

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

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diN0bot
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)

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tdm911
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.

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mahmud
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.

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whatusername
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.

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netsp
Crazy John's name was Mustafa.

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tdm911
I didn't know that. Mustafa Ilhan was his real name, not John Ilhan. There you
go.

<http://en.wikipedia.org/wiki/John_Ilhan>

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nedwin
"Crazy Mustafa's" doesn't have quite the same ring to it

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tomhoward
More commonly heard angrily yelled out of car windows in Sydney Road.

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netsp
Or the cook at Alaysa.

I'm surprised at the number of Aussies in here.

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tdm911
I noticed that too! A great Aussie success story brings us all out! :)

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

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rw
He also invented supply!

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pvg
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.

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patio11
_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.

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Kisil
_Theft_

The business model is predicated on other people's honesty.

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radioactive21
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.

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

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

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

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snewe
Technically he tapped demand previously unsatisfied in the market.

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shib71
Yes - but those people didn't realise they had the need.

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

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lsc
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.

