Dive Brief:

• In an effort to avoid fiascos such as the recent Lilly Pulitzer mess, Target is banning resellers, limiting quantities, and reserving the right to cancel online orders, according to reporting by EcommerceBytes.com.

• Target recently faced a lot of disappointed (and even angry) customers who didn’t get a chance to shop for its recent limited-edition Lilly Pulitzer line when it sold out in stores and the retailer's site crashed.

• The much-anticipated line was scooped up swiftly and in huge volume by eBay sellers who bought in bulk and listed the merchandise online at big markups. 

Dive Insight:

The practice of scooping up a ton of merchandise at a retailer and reselling it on eBay is known as “retail arbitrage.” For the consumer, it’s a mixed bag. While it can be a way to find otherwise sold-out items or items at a discount, savvy shoppers will often find that an item on eBay listed at full price or higher can be found at the original retailer for less.

The practice doesn’t always pan out for sellers, either. The last time there was a frenzy at Target, it was during its limited Missoni run. But in reality, writes financial writer Ann Logue, many of those items didn’t sell because the markups were too high, and in fact there are still loads of Target Missoni items for sale on eBay even today that don’t appear to be moving anywhere.

The same could happen with the Lilly Pulitzer for Target line, making it a losing proposition all around. Target misses out on making connections with customers, instead ending up with a lot of frustrated ones. Customers lose out on the fun of shopping for the limited run, and sellers end up with merchandise sitting on eBay that’s marked up too high to sell or must be otherwise sold at a loss.

Cracking down on reselling could bring some sanity to the next limited designer collaboration at Target, which also made the unusual move of limiting sales to resellers who buy online.