Kohl’s bans me for being a reseller

History with Kohl’s

I was about to write a post about all the new Kohls.com changes that I had been seeing lately.  So let me go ahead and do that and give you background on my history with Kohl’s.  I had been buying from Kohl’s since early 2013.  Back then, Chase gave out 10X Ultimate Rewards points to Kohl’s and you could even buy a gift card to get 10X.  So the play was to buy a gift card for 10X and then loop back around and buy merchandise with that gift card for another 10X, essentially 20X for your money.  On top of that, you could be a Kohl’s card holder, which I am, and you’d get 30% off on your item; the play here was that you could pay for 100% of the merchandise on gift cards, and you’d still get the 30% of.  And to top it off, for every $50 of spend, you would get $10 of “Kohl’s cash” for your next purchase.  So let’s say you bought an item for $100, you would pay $70 after discount plus you’d get $10 to spend on your next item PLUS you also got 20 Chase Ultimate Rewards points.  This added up to a great reselling opportunity; all of the items I bought earned me a profit excluding portal points.

Recent order cancellations

My last successful “big” order was around mid-March, where I bought something like 5 Roomba’s and 5 Dyson’s.  Is that really heavy volume?  I don’t think so.  Does someone really need 5 Roomba’s and 5 Dyson’s?  Probably not unless they live in a mansion and are too lazy to move Dyson’s around.  Hey, it could be argued.  Anyway, I then placed an order on 3/29 for just 1 Dyson (one that I had never bought before) and almost immediately, I get a cancellation email on my order, which had never happened before.  I then called them up and asked what happened.  They said it was most likely due to me buying a big ticket item (like a Dyson) using gift cards.  The rep then did some magic on her side and asked me if I wanted to place the order again on the phone.  I told her NO and that I’d do it online.  I re-placed the order online and it worked.  I then bought 4 more, for a total of 5, because, you know I live in Buckingham Palace.

Then on 4/15, I made an order for a different Dyson; this one the smaller one to help me get to the cobwebs in my ceiling corners.  This order was immediately cancelled again.  I even tried to place the order using a different account, thinking my account was ‘flagged’ and even the 2nd account got an immediate cancellation.  I called then up once again, and the lady thought it was an issue with my mailing address.  I told her I hadn’t moved and have been buying items to this address just fine.  Then she said it probably was due to the Dyson and gift cards again.  She once again did something on her end, and I was able to place that order online immediately after the call just fine.  I then emailed the Kohls Twitter them trying to figure out what’s going on with my orders lately.  Usually, they are very responsive, but they never responded to my email at all, which I thought was very strange.

Fast forward to 4/23, where I tried to make another order for that small Dyson again.  This is where things got strange.  In the past, I had always been able to put 100% of my order on a Kohls gift card and gotten 30% off.  This time, it wouldn’t let me use the 30% off code since their system detected I wasn’t charging anything to my Kohl’s card.  Well you know what, if I paid just 1% of my order using my Kohl’s card and 99% using gift cards, I still got the 30% off.  So suck on that Kohl’s!  Anyway, after placing a successful order, sure enough, rejection again.  This time, I forwarded the cancellation email to their Twitter team to see what the hell was going on.  Still no answer to this day.  Fed up, I finally called them again this morning to see what’s wrong with my account.  The first line rep put me on hold for a bit, and then came back and said it was cancelled because I had been flagged as a reseller.  Cue death music!

The economics of resellers

I understand why Kohl’s banned me for being a reseller, but the question is – should they ban resellers at all?  I’m no economics professor, but let’s play “store owner” with me. Imagine you own a store and you sell 5 different items.  If an item is being discontinued and you just want to get rid of it, then you would most likely deeply discount the price on it and just hope it sells to anyone right?  In this example, you have limited supply and want to keep dropping the price until it meets demand and thus sells out (this would be like the items you see on the clearance rack at most stores.)  Now let’s say you want to drive traffic into the store, and you decide to do this by deeply discounting 1 item in hopes sellers buy items 2 and 3.  This is your “Black Friday” scenario.  In this scenario, you want to sell your deeply discounted item to as many people as possible since a) you have limited supply and b) you are taking a loss on the item in hopes the total customer’s cart is profitable.

So what scenario do you put Kohl’s in my example?  The items are not being cleared out.  They certainly don’t have limited supply (they can just order more Dyson’s).  You could argue it’s the “Black Friday” scenario since they are hoping the 30% off drives traffic into the door.  The counterargument to this is that  a)the entire store is 30% off, b)this happens monthly and c)they don’t advertise the Dyson in their ad (thus the Dyson’s price isn’t driving incremental traffic).  This then implies that certain items have different profit margins, even  with the 30% off.  Thus, if you buy a Dyson at 30% off, they are willing to take that loss, but if you also buy clothes, then they’ll make a profit on the clothes (even with the 30% off).  This is why they limit quantities to 5 on the Dyson’s since they don’t want you buying all Dyson’s.  But why should they need to limit it to 5?  Isn’t this really a pricing problem?  If the Dyson is priced too cheaply, then that means, resellers will jump on it.  If it’s priced too high, then no one will buy it.  I think it’s clear that the Dyson is priced too cheaply; they need to find a price point where resellers like myself wouldn’t resell it, but yet it’s still priced for your average consumer to buy.  Isn’t that the heart of the problem here – that they are mispricing the Dyson’s?  So instead of fixing the problem, they just go ahead and cut off the resellers.  You could also argue that maybe if items 2-5 in your store weren’t so overpriced that you need to deeply discount item #1 to drive traffic, then you have a bad business model (see Best Buy vs Fry’s for the perfect example)

Conclusion

A little part of me is sad that I’m banned, but to be honest, after those 2 rejected orders, I’m glad this happened.  It’s like the end of my Wells Fargo 5% card.  It became so annoying to have to call every time to clear orders that it’s just not worth it anymore to even shop there.  So I think I’m more relieved and happy than sad at this point.  I think we’re breaking up on good terms here.  I’ve moved on to Bloomingdale’s anyway.  I do hope their stock drops though because revenue is down although profits are slightly up.  I wonder how much of their business were going to “resellers;” my guess is up to 10%.  By the way, I found this little nugget while I was typing up this post, so I’m glad it’s not just me.  I do think this will affect their bottom line; especially since their crap is overpriced without the 30% off coupon.

I had asked my coworker who also is a Kohl’s reseller to see if he’s been able to place orders just fine recenlty.  He said he tried to place an order on 4/24 and got immediate cancellation too.  He was able to call them up to “unlock” his account.  However, I’m sure his days are numbered too.

The downside of all this is that I still have $1,000 worth of Kohl’s gift cards coming in, which I’ll probably wait till I get a 30% off code mailer in the mail, which I’ll then use at the store.  I won’t get the 5% portal discount, but at least I’ll be able to make money off the gift cards vs selling them for a loss.  Who knows…I may just sell them for a loss anyway just because I can’t stand Kohl’s anymore.