5 ms·

>Did you really think arbitrage of used goods could be a business? Isn't that basically the business model for antique dealers and pawn shops?

phil 15y ago
Yeah, but that suggests that the success condition is running a pawn shop. Probably not what you're after if you are a software startup that's just taken seed investment.
- catch23 15y ago
  isn't ebay technically a very large pawn shop? wasn't it bessemer that passed on ebay because a company with a marketplace for used goods wouldn't amount to anything?
callmeed 15y ago
err, yes, and I suppose used cars too. Maybe I should have been more specific. But pawn shops don't get into YC and I doubt Cal Worthington ever raised a series C round on Sand Hill Road. Those types raise money via bank loans (if at all) and most people in the valley would call them "lifestyle businesses". My point wasn't if such businesses exist but rather if Priceonomics really thought they could form a scalable business doing this. My guess is that they didn't (again, I don't know them and I'm often wrong). Rather, I think it was more of an experiment that would expose real business problems, validate ideas, create a case study, and/or make a little extra cash.
- Berone 15y ago
  http://techcrunch.com/2010/05/12/internet-pawn/ http://techcrunch.com/2010/05/12/internet-pawn/ Actually they do. And a business doesn't need to get into YC or get VC funded in order for it to be a real business.
- philwelch 15y ago
  A bookstore isn't a scalable business either, but Amazon turned it into one. Do you really think there will never be an Amazon of pawn shops?
  - quanticle 15y ago
    Well, if you take out the collateralized-loan portion of the business, both Craigslist and eBay fit the bill.
    - philwelch 15y ago
      Not quite: maybe I just want to put all my stuff in a truck, give it to a guy, and get a check. I don't want to worry about shipping and accepting payment from a hundred different people and keeping my listing up to date and figuring out pricing and not getting scammed.
    - gt384u 15y ago
      But that is the pawn business. Anything else is a different business entirely, e.g. being a second hand goods dealer. Pawn shops can deal in second hand goods and often have the licenses for outright purchase (which may be where some of the confusion that I've seen from people originates), but that is not strictly speaking what pawning is.
    - callmeed 15y ago
      Not at all. They are platforms/marketplaces who collect fees for bringing buyers and sellers together (or employers and job seekers). They do not keep inventory or buy anything.
- notJim 15y ago
  This seems like Silicon Valley echo-chamber thinking at it's finest. If your definition of a scalable business is based on the number of VC rounds raised, or which prestigious incubator it comes from, then no, I suppose it's not a scalable business.
  - callmeed 15y ago
    No my idea of a scalable business is correct: grow revenue without costs growing proportionally. Software is the perfect example: you write it once and (potentially) sell it infinity times. (Please don't nit pick my definitions unless you fundamentally disagree) Buying and selling used goods is absolutely not that. You're talking about searching, inspecting, paying (cash), storing inventory, selling, shipping, etc. And, no, eBay and Craigslist are not examples. They don't buy things. They are a marketplace and that's not what the original post set out to do.
    - notJim 15y ago
      Well, that may be what you were thinking, but it isn't what you said.
    - philwelch 15y ago
      > searching, inspecting, paying (cash), storing inventory, selling, shipping, etc. So Amazon was never a scalable business? Or netflix? You don't have to be sitting around a kitchen table selling nothing but bits for it to be scalable business.
      - skore 15y ago
        I have no idea whether you have a point that you're getting at. Amazon wasn't profitable for a long time and only scalable because of massive investments. They don't buy used goods and resell them. Same for netflix. His main argument is that the acquisition of items for resale is not scalable, because you are dependent on people to supply used goods. You cannot make the market provide more used goods to meet demands. Amazon and netflix can perfectly well do that.
InclinedPlane 15y ago
That's not arbitrage, neither is buying goods in one location and selling them in a far away location. Arbitrage is a simultaneous purchase/sale in different markets with a trivial amount of work and no risk. If there is risk, it's not arbitrage; if there is work, it's not arbitrage; if there is a lot of time involved (and thus, of course, risk), it's not arbitrage. Antique dealers buy from people who want to get rid of things and sell to people who want to buy things. They make a profit because historically it is difficult to find antiques when one wants to buy them. Even if you managed to be connected to every antique seller imaginable you'd have to be lucky enough to have an item go on sale within the time you want to buy it. Antique dealers serve as a buffer, offering quick cash to sellers and selection to buyers.

phil 15y ago

Yeah, but that suggests that the success condition is running a pawn shop. Probably not what you're after if you are a software startup that's just taken seed investment.

catch23 15y ago
isn't ebay technically a very large pawn shop? wasn't it bessemer that passed on ebay because a company with a marketplace for used goods wouldn't amount to anything?

callmeed 15y ago

err, yes, and I suppose used cars too. Maybe I should have been more specific. But pawn shops don't get into YC and I doubt Cal Worthington ever raised a series C round on Sand Hill Road. Those types raise money via bank loans (if at all) and most people in the valley would call them "lifestyle businesses". My point wasn't if such businesses exist but rather if Priceonomics really thought they could form a scalable business doing this. My guess is that they didn't (again, I don't know them and I'm often wrong). Rather, I think it was more of an experiment that would expose real business problems, validate ideas, create a case study, and/or make a little extra cash.

Berone 15y ago
http://techcrunch.com/2010/05/12/internet-pawn/ http://techcrunch.com/2010/05/12/internet-pawn/ Actually they do. And a business doesn't need to get into YC or get VC funded in order for it to be a real business.
philwelch 15y ago
A bookstore isn't a scalable business either, but Amazon turned it into one. Do you really think there will never be an Amazon of pawn shops?
- quanticle 15y ago
  Well, if you take out the collateralized-loan portion of the business, both Craigslist and eBay fit the bill.
  - philwelch 15y ago
    Not quite: maybe I just want to put all my stuff in a truck, give it to a guy, and get a check. I don't want to worry about shipping and accepting payment from a hundred different people and keeping my listing up to date and figuring out pricing and not getting scammed.
  - gt384u 15y ago
    But that is the pawn business. Anything else is a different business entirely, e.g. being a second hand goods dealer. Pawn shops can deal in second hand goods and often have the licenses for outright purchase (which may be where some of the confusion that I've seen from people originates), but that is not strictly speaking what pawning is.
  - callmeed 15y ago
    Not at all. They are platforms/marketplaces who collect fees for bringing buyers and sellers together (or employers and job seekers). They do not keep inventory or buy anything.
notJim 15y ago
This seems like Silicon Valley echo-chamber thinking at it's finest. If your definition of a scalable business is based on the number of VC rounds raised, or which prestigious incubator it comes from, then no, I suppose it's not a scalable business.
- callmeed 15y ago
  No my idea of a scalable business is correct: grow revenue without costs growing proportionally. Software is the perfect example: you write it once and (potentially) sell it infinity times. (Please don't nit pick my definitions unless you fundamentally disagree) Buying and selling used goods is absolutely not that. You're talking about searching, inspecting, paying (cash), storing inventory, selling, shipping, etc. And, no, eBay and Craigslist are not examples. They don't buy things. They are a marketplace and that's not what the original post set out to do.
  - notJim 15y ago
    Well, that may be what you were thinking, but it isn't what you said.
  - philwelch 15y ago
    > searching, inspecting, paying (cash), storing inventory, selling, shipping, etc. So Amazon was never a scalable business? Or netflix? You don't have to be sitting around a kitchen table selling nothing but bits for it to be scalable business.
    - skore 15y ago
      I have no idea whether you have a point that you're getting at. Amazon wasn't profitable for a long time and only scalable because of massive investments. They don't buy used goods and resell them. Same for netflix. His main argument is that the acquisition of items for resale is not scalable, because you are dependent on people to supply used goods. You cannot make the market provide more used goods to meet demands. Amazon and netflix can perfectly well do that.

InclinedPlane 15y ago

That's not arbitrage, neither is buying goods in one location and selling them in a far away location. Arbitrage is a simultaneous purchase/sale in different markets with a trivial amount of work and no risk. If there is risk, it's not arbitrage; if there is work, it's not arbitrage; if there is a lot of time involved (and thus, of course, risk), it's not arbitrage. Antique dealers buy from people who want to get rid of things and sell to people who want to buy things. They make a profit because historically it is difficult to find antiques when one wants to buy them. Even if you managed to be connected to every antique seller imaginable you'd have to be lucky enough to have an item go on sale within the time you want to buy it. Antique dealers serve as a buffer, offering quick cash to sellers and selection to buyers.