Re:Inventing Demand
by patio11 on Friday September 04, 2009 @05:44AM
(#804555)
He was obviously prepared to risk that the demand would be very low or zero
That wouldn't be risky. Let's say he lists 5 Wiis. If no one rents a Wii, you simply don't buy it. If one person rents a Wii, you buy 1 Wii. If 5 people rent Wiis and 50 more express interest, you increase the number of Wiis you list and meanwhile demonstrate to people that there is a market for Wii rental.
Or what if he offered too many of the common items and effectively ended up competing with his own potential users who have something to rent?
You could, essentially, do one-sided-collusion with your users. For example, suppose the site offers 10 Wiis at $100. Later, one person offers a Wii for rent at less than or equal to $100. You simply stop offering one of your Wiis, and either hold it in inventory or sell it used to recoup most of your purchase price. The supply of Wiis stays constant but the portion of economic activity happening between customers increases.
The big two risks: listing more items than he could fulfill (either for lack of capital or lack of sufficient supply among the merchants he used -- you can't rent 30 Wiis if they'll only sell you 5, and your failure to deliver on the contract would only be discoverable after you've taken money for it, which spells "serious egg on face") and theft. If you're renting for 5% of the purchase price per week with a 50% of retail deposit, and the Wiis are not coming back, even if you're getting your Wiis below retail you could start bleeding money very quickly.
That wouldn't be risky. Let's say he lists 5 Wiis. If no one rents a Wii, you simply don't buy it. If one person rents a Wii, you buy 1 Wii. If 5 people rent Wiis and 50 more express interest, you increase the number of Wiis you list and meanwhile demonstrate to people that there is a market for Wii rental.
Or what if he offered too many of the common items and effectively ended up competing with his own potential users who have something to rent?
You could, essentially, do one-sided-collusion with your users. For example, suppose the site offers 10 Wiis at $100. Later, one person offers a Wii for rent at less than or equal to $100. You simply stop offering one of your Wiis, and either hold it in inventory or sell it used to recoup most of your purchase price. The supply of Wiis stays constant but the portion of economic activity happening between customers increases.
The big two risks: listing more items than he could fulfill (either for lack of capital or lack of sufficient supply among the merchants he used -- you can't rent 30 Wiis if they'll only sell you 5, and your failure to deliver on the contract would only be discoverable after you've taken money for it, which spells "serious egg on face") and theft. If you're renting for 5% of the purchase price per week with a 50% of retail deposit, and the Wiis are not coming back, even if you're getting your Wiis below retail you could start bleeding money very quickly.