Inventing Demand

http://startupblog.wordpress.com/2009/09/04/inventing-demand/

by tomhoward • 17 years ago

88 32 17 years ago

startupblog.wordpress.com

jwilliams• 17 years ago

In case anyone is wondering - Harvey Norman is a large Australian retailer. http://www.rentoid.com itself is a Melbourne based startup.

mahmud• 17 years ago

For non-Aussies; Harvey Norman is like Best Buy here in Australia.

I am still a newcomer to Australia (~3 months) and I noticed a good deal of department and chain stores here have their owner's names. In the U.S. we have corporate names brands.

xelfer• 17 years ago

I've lived here all my live and never really noticed that.. you're absolutely correct however. Harvey Norman, David Jones, Grace Brothers, Joyce Mayne, Crazy Teds..

10ren• 17 years ago

It takes a foreigner to see ourselves. Which dept/chain stores are you thinking of?

    Owner's names:   David Jones, Myers, Fletcher Jones,
                     Woolworths (==Safeway), Dick Smith, Ken Bruce
    Corporate names: Just Jeans, Jeans West, Country Road, Safeway
    I'm pretty sure these Australian stores originated in the US:
                     Target, Kmart, Tandy

PS: Back atcha: Wal-Mart was founded by Sam Walton; there's Colonel Sanders' Kentucky Fried Chicken; and Dick and Mac McDonald founded McDonald's.

Gormo• 17 years ago

Some interesting tidbits:

Woolworth was originally a major retailer in the US, which expanded into the UK in the early 20th century. The Australian Woolworth was so named to capitalize on the brand recognition from the US/UK retailer, which never operated in Australia, so had no trademark there. The last Woolworth stores in the US closed in the 90s.

Tandy was originally a leather goods company in Texas, named after its founder.

whatusername• 17 years ago

founder more so than owner.. Thinking Coles, Myer, David Jones, etc here.. Those companies are all publicly listed now..

For current Owner I can think of Harvey norman, Bing Lee (although it doesn't exist in VIC, Ken Bruce, And Crazy John until he passed away..)

Also: Walmart.

netsp2• 17 years ago

Crazy John's name was Mustafa.

sho2• 17 years ago

Bing Lee also passed away.

ryanwaggoner• 17 years ago

This isn't that uncommon in the US either: Sears, Macy's, Lord & Taylor, Nordstrom, Saks, Barneys, Bergdorf Goodman, Neiman Marcus, Dillard's, JC Penney, Bloomingdale's, Marshalls, Albertsons, Kroger, etc.

Even Wal-Mart and Kmart carry part of their founder's names.

rw• 17 years ago

He also invented supply!

pvg3• 17 years ago

In fact, he did invent/fund supply and hoped there would be a demand for his service. He was also spending his own money in order to bootstrap and taking the associated risks. He was obviously prepared to risk that the demand would be very low or zero. One risk he doesn't mention - what if demand had exceeded his physical ability to supply the items he'd promised? 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? How and when (if ever) did he decide he'd done enough bootstrapping? I imagine these are all things he thought about and would have been interesting to hear about as well.

smsamm• 17 years ago

I'll do a follow up on 'excess demand' & other issues you raised 'PVG' above - (you really thought it through) Steve.

patio11• 17 years ago

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.

sho2• 17 years ago

"what if demand had exceeded his physical ability to supply the items he'd promised"

Otherwise known as "a good problem to have" ...

snewe• 17 years ago

Technically he tapped demand previously unsatisfied in the market.

shib71• 17 years ago

Yes - but those people didn't realise they had the need.

The potential demand only mantifested after he created an imaginary supply.

diN0bot• 17 years ago

i like this guy's authenticity. it sounds like he cares about his users and his business's success. good post, inspiring reminder (i don't usually like these kinds of posts)

tdm9113• 17 years ago

As an example of Steve's commitment to Rentoid, he lists his mobile phone number on the site and actively encourages people to call it. He's had calls at all times of the day and night, however the feedback he gets from his customers through this is second to none. He also gets the opportunity to convert an unhappy customer into a happy one instantly. The phone is still a powerful medium, especially in businesses where trust is paramount.

seshagiric• 17 years ago

This is a great tip. Need more of same on HN.

mildlycurious• 17 years ago

Boot strapping is under-rated. Planning and strategy templates are over-rated.

mseebach• 17 years ago

Really nice marketing hack. But someone should alert him to the invention of thumbnail generators :)

radioactive21• 17 years ago

Doctors do this all the time, there is even a term for it called "supplier induced demand." In a normal setting you'll see that as the number of suppliers for a particular good or services in creases, demand should decrease as there are too many in the industry.

What doctors have done is they induce demand by changing the way they offer their services. For example spending more time with customers or offering better service. This is why in such areas as Beverley Hills where there are hundreds of plastic surgeons they still all charge you a premium price. They all offer the same service, but because they can induce demand by their name and skill and location they make more, all of them.

Also this is one of many factors why the health care in America cost so much. Doctors can pretty much make up their own pricing. The more specialist the more you can charge, so everyone suddenly claims they are specialist doctors so they can charge you $1000 for clipping your nails.

lsc• 17 years ago

you've got to be careful with that, though. A long time ago I was writing software to help people sell books. I got mired down in actually selling books, and the software itself never became very good.

Inventing Demand

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