & Retail

Counterfeiters and other online bad actors are opportunistic at their core and will seize on any chance to make a quick profit out of unsuspecting consumers. The COVID-19 crisis is no different, with bad actors swift to list both medical products and everyday consumer items at marked-up prices as demand skyrockets.

Price gouging refers to the act of exploiting consumers during an external crisis by charging excessive prices for products far above the market rate. During the COVID-19 crisis, price gouging has been observed on B2C marketplaces and websites by distributors and private sellers. Many countries have anti-price gouging legislation to protect consumers during national emergencies, but even where protections do not exist platforms will often prohibit the practice.

In April, Amazon claimed it had removed more than half a million COVID-related items and suspended more than 6,000 sellers across its global marketplaces after infringing its price gouging rules[1].

In an unusual step, Amazon has even gone as far as requesting new legislation to be drafted with VP of Public Policy Brian Huseman calling on Congress to make price gouging illegal during a national crisis[2]. The executive notes that similar laws already exist at state level and are effective at fighting bad actors online.

The COVID-19 crisis has seen a dramatic increase in price gouging on a wide range of products, including those that consumers are more reliant on than ever: pharmaceuticals, hygiene products, and medical equipment. This piece looks at the data, providing analysis of the scale of the issue, before sharing insights into how your business can tackle this growing threat effectively.

Price gouging pharmaceuticals: Exploiting vulnerable consumers

COVID-19 related price gouging was first identified on marketplace listings for pharmaceuticals and other medical equipment supplies. Globally, enforcement agencies and regional authorities are looking to demonstrate their vigilance to the public in this climate and are watching for price hikes.

Price gouging on face masks sold on eBay (April 2020)
Price gouging on face masks sold on eBay (April 2020)
Price gouging on branded hand sanitizer sold on e-commerce website (April 2020)
Price gouging on branded hand sanitizer sold on e-commerce website (April 2020)

Talisman, Incopro’s Brand Protection platform, has identified rampant price gouging in recent weeks – which were then acted on by our analysts. These are just two of the countless infringing listings discovered:

  • Price gouging of up to a staggering 750% for a well-known painkiller with a box of 24 capsules on eBay for $329 with no guarantee they are authentic.
  • Price gouging of up to 100% for a global cold & flu brand across key marketplaces around the world.

Price gougers are exploiting vulnerable consumers who feel that they have little choice but to pay the hugely inflated prices for essential medical drugs and supplies.

Price gouging on consumer goods: Taking advantage of spikes in demand

The issue is not isolated to the health sector; we have also observed an increase in price gouging across a wide range of other product categories. Incopro’s Brand Protection experts harnessed Talisman to monitor these product categories on Amazon US for price gouging:

Desks and computer monitors

We analyzed the 10 most visible listings for desks and computer monitors, discovering that sellers have increased prices of their listings on average by 193% since COIVD-19 hit. An example can be seen below, showing the increase in price listed by a third-party seller for a desk from the beginning of the year to now, clearly taking advantage of the crisis.

One listing for a simple home-working desk saw a large price increase of 247%, going from $89 to $220.

Price fluctuations on home office furniture sold on Amazon.com (May 2020)
Price fluctuations on home office furniture sold on Amazon.com (May 2020)

Sports and exercise equipment

We analyzed the 10 most visible listings for bench presses and yoga mats, discovering that sellers have increased prices of their listings by 168% on average since COVID-19 hit.

One listing saw a large price increase of 370%, going from $160 to $330. This screenshot of a customer review from March 2020 shows that the product listed was cheap and potentially harmful, yet concedes that there’s ‘slim pickings’ due to the pandemic’s effect on supply:

Amazon customer review for bench press (March 2020)
Amazon customer review for bench press (March 2020)

Home entertainment

We analyzed the 10 most visible listings for a leading games console, discovering that sellers have increased prices of their listings by 161% since COVID-19 hit.

This data shows that sellers are taking advantage of COVID-19 to increase the prices of their listings, with all categories showing sellers increasing their prices by over 150% since the crisis has hit.

The threat to consumer safety and brand reputation

Not only do consumers face the prospect of massively overpaying for a product, there is also a chance that the products they are purchasing are already used[3] – meaning consumers are not getting what they paid for, or even non-genuine – putting consumers at risk of physical harm.

Brands face a two-fold issue with price gouging:

  1. Policing distributors that are selling genuine product far above the market rate/agreed price
  2. Removing copycat/counterfeit products that use the brand’s IP and are sold far above the market rate

Price gouging damages brand reputation and consumer trust in a brand, regardless if the product on offer is genuine. Distributors of the products will not face the brunt of your reputational damage, even if they are the party engaging in price gouging. Any damage is likely to be long-term and extremely difficult to repair.

In April, Incopro polled 87 business decision makers and Brand Protection professionals, asking about what they perceived to be the biggest risk to their businesses due to COVID-19 – over 45% said the risk to consumer trust and the consumer-to-brand relationship. This highlights that they recognize the risk that the shift in market dynamic has created.

Platforms cannot tackle the threat alone

We’ve noted that some platforms are taking action, and governments are setting up dedicated ‘price gouging’ taskforces – but they are unable to stem the tide alone. Amazon, for example, will actively monitor for price gouging, but due to the scale of the problem and the limits of their technology may be slow to identity and remove infringements. However, if they are notified by a brand of specific instances of price gouging, they will be able to act far swifter.

Incopro’s Brand Protection technology and expert analysts give you cross-platform, cross-territory insights into price gouging with a tried and tested online enforcement solution delivered at scale directly from the platform. The platform can also collate evidence packs for injunctions and wider monetary relief. and bespoke reporting by brand, platform, territory provides internal stakeholders with valuable sales insights.

Price gouging is not a new phenomenon – it existed before COVID-19 and will continue even as the global crisis eventually subsides. By taking a strong stance now, you can put consumer safety at the heart of your Brand Protection strategy.

Our price gouging solution can be delivered alongside your existing Brand Protection strategy, with a fast spin up. If you would like more information on our approach, please request to talk to one of our experts below.

Learn best practices for working with platforms such as Amazon and Alibaba to have infringements removed in quick time in our webinar on May 28.


References

[1] https://www.forbes.com/sites/reneemorad/2020/04/20/5-ways-to-avoid-coronavirus-related-price-gouging/#61a8296f4922

[2] https://techcrunch.com/2020/05/13/amazon-calls-on-congress-to-create-anti-price-gouging-law/

[3] https://www.which.co.uk/consumer-rights/advice/price-gouging

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