What is a Bucket Shop?

The designation of a business as a bucket shop can mean different things in different cultures and settings. In some areas of the world, a bucket shop is another name for an airline that offers discounted rate packages. Other cultures know a bucket shop as a brokerage firm that engages in unethical and sometimes illegal practices in order to secure business. A third application of the term has to do with illegal gambling, especially the placement of bets on horse, dog, or car races.

As applied to air travel, a bucket shop offers airfare at a lower rate than the published pricing available from travel agencies or airlines. This is accomplished by effectively buying seats on various flights at volume discounts, then selling them at prices that are below the published prices. The same general concept is also applied to purchasing hotel rooms in bulk, and reselling at a profit. In the United Kingdom, this type of operation is known as a consolidator as well as a bucket shop.

When it comes to investing, a bucket shop is a brokerage where salespeople attempt to entice investors into becoming clients by offering excellent deals on various securities. Unfortunately, the brokerage does not follow through with the purchase by executing the order on behalf of the client. The end result is that the investor loses both the initial investment entrusted to the brokerage, as well as any return based on the movements of the market. This type of bucket shop is also known as a boiler room.

A bucket shop can also refer to a gambling operation that is operating outside the laws of the land. This can include taking bets on sporting events like college football games, or on professional racing competitions such as a dog race or a car race. While some bucket shops of this type do actually pay the winners, others simply take bets and collect the funds for weeks prior to the actual event, then disappear once the event is completed.

While there are exceptions, the designation of an operation as a bucket shop is usually not intended to convey a favorable impression. Since the term is often connected with something that is considered unethical and possibly illegal, the reference is usually intended to warn people from doing business with the organization in question. The main exception is the consolidator who sells airline tickets that are acquired in a legitimate business deal, and that are sold to the consolidator’s clients at reasonable rates.