Start Up Blog

Inventing Demand

Posted in entrepreneurship by Steve Sammartino on September 4, 2009

It’s no secret I own and run www.rentoid.com – but here’s a story you don’t know. The story of how I got it off the ground and got people to use the website.

Rentoid had a classic chicken and egg problem when it first got launched. People wont list items until we have willing customers waiting to rent their stuff. Conversely, people couldn’t rent things until people willing to rent their items put them up for rent. It’s a bit like asking two people who don’t know each other to fall in love. To solve this problem I decided to ‘Invent Demand’. This is how I did it.

I went out and got myself a copy of the Harvey Norman and all the major department store catalogs. Scan through and them and picked off what items I thought would be suitable to rent. For the purposes of rentoid that meant items that were ‘hot‘ in market (their placement in the catalogue was proof enough of that), items which had a purchase value of over at least $200, and had a low likelyhood of damage. I then proceeded to gather photos of the specific items off Google images and listed each of them on rentoid. The rental prices I placed at 5% of item value for a week, and 10% of item value for a month. The bond I made 50% of the cost. I made sure I listed items from varying categories. I did it in 3 suburbs across Melbourne (North, West & East). The listings also said ‘as new, never used’ – how true. It also assisted with our SEO because people do ‘item & location’ specific searches.

Harvey Norman catalogue

When people rented the items, I went out and bought them, first hunting for the lowest price on line. Then rented it to the new rentoid member in good faith and gave them an exceptional user experience.  After the rental I sold the item on ebay for around about 80% of the retail price. I pretty much re-couped my costs doing this. Some items kept renting out often enough for me to keep them including my Nintendo Wii and Guitar Hero which have paid themselves off more than 3 times over. The cool thing is the experience I gave people and the live demonstration it gave me to the system I built.  It really helped me iron out many of the bugs in the system when it comes to usability and transacting on-line.

You may think this is slightly deceptive, but it isn’t, simply because the rentoid member got what they wanted from the site and the process was completely transparent. When they’d come over the pick up the item up for rent I’d tell them I own http://www.rentoid.com. I’d ask questions like how they found the site and what they think. In fact, they loved the idea and were stoked to transact with the founding entrepreneur.

It was a great process to not only to invent demand, but also gain some brand evangalists and supporters. And yes, I still list a lot of items on rentoid – espeically if it’s new and cool and we don’t have it on the site yet.

As entrepreneurs, we need not be afraid of how we can build demand and momentum with our start up. We must do this because action creates reaction and often people simply liking our idea isn’t enough. Instead we must show leadership and belief in our own product and embrace it and use it as our own ‘in house evangelist’. If we don’t believe, how can we expect them to?

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27 Responses

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  1. Ned said, on September 4, 2009 at 3:24 pm

    Killer post as usual Steve and great to hear how you got through the chicken and egg story. Also great to see you “eating your own dogfood”.

    Looking forward to hear how the Adioso guys are doing it at the Hive on Tuesday.

    Ned
    @nedwin

  2. Gaurav said, on September 4, 2009 at 4:19 pm

    Thanks for sharing this awesome tactic Steve. Any C2C startup faces similar challenges starting out, and ‘Inventing Demand’ can really help them out. Looking forward to more tactics next Tuesday on Startupblog Live!

    -Gaurav

  3. Steve Hopkins said, on September 4, 2009 at 4:20 pm

    Mate, great post. I love how you took the extreme approach and backed yourself to achieve the business goals. ‘Do’, as always, is king.

  4. Andre Sammartino said, on September 4, 2009 at 4:34 pm

    Haven’t you technically “Invented Supply”?… in that there was product on the site that wouldn’t have been there already.

    Or is it invented demand (for your website’s services as a listing venue)?

    Either way it is a cool story Cus.

  5. Kyle said, on September 4, 2009 at 5:30 pm

    Very very interesting, thanks for sharing this. I guess it’s like they say, “fake it til you make it!”

  6. Akshat said, on September 4, 2009 at 7:28 pm

    It is great example of overcoming the chicken & egg problem. You have showed us the seller aspect. What about the buyer end of the puzzle? How did you get people to visit rentoid?

  7. [...] rows his own boat quitely but diligently. From his must-read post “Inventing Demand” I went out and got myself a copy of the Harvey Norman and all the major department store [...]

  8. njoyinghim4vr said, on September 5, 2009 at 4:37 pm

    Extremely cool, now it only remains for many like myself to ascertain how that translates in our own field. I am psyched to explore this angle, thanks for sharing!

  9. Pete Williams - Preneur Marketing said, on September 6, 2009 at 9:36 am

    Nice one…

    One thing i think you mentioned that’s been glossed over is – the investment/income potential with rentoid.

    Do you know of any/many ppl ‘investing’ in items and renting them out – just like a real estate deal ?

    Pete

    • Steve Sammartino said, on September 6, 2009 at 9:41 am

      Good point Pete, we do have quite a few ‘Micropreneurs’ renting stuff out that has a high yield, and we’d love to encourage more people to do it… in fact I think I’ll provide some lessons on ‘how to do it’ what stuff rents well with good returns.

      Cheers,
      Steve.

  10. Eric Rudolf said, on September 7, 2009 at 2:49 pm

    Good points, all. Especially the part about believing in what you’re doing or no one else will. Also, very clever what you did overall here–I’m guessing people have already ripped off your ideas.

  11. Tim Cinel said, on September 10, 2009 at 8:42 pm

    I agree that it’s not deceptive at all – everybody involved gets what they want without any shortfalls. Though I also think you invented supply and catered for an existing demand (People finding you though SE, one example of existing demand).

    Marvellous post.

  12. [...] way that no one’s ever tried before, get inspired by Steve Sammartino’s personal tale, Inventing Demand, at Start Up Blog. I particularly love this line: “As entrepreneurs, we need not be afraid of [...]

  13. cprinstructor said, on September 29, 2009 at 1:45 pm

    This is such a common probem that most business face. I’d like to know how you were able to get customers to your site as well. Was it simple advertising or some other “secret tactic”?

  14. Felipe Albertao said, on October 2, 2009 at 1:34 am

    Excellent post! It would be great if you could explain how you solved the other side of the chicken-and-egg problem. I. e.: How you got renters to go to your site.

  15. Tim Cinek said, on October 2, 2009 at 10:04 am

    @Felipe: By adding items we know people are looking for, it’s possible that potential renters will now find rentoid in search results. If everyhing’s optimised perhaps they won’t just be potential renters :D

  16. Pieter said, on October 5, 2009 at 2:21 pm

    Classic problem, excellent solution. Well done Steve.

  17. Startup typologies « Start Up Blog said, on August 23, 2010 at 9:58 pm

    [...] and maybe even a life time. It’s very hard because we need to create the market and or invent demand. it takes strong charismatic leadership for it to be sold to the world. Which is why it pays so [...]

  18. [...] conflict resolution Chicken and egg problem on HN Strategy Letter on Chicken & Egg Problems Inventing Demand. “It’s a bit like asking two people who don’t know each other to fall in love. To solve [...]

  19. kellogs said, on February 18, 2012 at 1:26 am

    what a happy ending ponzi scheme!

    • Steve Sammartino said, on February 20, 2012 at 9:05 am

      Not even close to a Ponzi scheme. Very simple idea of investing in what there is demand for, and then taking “personal financial risk” in fulfilling that demdand. Hardly Ponzi scheme – maybe you should go and teach yourself what a Ponzi scheme is… Sounds to me like you haven’t got a clue.

      Steve.

  20. [...] by essentially buying the initial items himself and renting them out (though he refers to it as “Inventing Demand”, when actually he was seeding [...]

  21. Paypal, Reddit and power of fakin' it! | said, on September 5, 2012 at 3:10 pm

    [...] by essentially buying the initial items himself and renting them out (though he refers to it as “Inventing Demand”, when actually he was seeding [...]

  22. [...] "Invent demand", as Steve Sammartino did for Rentoid. If your product requires interaction, you may have to start out seeding activity while early users are still checking it out. According to the book PayPalWars, the payment giant got started using a bot that purchased products on eBay, then demanded to use Paypal for paying the sellers. This pushed the market towards adopting PayPal as the online currency of choice. A suggestion from Sangeet Paul Choudray is to buy some initial users from platforms such as MechanicalTurk to get activity started for cheap. [...]

  23. […] by essentially buying the initial items himself and renting them out (though he refers to it as “Inventing Demand”, when actually he was seeding […]

  24. […] by essentially buying the initial items himself and renting them out (though he refers to it as “Inventing Demand”, when actually he was seeding […]

  25. […] by essentially buying the initial items himself and renting them out (though he refers to it as “Inventing Demand”, when actually he was seeding […]


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