What is Auction swapping?

Auction swapping is a fraudulent scheme that involves exploiting the returns process of retailers.

The scammer first purchases returned or damaged items from auction sites, then assess the product and buy new, undamaged versions of these items from oblivious retailers. 

The shopper then uses the new item receipt to return the damaged item and then uses them to make returns to retailers for a full refund.

The scammer then keeps the new, undamaged version of the item while the retailer is left with a financial loss and an additional item to dispose of. This scam can be difficult to detect as it appears legal. However, the use of specialized tools such as re-turns.com can help identify and prevent such fraudulent activities.

Fraud using auction sites

For customers in search of a good deal, auction sites – like eBay, uBid, and PropertyRoom – are a gold mine. On many of these sites, shoppers can bid on items that were returned, overstocked, or, in some cases, seized from criminals. But like any internet business, auction sites are subject to their fair share of fraud.

Highly sophisticated scheme exposes yet another vulnerability of online auction sites

The most common auction fraud type is known as e-fencing, in which thieves steal merchandise and sell their stolen goods to unsuspecting customers online. But there’s a lesser-known auction fraud scheme that actually takes place offline – auction swapping.

To fully grasp auction swapping’s sophistication, it’s important to understand how auction sites function.


How auction sites work

As an example, look to Amazon Liquidation Auctions, a relatively new arm of Amazon’s business. This site has partnered with B Stock, one of the world’s leading liquidation platforms, to sell bulk quantities of returned merchandise and overstocked products from its warehouses. Items are offered in three conditions – new, lightly used, or salvage quality. And these products are available across a wide variety of categories, including apparel, books, consumer electronics, groceries, and home goods.

The goal for Amazon, and any auction host, is to dump excess inventory to clear space for newer, more valuable products while also retaining some value. For lucky, savvy buyers who bid on these bulk loads, they may come across in-demand products that they can resell online for a profit.

Auction or liquidation sites are becoming big business thanks to the ever-growing pile of returns each company has on its hands. In the next few years, the value of returned merchandise is expected to exceed $1 trillion. And with retail stores continuing to shutter (e.g., Toys R Us and Payless ShoeSource) at rapid speed, there’s no shortage of products to feed the auction beast.

But there’s a major loophole that some bad actors are exploiting.


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