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Connecting Peer-To-Peer Trades Of Physical Goods Online

Connecting Peer-To-Peer Trades Of Physical Goods Online
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Rachel Botsman, author of 'What’s Mine Is Yours: The Rise of Collaborative Consumption,' explores the story of Swap.com.

Rachel Botsman
  • 15 december 2010

College friends Greg Boesel and Mark Hexamer started to think about online swap trading in 2004, a time when peer-to-peer precursor sites such as craigslist, Freecycle, and Netflix were taking off. The pair had met while studying for graduate degrees at Boston College and had already created a successful legal software company together. As Hexamer recalls, “The inspiration for their site was really a whole bunch of things, as opposed to one ‘a-ha’ moment.” They began to notice that their nephews played a new $55 video game for a couple of weeks and then got bored with it. Their friends with children would watch videos such as Shrek and The Little Mermaid numerous times but would quickly move on to their next favorite movie. Boesel’s and Hexamer’s mothers would swap books with their friends without thinking about it. And their own shelves were full of DVDs and CDs they would neither watch nor listen to again. The final impetus was when Boesel, like so many readers, devoured The Da Vinci Code in a matter of days. After he turned the last page he wondered, “What do I with this book now?” He did not want to throw it away or go through the hassles of selling it for a few dollars on eBay. Boesel proposed to Hexamer, “Could we create a site that would let people swap any product for the same value as what they’re offering?”

As math whizzes, the two friends started to think about the algorithms that would enable trades to happen instantly. They realized the key would be to calculate an equal value of goods to automatically ensure an undeniably fair exchange. And not just for two-way direct trades but for three-way cross-media trades that would, as Hexamer put it, “explode the system.” For example, in a three-way, user A would send a CD to User B, User B would send a DVD to User C, and User C would send a video game to User A. The problem Boesel and Hexamer had to solve was much aligned to Chris Anderson’s Long Tail concept, the niche strategy of selling (or in this case, trading) large numbers of unique items in small quantities.35 How would a person in Iowa who wants to trade an unwanted Wii Super Mario Galaxy 2 for a PlayStation Sims 2 find a match?

The site Boesel and Hexamer ended up launching in 2007, SwapTree (now Swap.com), solves this problem in sixty milliseconds. You enter the UPC (for Super Mario Galaxy 2 it’s 045496900434) or IBSN on the back of the box (this code is used to identify the edition, release, or version, and thereby determine the value) in a little green box. You then mark the condition of the item from “worn” to “never used.” When we tried this system out on SwapTree, 132,209 items popped up that could be traded for the Super Mario Galaxy, including 100,350 books, 20,349 CDs, 8,809 DVDs, and 2,701 video games. And at the time we experimented, there were two copies of Sims 2 to be traded instantly for Super Mario, one from “Gwerd67” in Florida and the other from “Ukfan64” from Kansas. If you decided to make the exchange, SwapTree generates the postage label, too (on average items cost $2.20 to mail). The whole trip to the post office, including the weighing of the item, can be bypassed. From start to finish, swaptrading Super Mario for Sims 2 would have taken no more than two minutes.

In November 2009, there was an inventory of approximately 5.5 million items on people’s “have lists” and 3.5 million items on people’s “want lists.” To a certain extent, the multiway, multimedia trading system that connects these goods is leveraging the concept of six degrees of separation. Boesel explains, “We have essentially created a social network for your media. When you tell us you have the movie The Departed, we connect you to all the people who want that movie, and all of the people who want those people’s items.” Cracking this challenge has enabled the founders to create two critical experience factors that can compete head-to-head with shopping for new stuff: choice and instant gratification.

Swap.com is one of hundreds of innovative examples that are part of a new culture and economy called Collaborative Consumption transforming business, consumerism, and the way we live. It is explored for the first time in the must read book What’s Mine Is Yours: The Rise of Collaborative Consumption.

Rachel Botsman (@rachelbotsman//twitter) is a social innovator who consults, writes, and speaks on the power of collaboration and sharing. Roo Rogers is a serial entrepreneur and is currently the director of Redscout Ventures.

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