Marshall Brain's Blog

Man nets $800,000 through returned merchandise scheme

From the article:

A Connecticut man was charged with amassing $800,000 from retailers in 20 states through a returned merchandise scheme, authorities said.

Jeffrey Hlinak would buy an item at a department store, buy numerous copies of the same product at a discount store, doctor the department store receipts and then collect higher-priced refunds on the items he bought at the discount stores, authorities said.

This means that the "price spread" must be wide enough between discounters and department stores that Hlinak could make that much money -- $800,000 is a lot of money to make.

If Hlinak had been doing this with foreign currencies or stocks, it would be called arbitrage, defined in the dictionary as, "The purchase of securities on one market for immediate resale on another market in order to profit from a price discrepancy." It's completely legal there. Apparently arbitrage with consumer products is not appreciated in the same way it is in the financial markets.

Of course, if the Wholesale price of every item was visible, most of this price spread would evaporate. Consumers would be able to pick up an item and see the wholesale price of it right on the label. Then they could see the spread between the wholesale and retail price instantly, and avoid items where the retail price is a rip off. It is amazing to me that, in this day and age, we as consumers allow the wholesale price to remain hidden. Why not expose it for all to see?