The site began with another idea, though, that it continues to promote. Kids can also obtain Swapits by auctioning off toys, CDs, Pokmon cards, and other closet clutter to obtain something more desirable: hence the “swap” moniker. Children post descriptions of items for auction on SwapitShop’s site. When a bidder has won an item, the seller mails it to SwapitShop, which forwards it to the buyer. Sellers, meanwhile, redeem their Swapits for new or auctioned items on the Web site.
Taking a commission on auctioned items, as eBay does, isn’t particularly useful to SwapitShop, since Swapits aren’t worth anything outside the company’s own Web site. However, Attwood and his founding partner, Emily Elton, realized that the outflow of parcels from redeemed Swapits has made them one of the United Kingdom’s largest direct mailers to children. Now every package carries coupons and other marketing literature along with the purchased item. Attwood claims that the revenue from direct marketing covers the cost of processing the merchandise in the first place-plus a small profit margin.
|Elevator Pitch||Monetize the economic influence of children worldwide|
|Future Vision||“Swapits” will become a fungible kids’ currency|
|CEO’s Insomnia||Running out of money before building a critical mass of end users|
|Leg Up||Strong brand recognition in the U.K.; solid, well-known customers|
Attwood and Elton excel at squeezing every pound of profit from what began as the simple idea of swapping old toys. In addition to the sales of Swapits to consumer products makers and the fledgling direct-marketing business, they’ve created a division to survey and test-market third-party products to SwapitShop kids, obtaining valuable market data from a group that is traditionally difficult to reach. SwapitShop charges anywhere from several hundred to tens of thousands of pounds for these services, but the participants are paid, of course, in Swapits.
The duo’s obsessive pursuit of efficiency and profit has enabled the company to survive a grueling economy with minimal cash infusions. To date it’s raised less than $750,000 from angel investors and is squeaking by at more or less breakeven with five full-time employees. Nonetheless, it’s managed to expand its user base to more than 100,000 children and boasts Disney, Vivendi, Sainsbury’s, Nestl, and the U.K. government as paying customers.
Although now operating solely in the United Kingdom, SwapitShop has major ambitions for its currency. Attwood foresees Swapit cards that operate like debit cards, redeemable for discounts or merchandise in participating stores around the world. He pictures Swapits as gifts, allowances, and homework incentives-a universal motivator for kids.
Ultimately, the Swapit currency may become the mechanism for monetizing the economic influence of children. That’s a market gap that may be worth a fortune to the companies that can successfully exploit it, and to the investors lucky enough to pick a winner. Then again, the gap, like the economist’s ten-spot, may be just an illusion.