Last year, as the global pandemic shut down other forms of entertainment, many people gravitated toward video games as an escape. Life simulators like Animal Crossing and Stardew Valley saw major spikes of players, while cooperative and competitive games like Fall Guys and Among Us helped connect players from the comfort and safety of their own homes. The pandemic also happened to coincide with the release of the latest generation of video game consoles, the Playstation 5 and the Xbox Series S/X. These new consoles promised higher frame rates, faster loading of game worlds, and greater screen resolution for televisions that supported it. It was a good time to be a gamer - more people were online and the latest technology was going to make their games look better than ever.

Except...those gamers often couldn’t quite get their hands on the new consoles. New console releases are always a big deal in the gaming community, but this generation felt even more difficult to acquire. Scan through any video game forum and you’ll find countless stories of gamers struggling to make a purchase. Retailers would drop a batch of consoles only for them to be sold out in a matter of seconds. Buying a new console became a sort of race: could you complete the login and purchase process before they were gone? And was it even human for the consoles to disappear so quickly?

 

Chips and (supply) dips

A brief primer: any electronic device that has to do any kind of “thinking” does so using semiconductors. Cars have dozens of them, smartphones, computers, game consoles...even refrigerators and dishwashers have semiconductors built into their inner workings.

When the pandemic hit, demand for semiconductors surged, but only in specific sectors. Folks moving to work-from-home circumstances created enormous demand for the chips made for the electronics needed to support that lifestyle: computers, tablets, and monitors, for example. Conversely, demand for the semiconductors needed for auto manufacturing cratered, as people drove less and bought fewer cars, creating one of the biggest drops in auto sales in forty years. With less demand from automakers, semiconductor manufacturers shifted their lines to focus on the chips that people needed more of.

There are limited numbers of facilities making these chips, however, and they weren’t immune from pandemic shutdowns and natural disasters either. Every slowdown or stoppage has a cascading effect, and even as we approach the end of 2021, supply can’t catch up to demand. Drive by any dealership and you’ll see the impact of a shortage on electronics: there are far fewer cars in the lot than you’d see in normal circumstances.

Which brings us back to consoles. Sony and Microsoft released their new generation of consoles a year ago, at the height of the pandemic...and after the first dominos of the chip shortage began to fall. The initial rush to buy the consoles for the 2020 holiday season never petered out into a sustainable pace. Retailers remained under pressure to make consoles available to a clamoring public, and there simply weren’t enough chips to make enough consoles to keep everybody happy.

One Twitter user emerged as a sort of oracle for console retail. @Wario64 seemed to have some sort of inside information for when retailers’ console drops would happen, and as a result, their Twitter following exploded. At the beginning of the pandemic, @Wario64 had roughly 177,000 followers. By December of 2020, that number had more than quadrupled to over 800,000, reflecting the interest in beating the bots to the consoles. Months after the 2020 holiday shopping season, their following continues to grow, having now reached over a million.

The follower count of @Wario64 serves as one simple bellwether for interest in these consoles. It’s also reflective of the difficulty gamers have had in making the purchase - after all, why follow an account like @Wario64 if the supply of new consoles was sufficient to meet the demand? As early as May of this year, Sony warned that consoles might be difficult to acquire well into 2022. Toshiba, a major semiconductor manufacturer, warned that it might be even longer before they can meet their production goals. These estimates likely play a part in rumors that Sony will redesign their console to reduce reliance on the chips that have been hard to come by.

While chips play a huge part in why there aren’t enough consoles to go around, they’re not solely to blame for why the average consumer can’t simply buy one. For that, we have to look to bots.

 

Big money, no whammy

To their credit, console manufacturers have kept the list prices of the new generation (relatively) low. Both the PS5 and the Xbox Series X clock in around $450-$500, which, while high, are about as low as could realistically be expected for a device of that complexity. But that price point, coupled with the dearth of available consoles, creates a huge opportunity for resellers and the bots they operate.

It doesn’t take an economist to understand it: low supply and very high demand leads to an incredible incentive for fraudsters to grab as many consoles as they can get to resell. One resale website claims to have helped move more than 140,000 PS5 consoles since the release. Prices for the consoles even now, in September of 2021, can range from $730 to more than $900, representing 50% or more above list price. And that resale price will only go up as demand increases again over the holiday shopping season. It’s easy to see what would attract someone to bots that could net a reseller dozens or hundreds of consoles at hundreds of dollars profit for each.

These bots, which will be familiar to any sneakerhead, enable a user to go through the checkout process faster than a human ever could. In the time it takes you or me to enter our billing and shipping information, a bot has cycled through the process multiple times, taking all of the inventory available. What’s more, none of this is illegal. Sixteen states have laws on the books prohibiting “scalping”, but those apply to event tickets, not to retail item resale. And the federal BOTS Act, which just this year saw its first enforcement actions on ticket bots, also applies only to event tickets.

With no apparent legal restrictions on the use of bots to scoop up consoles, bot developers advertise openly, and are even the subject of fawning articles. And while some bots require a preliminary investment, the ROI is clear: for a few hundred bucks up front, you can skip the line and get several consoles, reselling each for hundreds over the list price. The bot pays for itself in no time.

 

So how can a human win?

While there’s little that can be done in the short term about the chip shortage other than wait for new console chips to make it off their assembly lines, the bots can be vanquished by retailers that want to step up to the plate. As the bot developer profiled in the article above said, CAPTCHAs aren’t enough - they’re worked around easily enough by a motivated developer. It takes something with a little more oomph to spot and stop the bots.

After all, the platonic ideal of a bot mitigation technology is to create friction for bots, but not for humans. CAPTCHAs slow down humans far more than they slow down bots, so asking for another input isn’t the answer. The key is to spot technical clues of automation and add barriers to the devices that show those clues. That could be a confirmation email or two-factor authentication prompt, for example.

And there are additional benefits to that sort of system - bots are capable of more than just inventory hoarding; they’re also capable of conducting account takeover attacks and web scraping. Retailers can protect themselves not only from the reputation damage of being known as a bot-friendly platform, but also from the financial, legal, and competitive ramifications of a data breach. 

Recent research by HUMAN revealed that 68% of consumers were at least somewhat concerned about bots preventing them from getting the holiday gifts they want. The same study uncovered that more than half of consumers would not return to a retailer that had bots buying up all of the inventory.

All of this is to say, bot mitigation is how humans win - not just the consumers, but the retailers as well. Online retailers need to think about how they’re ensuring that they’re not feeding into the bot battles that their customers are experiencing. With bots taken out of the process, humans can get back to the games they’ve been hoping to play for months. Which may or may not have to do with killing robots.

TAGGED: Retail , Bot Fraud