Ask HN: How to Monetize Online Bartering? | Hacker News Reader

Ask HN: How to Monetize Online Bartering?

10 pointswill_brown13 comments

I am a lawyer and I ran into an interesting legal problem this past week. Basically there is a physical good ("Widget") which is illegal to resell (sell p2p), but is perfectly legal to trade. As it turns out there is an entire "under ground" market dedicated to trading Widgets, the most analogous good I can think of are sneakers which have an enormous underground market, called sneakerheads, who buy/sell/trade custom, vintage, limited release, and rare sneakers p2p. The only difference with the Widget and sneakers is the Widget can not be sold p2p, Widget can only be traded. Therefore, if you need a specific product to answer, imagine the product would be shoes and the community would be sneakerheads.

How might one monetize or make a business out of building a online community for the sole purpose of facilitating p2p trades of Widgets? I can think of advertising, paid membership and selling products to the community related to the Widget.

I've thought about this a bit for homebrewed beer (illegal to sell, but perfectly legal to give away and/or trade). My only thought is that you could manage the shipping of the items--have each trader send you the item, where in you inspect it, and once you've received both, you send both along, otherwise, you return the original widget to the sender.

Charge shipping plus a fee for that service. Plus, if you have a centralized shipping location, you'll be better suited to get deals on shipping costs.

This, of course, ignores the fact that it's illegal to ship alcohol via USPS, and it's against policy for UPS and FedEx.

> My only thought is that you could manage the shipping of the items--have each trader send you the item, where in you inspect it, and once you've received both, you send both along, otherwise, you return the original widget to the sender.

I wouldn't take the risk of confirming the value of products. Take the example of sneakers, there are plenty of knockoff sneakers on the market. You can usually tell, but if you aren't in tune with that market then you might well sign off on a pair of fake sneakers and become responsible for allowing a fraudulent transaction to take place.

> This, of course, ignores the fact that it's illegal to ship alcohol via USPS.

Currently, but USPS has indicated they would like to get into this business. It would be a worthwhile risk to set up a service that would take advantage of this beforehand so they could be the first service to do this.

As being a man-in-the-middle, that would double the price of shipping, where it already costs 10% to 50% of the widget's value. Though it might be a good service to have available for new users who don't have any feedback in their profile.

Being a MITM would certainly increase shipping costs, but if you're able to get bulk pricing, you could potentially drop the shipping costs to less than what it could cost the users to ship it themselves.

Simple question: given the high barrier to entry and an illiquid market, are the potential returns so massive as to justify the risk? To put it another way, does this market have the potential to be exponentially more lucrative than antiques?

The other question is about the culture. Is the current barter system part of the attraction for people engaged in the trade? Think about the way the internet changed the world of Grateful Dead concert recordings.

What is the price point of the product? How difficult is it to connect with another to trade it? How frequently are these trades made by individuals? It might be possible to charge a finder's fee if you built some sort of matching service if the numbers look right to be worth your time. I could also see this fee just being wrapped into a paid membership plan or one time fee if the numbers went another way.

>What is the price point of the product?

Much like shoes the price of the Widgets vary dramatically. But best estimate trades generally being valued at $50-$200 with the shipping at $20-$30.

>How difficult is it to connect with another to trade it? Most of the current trading I am aware of is done on craigslist locally or on Instagram, so search is involved, but as you suggest matching trades could be automated. Though the way the community is, traders probably want to limit the number of users they trade with and build trusted relationships.

>How frequently are these trades made by individuals? Much more frequently than shoes, people I know trade 1 or 2 times per month, but they will not hesitate to do more trades for a Widget they really want.

How about a website where users can upload pictures (with description) of what they have available to trade, and other users can match the appropriate items from their inventory to make trade offers. With the user's profile, you can have a trade history, feedback, the ability to make private trades (maybe a premium feature), and a "showroom" where users can display their prized widgets.

Of course forums, private messaging, along with advertising would be appropriate. I've never built an online community, but I would wait to gauge interest of users interested in purchasing widget-related products before investing the time and capital to develop that.

Most marketplaces have a small listing fee. Perhaps you could have paid memberships and members don't have to pay the fee to list.

A listing fee or transaction fee would be my suggestion, too. Just charge for the service, not for the goods.

Is the widget a digital, or a physical good?

Can the widget only be traded for similar widgets, or can it be traded for any such as baseball cards? If it is digital, does it require a proprietary service to facilitate the trade?

Physical good. Legally the widget must be traded for other widget(s).

Offer escrow services for trades that can't be made face to face.

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