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Shop Theorem Has Created A New Way Of Buying And Selling Stuff Online

TechCrunch logo TechCrunch 16/04/2014 Colleen Taylor

You might think that haggling or negotiating was something that largely died out in the early 20th century, or that happens today only in bustling outdoor markets and bazaars. But if you think about it, you haggle in your head all the time. You look at a shirt online and say to yourself, “Hrm, that’s a good deal” or “Nope, too much.” If something you like is too pricy, you wait it out until the retailer comes back with a better number.

A new startup called wants to bring that conversation back out into the open. Shop Theorem is an e-commerce company that has created a system for merchants to negotiating prices and sell to consumers. At launch today, the company’s focus is on locally-made apparel and accessories.

The idea, Shop Theorem’s co-founder told me, is that many of the best small batch brands are new at the game of selling things, and can’t afford complex market research — so pricing is largely a guessing game. And consumers have become so used to fast fashion and mass produced goods that they often need a second look at something, and sometimes a conversation with the maker of it, to establish the correct price expectations.

“In a city like San Francisco, you can walk down any street and see awesome brands and stores making clothes, furniture, and accessories. The people who run these brands are awesome makers and make awesome products, but they need to have a conversation with the consumer when it comes to the purchasing,” Jackson said. “The consumer might start with saying ‘Oh, that’s expensive,’ and then the maker says, ‘It’s made here in San Francisco, out of these high quality products. It will last a long time,’ and the consumer might say, ‘Oh I see. But, well, it’s still a little pricy,’ then the maker says, ‘How much would you be willing to pay?’”

Shop Theorem allows that back-and-forth to occur online, where many people prefer to shop nowadays. The site lets consumers name their own price on any given product. Shop Theorem then aggregates it all together and presents it on a dashboard for the merchant. The merchant can then use that system to establish the ideal price point, and easily accept the offers of anyone offering that number or more for a product. Shop Theorem, which is just launching today out of beta, takes a “small” cut of the transaction — right now the percentage varies based on the item, as the startup is looking to sort out the best revenue model.

Here is a screenshot of a merchant dashboard for Shop Theorem:

There are subtle differences between Shop Theorem and the classic auction model that make it a bit more special. Shop Theorem doesn’t automatically go the highest bidder, or drive the price down to the lowest common denominator. It is more reminiscent of the , or the . It’s a more complicated negotiation scheme, but one might actually create the best outcome for both buyers and sellers.

Creating this kind of system online was not a technically simple task. Shop Theorem, which is currently bootstrapped, has been built entirely by co-founders Ryan Jackson and , who met each other through previous startups founded in Y Combinator, along with a small team of interns. It goes to show what a dedicated set of co-founders — a software engineering “hacker” and a business and finance savvy “hustler” — can do.

In all, I think Shop Theorem is a very clever take on an age-old industry that could solve some very real problems for merchants and consumers alike. The currently dominant retail method of mass pricing and production has led to a lot of waste and excess inventory, not to mention a lot of sub-par products. If Shop Theorem can help push against that trend, we all stand to benefit.

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