Episode 724: Cat Scam : Planet Money The internet was supposed to get rid of middlemen--but instead there are more than ever. Today on the show, we look into how one sneaky strategy, dropship arbitrage, is taking over Amazon and Ebay.
NPR logo Episode 724: Cat Scam

Episode 724: Cat Scam

Fred and Natasha Ruckel's cat, Yoda, sits on top of the Ripple Rug. The Ripple Rug was the subject of a classic middleman scheme involving eBay and Amazon. Courtesy of Snuggly Cat hide caption

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Courtesy of Snuggly Cat

Fred and Natasha Ruckel's cat, Yoda, sits on top of the Ripple Rug. The Ripple Rug was the subject of a classic middleman scheme involving eBay and Amazon.

Courtesy of Snuggly Cat

Note: This episode originally ran in 2016.

Fred and Natasha Ruckel invented a cat toy called the Ripple Rug. It's like a scrunched up doormat with holes in it, and for cats it's like going to Disneyland. When the Ruckels put it up for sale on Amazon, it started selling well. It was a solid business. Then one day, Fred noticed that the Ripple Rug was also on sale on eBay--for twenty dollars more.

It looked like his product. It looked like he was selling it. But he had never posted it on eBay. IT was a case of cat toy arbitrage. The eBay sellers weren't changing the original Ripple Rug, and Frank didn't think they were adding any value. They were just jacking up the price and pocketing the difference.

This is a classic middleman scheme. It's also a scheme that could only happen on the Internet. But the Internet was supposed to get rid of the middleman. Instead, middlemen are stronger than ever. The biggest companies on the internet are middlemen. Today on the show: Why middlemen are taking over the global economy, why there's very little anyone can do about it, and why that could be a good thing.

Check out the article by Jason Feifer in Entrepreneur magazine, which inspired our episode.

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