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Massdrop Helps Manufacturers Meet Customer Demand

Manufacturers are challenged to keep up with customer demand for products without creating waste.
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They make and ship items on a daily basis, only knowing by orders whether a product is moving or not. To avoid waste, manufacturers are interested in knowing a product will sell well before creating a large quantity.

One San Francisco startup has a solution. Massdrop provides a platform for customers to join together to purchase a product from manufacturers at a discount. The site is the perfect portal for enthusiasts, attracting everyone from technology lovers to quilters. But it's also a great site for businesses, who can manufacture items with customers already in place to buy them.

"We're building a community commerce platform for enthusiasts," says Massdrop CEO Steve El-Hage, "providing people with the tools to come together, discuss the products they're passionate about, and purchase those products together."

He added, "for businesses, it's not easy to connect directly with the people who are most passionate about your product. At Massdrop, we're giving companies a platform to do just that."

Customer Polls

The process begins when someone posts a "poll," which determines customer interest. Customers can browse polls, learn more about each product, and purchase that product at a group discount. When enough people buy in at that price, each customer gets it at a significant discount over what they'd spend alone.

"What you have is a community of people who care about their product or activity very deeply, all working together to find the best product in their category" says El-Hage. "By crowdsourcing our product selection, we've developed a model that always pushes the best products to the top."

Based in San Francisco, Massdrop is a community commerce platform that brings the purchasing power of the masses to save money. When a large number of Massdrop users agrees to purchase an item, Massdrop calls it a "drop," which signals the vendor that the item is being requested by many customers.

Customer Driven

While vendors can add polls, many are added by community members themselves based on products they personally want to purchase. It doesn't have to be a specific item. A member can even post a poll stating they're looking for a gadget that starts their car or keeps their floors clean. Massdrop users suggest items for that person and other members vote on those suggestions. If an item receives enough votes, Massdrop contacts the manufacturer to negotiate the lowest price possible for a bulk order.

Once a price is available, users can begin committing to purchase the item. Like crowdfunding sites, a buyer isn't charged unless the drop price has been reached at that price. In some cases, the manufacturer has agreed to sell items at a set price if a certain number sells, with an even lower price available if an additional number of members buy in by the date that the drop is scheduled to end. An item retailing for $100 could sell for $90 if 10 members purchase and $80 if the number of sales goes to 15, for example.

A Unique Business Model

Massdrop is making news for its unique business model, which benefits both manufacturers and consumers. The company makes money through small listing fees charged to the vendor when a product is listed. The company compares the fee structure to sites like eBay, with the percentage based on how the product is priced.

El-Hage explains, "We're not interested in selling a company's product just once--we want to have lasting relationships with the vendors we work with. That means offering products at prices that both reward consumers for their commitment, and also makes sense for businesses to sustain and grow. It's a delicate process, but we've had success with companies as small as recent Kickstarter projects, to public companies, making award-winning headphones."

The products listed on Massdrop aren't indexed by search engines, making the process of sharing and polling a social one. Members can share items on their own social networks to get more votes and help an item meet its purchase goal. This also gives Massdrop exclusivity, since most members find out about the site from other members, whether on social networks or through word-of-mouth.

While this method is currently working for Massdrop, marketing expert John Rampton says, "I wouldn't rely on any one method to build your business.  If you're relying strictly on social shares you may see a decline in business over time as social media sites update their algorithms.  If you rely 100 percent on anything then your business model could be disrupted too heavily and go down the drain. A company should put their eggs in many different baskets to increase traffic."

In addition to taking suggestions from members, Massdrop also develops relationships with manufacturers. Through this network, the site can offer products that are recommended by manufacturers themselves. Additionally, Massdrop's talented team of buyers and community managers often recommend great products to help build the site's catalog.

"From our members, to the vendors we work with, we're all working together to build a strong community on Massdrop," says El-Hage. "A lot of that comes from the transparency and direct communication we have with our users. Everyone, including Massdrop employees, participates in the discussion with the goal of learning about and discovering the best products together.

Massdrop looks forward to building its community of members and products to help shoppers find the products they want at great prices. With a customer-friendly attitude and an easy-to-use website, Massdrop is a great community for gadget-lovers and those who just love to shop.

Last updated: Jul 22, 2014

DREW HENDRICKS | Columnist

Drew Hendricks is a tech, social-media, and environmental addict. He's written for many major publications, such as Forbes and Entrepreneur.

The opinions expressed here by Inc.com columnists are their own, not those of Inc.com.



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