Hard times and the resurgence of barter and used goods

Citation

(2009), "Hard times and the resurgence of barter and used goods", Journal of Consumer Marketing, Vol. 26 No. 5. https://doi.org/10.1108/jcm.2009.07726eag.001

Hard times and the resurgence of barter and used goods

Article Type: Internet currency From: Journal of Consumer Marketing, Volume 26, Issue 5

Edited by Dennis A. Pitta, University of Baltimore

Movie fans who have seen films set during the world wide depression of the 1930s have probably heard the term, “hard times.” Bonnie and Clyde referred to them as they robbed banks. In the book and movie, The Grapes of Wrath, Ma Joad talked about them as the bank took the homestead. Today’s millennials may not know the references but their reality is changing. Consumers today are worried about the future and have shown restraint in their consumption that has not been seen since the last deep recession. As disposable income declines, even teenagers, those beneficiaries of income gained by part time work and parental allowances and nonexistent living expenses are feeling pressure to save. However, each age group reports concern over affordability of a variety of products. As the worldwide recession deepens, some of my working students report reduced job hours, fear of job loss, and for those on commissions, curtailed income. The sample is not random and the experiences reported may not be universal but those selling luxury goods like jewelry and moderate to expensive cars report severely lowered sales volume. Commodities and staple items like food and shelter still have respectable demand.

Some of us have lived through this before. During the 1970s the combination of the Arab oil embargo and the fall of the Shah of Iran, boosted oil prices and caused some economic shock. Then consumers started thinking about economizing. Later, other factors shook economies around the world and pushed barter into high gear. In fact, Argentina’s consumers in 2000 developed an alternative, barter based economic system. Barter is inherently limited by the need to make one trade transaction at a time. It may take several trades for an individual to finally get what he wants. Money, or another medium of exchange, benefits the system by reducing the need to engage in numerous transactions. Consumers in Argentina actually developed their own barter currency to avoid the need for multiple contacts.

Marketers have learned from the past. The key ingredients to selling today seem to be low price, low risk, and extra benefits that swamp the competition. When combined with barter exchanges, the results can be interesting.

Numerous online companies in several industries have been able to capitalize on the caution about consumption. Some great examples can be found in video game retailing. Video games are increasingly complex with amazing graphics, really complex programming and the need for robust product testing. The result is very high production cost that translates into high price.

Arguably, individuals can do without video games. Moreover, the video game enthusiast seems compelled to go through each game, level by level until he or she masters it. They might play it again but the goad of success, of “making it to the top” is missing. Video games epitomize products that have high cost and retain high quality even though their owners do not use them any more. Products like these have contributed to a resurgence of barter and trading in.

Goozexwww.goozex.com

Goozex.com is a video game trading community. It is a bit like the old version of Napster. Napster allowed users to share music over the internet. That sharing violated copyright law and Napster was sued into submission. After music companies discovered Napster’s profit potential for music distribution, it was resurrected. Its brand and logo were purchased after the company closed its doors and continue to be used by a company in partnership with the retailer Best Buy.

Goozex was always a sharing service that did not violate copyright. Unlike Napster which treated users anonymously at arm’s length, Goozex serves as a clearing house for game sharing. Users trade their old games and request new ones through the site. Goozex also enhances trading by imputing a value to each title. Each game title earns a specific point value based on its popularity and to some extent, its original cost. The more popular and pricey games carry the most points.

The three-stage process works like this:

1. 1.

   Offer games. Users add the games they wish to trade to their “Offers” list and wait for Goozex to find a perfect match. Goozex notifies users automatically when a game is requested by another user.

2. 2.

   Mail games and earn points. When Goozex finds a match, a user mails the game to another member, and earns Goozex Points.

3. 3.

   Request games. Users can add games to a “Request” list. With enough points and trade credits in their “bank accounts” they can receive the games in the list! Goozex notifies users automatically when games are shipped to them.

There are several nice features; first users have the ability to say no. Second, users are not really anonymous; a condition meant to spur responsibility and honesty. Third, users who trade games pay $1 per game upon receipt. Lastly, goozex guarantees each trade. Variety and selection are critical to the long run popularity of a sharing site. Goozex lists over 24,000 titles that users can browse. Notably, it supplies an easy-to-use search engine to help users find and request the games you want to buy.

Pricing

Valuation is an ongoing issue in marketing. The problem is enhanced when trading without the use of money. Goozex provides a standard value for every individual video game on the system. The service uses Goozex points that are roughly equivalent to dollars. Quantifying the value of a game avoids time spent negotiating a price, as well as money lost due to mistakes in valuation.

Feedback score

The company also attempts to reduce buyer dissatisfaction. It solicits feedback from buyers to track a seller’s performance. In doing so, it provides users with incentives to increase their feedback score; a higher score means more open trades at the same time, and faster payment of points.

Goozex guarantee

Goozex offers a 100 percent guarantee. It covers losses or damage in shipping and promises a refund of the applicable points and trade credits. It also automatically replaces the game request. To avoid scams, it only transfers credits to the seller after the buyer submits positive feedback. To spur positive outcomes, sellers’ feedback scores are tied to the speed at which they will be credited. Goozex stresses that the trade is for keeps; it is an exchange of property that conveys ownership. Assuming that a trade is valued equally, the total cost to the buyer is $1.00 or one Goozex trade credit. Goozex states that it is the cheapest way to legally trade games free from monthly membership fees, setup fees, and hidden costs.

Lessons learned

The idea is simple and surprisingly inexpensive. However, one must question the volume necessary to cover even modest costs at $1 per trade. Goozex is a relatively young company without a lengthy track record. It remains to be seen how well its business model works. Still, the idea of refreshing one’s game inventory at minimal cost is appealing. The model is adaptable to other items and offers sellers higher prices than they would get at a yard sale. It also offers buyers lower prices than they would incur at a retailer. One might imagine items like furniture or other high priced goods available for barter. In fact, furniture might well be traded through a version of goozex catering to individuals moving long distances. It might be cheaper to leave a couch in one city as a trade and pick up one in the new location, all at a low price. Clearly segmentation is a critical obstacle in extending the concept.

It is also important to consider counter tactics. In this case the tactics of the game developers. They face a high production cost structure for the amazingly detailed and complex games that gamers demand. They make profits when individuals buy, and keep a game. Buying then re-selling it effectively removes one new sale from the pipeline. When a single game is traded several times, the financial loss may be considerable. Developers have a competitive trick up their sleeves: extensions for old games. After a player has mastered the 18 stages of a popular game, developers can provide six additional, challenging, levels at a modest price in terms of money and learning the game. It is a way to target experienced gamers who always want more. What’s the catch? The extension would require the original game. If one trades it away, the extension cannot work. Thus, they motivate consumers to keep their old games in anticipation of new add on levels.

The internet is likely to be a marketplace that sees more trading. It is also likely to spur competitive actions that turn it into a tough playing field, suitable only to a few product categories.

Reader requests

Please forward all requests to review innovative internet sites to: Dr Dennis Pitta, University of Baltimore, 1420 North Charles Street, Baltimore, MD 21201-5779, USA. Alternatively, please send e-mail to: dpitta@ubalt.edu for prompt attention.