Gutz introduces the Buyer and Seller of Last Resort concept for Group Buys

[berserkfan]

[note to Mod, this post is more relevant for group buys than any other category]

Hello all

This post is to introduce my concept of Buyer and Seller of Last resort. I offer these ideas in the hope that some of you will be inspired to follow in my footsteps. I do not have the resources to execute my plans in every group buy on geekhack, but I have done so for one GB so far (GhostofHarry’s Tai Hao GB) and am now committed to carrying out this plan for another GB (the SA profile relegendables buy organized by 00zero). I believe that if I do this enough, eventually more people will step forward and follow through with this concept to create a win-win situation for everyone in every group buy.

All group buys have the following weaknesses:
1)   Need for enough buyers to meet MOQ otherwise production will not start
2)   Need for enough purchases to ensure a favourable price tier. This is a chicken and egg situation, since if you don’t have enough people you can’t get a low price, but if you don’t have a low price you can’t get enough people.
3)   Group buys can’t take too long to start. Especially with paypal insisting that everything be done within a month. But it always takes time for information to filter out and other potential buyers to get interested. So group buys always get a lower number of orders than the potential.
4)   A good many people always manage to miss every group buy after which they’re forced to beg for the out of production items
5)   It is rare that anybody keeps extra stock to meet the demand that always surfaces after the GB especially when photos of keyboards surface.
6)   The lack of supply also creates an unhealthy environment where profiteers thrive. This is bad for geekhack as a community.

I believe GBs could be helped by the presence of a sponsor, vendor, volunteer. This person plays the part of the Buyer and Seller of Last Resort (BSLR)

He commits to buying a number of sets right away. Or else he commits to buying a max of x items/ an expenditure of x dollars, should that be required in order to attain a price tier or MOQ level.

This person then commits himself to be the last person to get his stuff. That way if some items are flawed or keycap sets are incomplete, other buyers are supplied first. The BSLR will wait until all issues are trashed out with the factory.

If the usual late buyers pop out of the woodwork, they can buy the BSLR’s stock at the same rates that everyone else paid.

If there are no additional orders, the BSLR gets his stuff delivered eventually.

BSLR does not need to want to use anything. He can just keep his purchases as inventory.

People who come by a few months later can buy from the BSLR. By that point prices should be higher since BSLR has incurred shipping costs, but at least availability is guaranteed and the higher prices are still reasonable.

Thus far I have talked about these ideas on the group buy threads. I have some praise from ghers, but nobody else has taken my ball and run with it (ie saying that he’ll consider doing the same thing). It is my hope that you guys will think about it. We could do with one BSLR for every group buy!

Many of you out there will happily plunk down $500 on a clack. Or $1000 on a vintage board that is dirty and non-functioning. Why don’t you guys consider risking a much smaller sum of money to help out with some group buys?

You are NOT losing anything as a BSLR. You will get the goods eventually. And since this is a group buy, you are getting your stuff at favourable prices.

You can resell so you don’t lose a cent. Hell, when I resell things I try to recoup my shipping costs too! I’m merely the kind of person who likes looking for wise, win-win solutions. I’m not a charity organization!

Want a clack that you can show off? How about a good reputation on geekhack? Isn’t some community respect just as good?

[derezzed]

I’m hesitant to reply because I have not been involved in a Group Buy yet and I don't understand the level of financial commitment required for your proposal, but your proposal is synergistic with a post I’ve been thinking about writing, which is a proposal for a group buy calendar that would allow people to schedule group buys for increased effectiveness.  This could alleviate some of the weaknesses you mentioned.   

Having the ability to schedule a group buy so it is not concurrent with, or approximate to, another group buy may help a group buy meet its MOQ and reach a favorable price tier.   Alternatively, a calendar would also facilitate two complementary group buys running concurrently.  If people joining group buy 1 are also likely to want the item offered in group buy 2, running them together may increase the success of group buy 2.    Better scheduling could alleviate the time pressures associated with PayPal transactions.    Better scheduling would also minimize the phenomenon of points 4 and 6 (people missing out, and lack of supply).  If the group buy reaches a favorable price tier and it looks like everyone who wants the item joined, the Buyer and Seller of Last Resort could always choose to order an additional number of units (5? 10?) at his or her discretion to address the phenomenon of your fifth point (interest from people after the group buy has ended). 

If a calendar or some kind of schedule could be implemented, it could reduce the burden placed on the BSLR and may encourage more people to assume the role of BSLR.  However, the successful implementation of a group buy calendar faces a major challenge in that it requires a fair amount of administrative overhead and it requires the involvement of the community.   Establishing a BSLR only requires the commitment of a single person and, as a method of facilitating a group buy, has a greater chance of success.  Of course, that person has to be able to make an increased financial commitment. 

[nubbinator]

While it's an interesting concept, stating that the person who commits should resell at cost really isn't realistic.  How many people would take on the risk of propping up a potentially unpopular group buy, especially if they have no incentive to do so and no way to mitigate their risk and potential that their sets don't sell?

What would be far more effective is something like MassDrop's system with commits at any tier and precommits who guarantee to commit once enough commits and pre-commits sign up for a given price tier.

Idealism is good and I'm a bit of an idealist myself, I just have major doubts about the viability of any such system.

[byker]

While it's an interesting concept, stating that the person who commits should resell at cost really isn't realistic.  How many people would take on the risk of propping up a potentially unpopular group buy, especially if they have no incentive to do so and no way to mitigate their risk and potential that their sets don't sell?

What would be far more effective is something like MassDrop's system with commits at any tier and precommits who guarantee to commit once enough commits and pre-commits sign up for a given price tier.

Idealism is good and I'm a bit of an idealist myself, I just have major doubts about the viability of any such system.

I agree with nubbs. The problem is that someone is going to be putting up some serious cash. You say it like it is only $1000, the equivalent of a keyboard or something, but you are realistically looking at at least 30 sets, probably closer to 100 sets, if it is something like a gmk group buy. 100 sets at $110 each is some serious cash. I can see this working with something cheaper, but honestly the best option I think is to do this with vendors like Zeal. Someone like Zeal likely has some cash that he can invest into stock for his company, and then resell at a higher price to make some profits for his risk and time.

[Asininity]

While it's an interesting concept, stating that the person who commits should resell at cost really isn't realistic.  How many people would take on the risk of propping up a potentially unpopular group buy, especially if they have no incentive to do so and no way to mitigate their risk and potential that their sets don't sell?

What would be far more effective is something like MassDrop's system with commits at any tier and precommits who guarantee to commit once enough commits and pre-commits sign up for a given price tier.

Idealism is good and I'm a bit of an idealist myself, I just have major doubts about the viability of any such system.

I agree with your comment, as that was really the only major flaw that I saw in otherwise a spectacular idea.

Perhaps a incentive, for both the participants and the BSLR, is something along the lines of extra stock is sold at the original asking price. For example, a particle key starts off at costing $1. However, after 100 of those keys are purchased the price per key drops to 90c and so on down the line. The extra stock that the BSLR has is sold at the original asking price of $1. All potential extra proceeds go to the BSLR.

This method could mitigate some of the issues while simultaneously incentivise individuals to stand up as a BSLR.
 

[JaccoW]

You are NOT losing anything as a BSLR. You will get the goods eventually. And since this is a group buy, you are getting your stuff at favourable prices.

You can resell so you don�t lose a cent. Hell, when I resell things I try to recoup my shipping costs too! I�m merely the kind of person who likes looking for wise, win-win solutions. I�m not a charity organization!

While the idea is nice, any good businessman will tell you there are some serious flaws in your assumptions.

Even just 10 sets at $100 is $1000. That is $1000 that could have been used to buy and sell more profitable items for the few months to a year that a GB runs.
With just a 4% interest rate (Or whatever it is in your country) that means you lose out on $40 after a year. And this amount increases with more sets or higher interest.
So financing 50 $180 GMK sets will cost you $360 over a year. That is charity.

Most commercial vendors mitigate this by selling sets at slightly increased prices after a GB. So a $100 set will be $100 + $3 (shared) shipping + $4 interest cost + (10% profit) $17 = $124 + shipping to your place
And that is when we leave out the money it might cost to store all of these sets and that most companies try to have a bigger profit than that.
That's not unreasonable. Only people who have no idea what all of this costs will complain about these prices.
It's the price for being stupid (Stupid as in being lazy, too poor at the time or just plain forgetting about something important.)
For artisan caps you often need luck but there is little excuse for missing a GB that has been open for a month or has been announced months in advance.

If you plunk down that sort of money you want to see a return on it. Not run the risk of not even getting some caps in your hands and just a transfer of the original amount because other people already bought the remaining stock.
It's the equivalent of someone borrowing your car and returning it without filling up the gas tank while just saying "thanks!"

[berserkfan]

While it's an interesting concept, stating that the person who commits should resell at cost really isn't realistic.  How many people would take on the risk of propping up a potentially unpopular group buy, especially if they have no incentive to do so and no way to mitigate their risk and potential that their sets don't sell?

What would be far more effective is something like MassDrop's system with commits at any tier and precommits who guarantee to commit once enough commits and pre-commits sign up for a given price tier.

Idealism is good and I'm a bit of an idealist myself, I just have major doubts about the viability of any such system.

Just to clarify, nubbinator, there's no particular reason why the BSLR needs to sell only at his cost.

I will do so. I was taking the risk that I'd end up with several sets of Tai Hao that I don't need, for instance. And I've vowed to take the risk of buying up to 120 relegendables (when I need only 36 max) just to help the Geekhack masses hit cheaper price tiers on 00zero's GB.

But there are so many GBs going on. I'm involved in less than 1% of all GBs. If some people need the profit incentive in order to take that risk, I'm not against it. Better a modest profit than no supply at all. I just hope they understand that what goes around comes around. As members of this community we should target to just cover costs and make things easier for everyone.

MassDrop's system is great and I like that, but it doesn't apply to most group buys on geekhack. Most GBs simply never make it to massdrop.

until one of us comes up with a software platform that...

In fact, I'm going to propose that when I have time. Lets gather a bunch of programmers and replicate that Massdrop platform for the use of all group buy organizers. It's better than our current system of posts and pms which will drive any GB organizer mad.

[Oobly]

I can see this working for smaller GB's, ones for things like single caps, springs, etc that don't have a high cost per item. For this to work for something like one of Ivan's GMK Group Buys, you'd have to be willing to spend a heap of cash if it doesn't meet MOQ.

At $100 a set and an MOQ of 300, even if a BSLR commits to only say 50 sets, that's $5000 that they have no guarantee of recouping, and if they do, it'll be a slow trickle.

In some cases Ivan and BunnyLake has acted in just such a role, and as GB organiser he has the trust of the buyers that he won't sell at some stupid markup. I think this is often best left to the organiser, to prevent unscrupulous people with spare cash on hand from taking advantage.

I do like the idea of a GH-specific MassDrop style system, but it'll take some work to implement and some more work to maintain & administer.

[Binge]

Already do this.  It's incredibly risky, and one must have a secure financial situation before doing this.

[JaccoW]

Already do this.  It's incredibly risky, and one must have a secure financial situation before doing this.

This.

Basically what Berserkfan is suggesting is to completely ignore business risk for the one funding extras and let someone else run the risk because he wants something.
As someone with a background in business this actually makes me angry. 

[tp4tissue]

this makes no sense.. LOL b-fan..

Why would anyone take on risk for no profit..

This is asking for altruism.. even if we assume people are capable of it.. It's usually in proportion to their wealth..

So pretty much only really rich people can afford to be philanthropists..


That is to say...  Where be the GH millionaires that could help us out....

[Novus]

Beserk you ever run a group buy?

[tbc]

Already do this.  It's incredibly risky, and one must have a secure financial situation before doing this.

This.

Basically what Berserkfan is suggesting is to completely ignore business risk for the one funding extras and let someone else run the risk because he wants something.
As someone with a background in business this actually makes me angry. 

if this doesn't constitute a charity, i'm really wondering what his definition is lol.