EcommerceBytes-Update, Number 384 - November 08, 2015 - ISSN 1528-6703     2 of 6

Reverb Marketplace Strikes a Chord with Musicians

By Greg Holden

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Ecommerce is just around the corner. That's one of the great things about selling online. Your next-door neighbor might have a thriving eBay business. Many of the stores in the nearby shopping strip might sell through Web stores as well as brick-and-mortar stores. And it turns out that the subject of this article is a musical instrument marketplace and community that does $130 million in business each year and that I pass every day on my way to the gym.

When a reader suggested doing a story on Reverb, I knew I had seen signs for it somewhere here in Chicago. I didn't realize they were at 3345 North Lincoln Avenue, a five-minute walk from my house. The sign is across the street on the building that houses the Chicago Music Exchange, a store for high-end, high-quality musical instruments. That's not a coincidence. David Kalt, who owns the Music Exchange, founded Reverb after he and other musicians had problems selling on the other big musical instrument exchange, eBay.

Kalt worked as a recording engineer in the early 1990s. As recording studios moved to computers, he decided to learn programming, and received a Master's degree in computer science from DePaul University in Chicago. He cofounded the online broker options Xpress in 2000. He left the company in 2008, and it was eventually sold to Schwab in 2011 for $1 billion. He bought a company where he had purchased guitars before, Chicago Music Exchange, in 2010. He helped increase its sales from $3.5 million in 2010 to $20 million in 2014.

Kalt became a big buyer and seller of musical instruments on eBay. But the 10 percent fees eBay took on each sale grated on him. "The high fees make it hard for sellers to make money," he says. "They hurt collectors who need to sell the gear they already have to buy the next instrument they want."

Kalt launched Reverb in January 2013 with the goal of creating a better resource for buyers and sellers, including himself: lower fees, more accurate listings, and lots of content to help musicians research products and brands.

It's free to list, and sellers pay 3.5% when an item sells ($1 minimum and a $350 maximum fee), billed at end of the month via credit card. And sellers who wish to upload many listings at once can inquire about Reverb's inventory management. More information is available on the pricing page.

Kalt has bought more than 150 items and sold more than 100 items on Reverb. "He is one of the strongest influencers of the user experience because he's in there ever day using the product himself," says Chrissy Hansen, Reverb.com's Brand Manager.

Reverb's model is growing in popularity. When I visited, the company was hiring in order to prepare for the busy holiday season. There are now 62 employees. They work in an open second-floor space with instruments scattered around including an upright bass, a drum set, and a wall full of guitars waiting to be played. In its third year, 2015, Reverb expects to reach $130 million in GMV. At any one time, the site has 250,000 listings, 170,000 active buyers, and 65,000 active sellers.

A feedback system similar to eBay's rates buyers and sellers. But Reverb's system of resolving disputes is certainly different than its main competitor's. "The percentage of problem transactions is small," says Hansen. "If something goes wrong, we step in and make it right. We speak to the parties."

"Literally? On the phone?" I asked, looking around Reverb's offices at employees talking on phones and sitting at computers.

"Yes," she said. "We determine what happened and what needs to be done. We help file insurance claims if that's needed. If something happens along the lines of "not being as described," we speak to the seller and see if they are willing to be responsive, and if not, sometimes we provide a refund out of our own funds."

Can you imagine eBay saying such a thing? Hansen added that the site does suspend both buyers and sellers if it is warranted.

As far as payment, Reverb accepts the major credit cards, PayPal, and an option called Reverb Bucks. Reverb Bucks enables money made on a sold item to remain in a user's Reverb account so it can be used for a later purchase. Many musicians like to try out equipment for a short time and then sell items so they can try something else out.

Reverb also uses a payment company called Affirm, which Hansen said is especially good for musicians. If a musician is on tour and his amplifier "blows out," Affirm lets them get a short-term loan to buy the equipment quickly without maxing out their credit card or checkbook.

All sellers on Reverb set up storefronts on which they list equipment for sale. Sellers range from retailers like Sam Ash, Cream City Music, and Alto Music, to individual musicians and collectors. Well-known names like Rick Nielsen of Cheap Trick and Ray Lamontagne have sold in the marketplace.

The music-centric clientele means that employees, buyers, and sellers alike know a lot about equipment and don't tire of reading or talking about brands and models of guitars, amps, drums, and other gear.

"We are all musicians," explains Hansen, referring to Reverb's staff. "We can make sure all our listings are curated so they appear in the right places on the site. The experience of selling on Reverb is a lot more accurate than selling on other sites. Sellers can upload their own videos, but we also do up to 50 demo videos on gear every month. Pricing is one of the areas where we are really transparent. We have a Reverb Price Guide that buyers and sellers can refer to. It aggregates sales data going back to the beginning of the company. It gives buyers confidence that they know the accurate value of an item."

There are other advantages to working in a company full of musicians and musical instruments, she adds. "We had a jam party at the end of the week. We got a drum set and everyone jumped in and played. Because we are growing really fast, we need to do that just to keep getting to know one another."


About the author:

Greg Holden is EcommerceBytes Contributing Editor. He is a journalist and the author of many books, including "Starting an Online Business For Dummies," "Go Google: 20 Ways to Reach More Customers and Build Revenue with Google Business Tools," and several books about eBay, including "How to Do Everything with Your eBay Business," second edition, and "Secrets of the eBay Millionaires," both published by Osborne-McGraw Hill. Find out more on Greg's website, which includes his blog, a list of his books, and his fiction and biographical writing.


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