Recently launched Shpock wants to facilitate the buying and selling of products listed online, but the system was designed to deliberately omit payments from the process.
Its philosophy would seem to run in stark contrast to how a similar company, eBay, built its own online marketplace over a decade ago. When eBay realized the value then-startup PayPal provided to its users, it first tried to develop a rival payment system, Billpoint, with the help of Wells Fargo. Ultimately eBay chose to purchase PayPal in 2002.
Owning or at least embedding a trusted payment system “provides a level of control,” says Dave Kaminsky, an analyst with Mercator Advisory Group. At eBay, “they have their own payment system that they stand behind and monitor to make sure it’s as secure as they need.”
And more recently, eBay rival Etsy began urging its own audience to use its homegrown Direct Checkout system. Direct Checkout is required for some Etsy functions, such as gift-card acceptance.
“To pair an online marketplace with a payments system is a very logical place to expand,” says Kaminsky.
Consumers use Shpock, created by Austrian startup Finderly, as a way to buy and sell products. The app was created for local purchases where buyer and seller could meet and exchange product for cash, and users that ship products are finding their own ways to handle payment, Shpock co-founder Armin Strbac says.
“It’s not really an auction, just a hyper-local marketplace,” Strbac says.
But Kaminsky says this approach is short-sighted.
“There’s no reason to limit yourself like that,” he says. Having an online payment platform “opens yourself up to far more transactions.”
The Shpock mobile app was designed to take advantage of smartphone technology allowing consumers to take and upload photos with their mobile cameras.
Even though the mobile app wasn’t created for global transactions, the startup will not have a choice in how consumers use the app. Shpock seems to be faring well, though, with 2,000 products loaded onto the app in the first month.
Andra Muresanu, a Shpock buyer and seller, has purchased a snowboard and purse through the marketplace, both times meeting the local Vienna seller and paying cash.
After buying the purse, Muresanu started posting her unused purses on Shpock and hopes to see potential buyers soon.
She says she enjoys the local-deals aspect of the marketplace, since it makes Shpock more social than alternatives such as Craigslist and Etsy.
Craiglist is filled with false photos of apartments, plus sellers don’t always respond to buyer emails, she says. And while jewelry she bought on Etsy looked great in the pictures, it didn’t meet her expectations in person.
While Muresanu likes meeting sellers, she says the company might need to think about payments once its audience grows. She suggests text-message payments or a Near Field Communication system built into users’ phones.
Strbac says the company plans on asking its users what payment method they’d prefer.
Some Shpock customers use PayPal when sending items to non-local buyers, Strbac says, while others use bank transfers or mail checks upon delivery.
But Strbac says he wants to be careful when choosing a payment method, especially since the company is trying to branch out into Eastern Europe. Europeans are more protective of their account information, such as credit card numbers, than U.S. consumers, Strbac says.
Online merchants use electronic payment methods such as PayPal because they provide transaction data and fraud protection, says Gil Luria, an analyst with Los Angeles-based Wedbush Securities.
Shpock might not need to create its own proprietary payment system, but the company should think about integrating with payment providers, he says.
“A link to PayPal and integrating card acceptance is pretty critical for [Shpock] to be successful,” Luria says.