You can’t discuss haystakt.com without bringing up the futuristic world described in Cory Doctorow’s 2009 novel “Makers.” This world includes a tribe of semi-nomadic inventors whose ingenious creations are designed and produced right out of a garage or someone’s back yard, using cheap electronics, digital modelling and 3D printers. The process, from idea to serialized product, has been reduced to a minimum, and the ensuing bloom of garage innovation has sidelined the old model of industrial mass production.
The novel is utopian – but only slightly. There are signs of “Maker Economy” today, manifested in the success of platforms such as Etsy and Kickstarter. Both are designed to help make work sustainable for small-scale producers.
The Singaporean startup Haystakt targets the same segment, but zooms in on a particular aspect of the process: pricing. I spoke with founder Joel Leong about the genesis of Haystakt, the world’s first crowdpricing platform.
Joel’s story goes like this: while studying abroad, he had come into contact with, and fallen in love with the “do-it-yourself” maker culture and the beautiful things it was creating. He returned home to Singapore with the plan to build a platform for niche design products from Southeast Asia. This was two years ago. But Haystakt was not growing fast enough.
Joel wanted the platform to improve and to get a step ahead of competitors. First they went into a phase of research. They interviewed makers and buyers about what types of improvements they would like to see on the platform.
Unsurprisingly, the top concern among buyers was price. They liked the objects a lot – but could they not be a little cheaper?
On the producers’ side the answer was more complex. Producers said they were often unsure where to set the price in first place. There is an obvious risk involved in creating things. If there aren’t enough buyers, the producer loses time and money. Each of the objects sold needs to cover material costs and contribute towards overhead costs. But producers can’t know in advance if a product is going to be a success, and they have to set the price high in order to reduce risk.
This is when Joel and his team decided Haystakt was going to focus its attention on the pricing problem. They came up with a model they call crowdpricing.
How it works
The basic idea is to reduce risk for producers by making the number of pre-orders visible in advance. Once producers are sure their expenses are covered by the minimum order, they can actually go further and lower the price of an individual object if orders keep coming in.
Every order after the minimum order threshold decreases the cost of an object because overhead costs are distributed across all buyers. This principle works especially well with serializable objects such as prints or casts. Here, the overhead costs to create the design, print screens or moulds is comparatively high, but once they’re covered, the price of an individual piece is low.
Incentivizing early orders
In this model, the safest bet for buyers would be to wait until many orders have sunk the price significantly. To counter this, Haystakt incentivizes early orders – the first people to place orders get a guaranteed discount.
This is better explained with the help of the graph every object in the pre-order section comes with. Let’s look at the pricing curve for a ceramic bamboo-mold cup:
The price of minimum order of 10 items is at $20.79 . At 50 orders it will drop to $ 14.5.
Currently there are 21 orders at the price of $ 16.54 each.
The first buyer however only pays $ 16.23 , even if only 10 orders are made. Of course, if the price drops below $ 16.23, the first buyer pays the same as everyone else.
The system is designed to not only to incentivize early orders, but also to motivate buyers to talk about the product and get other people on board as potential buyers because they can collectively lower costs.
Haystakt is a pioneer in crowdpricing and benefits from the attention it’s getting for its new pricing model. Maybe their innovation is bringing us a step further towards Doctorow’s Maker Economy. But since the launch of the crowdpricing feature in March this year, only some 8 projects have been successfully funded this way. To make this pricing model so attractive for producers and buyers that large numbers chose Haystakt’s ecosystem over other options is the challenge they are facing.
Nadine is a communications consultant based in Jakarta. If you would like her to review your app, device or service, drop her a nice message at firstname.lastname@example.org.