Context
In 2020, while pursuing my MBA at Insper, I set out to build a business centered around a dedicated e-commerce platform for board games. During my research, I identified a fascinating pattern: most retailers sell a consistent percentage of their inventory each month—typically between 8% and 10%, depending on the industry.
Initially, I assumed that since inventory is heterogeneous (e.g., newer products typically sell faster than older ones), the percentage of inventory sold each month would vary significantly based on product quality. While this was partially true, I realized that the high degree of heterogeneity often balanced itself out.
This led me to define a North Star metric: my inventory's total monetary value. Since most board games retain their value over time, I theorized that reinvesting all profits into acquiring more inventory would eventually allow 8% of my stock's value to generate a sustainable revenue stream. This approach seemed particularly appealing for a lean business model. While I still believe this is a viable strategy for micro-businesses, I encountered three major challenges.
The Problems
The challenge was threefold.
Problem 1: User Acquisition (UA)
The first hurdle was attracting buyers. While building a well-designed e-commerce website was within my expertise, driving traffic to it was a different story. Paid ads and other performance marketing channels would likely consume a significant portion of the contribution margin.
I explored alternative growth strategies, such as SEO-driven content marketing and leveraging social media—particularly Instagram videos, a rising trend at the time. However, this approach required either substantial media investment or a heavy commitment to content creation across multiple platforms, each with its own learning curve.
Solution: Selling on Marketplaces
A well-established strategy in e-commerce is leveraging existing marketplaces, which already have an audience. While marketplaces charge a significant commission, they eliminate the need for costly user acquisition efforts. Realizing that launching a standalone website with no visitors would be futile, I decided to focus on sourcing inventory and selling through marketplaces instead.
Problem 2: Price Gravity
Selling through marketplaces solved my user acquisition problem, but it introduced a new challenge: price-based competition. My listings appeared alongside those of other sellers, typically sorted by price. This created two risks:
- If I lowered prices to compete, my margins would shrink, limiting my ability to reinvest in inventory.
- If I kept prices high, I might not sell anything at all.
I concluded that this was a scale-driven business, favoring sellers with the best cost structures. And who has the best cost structures? The marketplaces themselves. Selling on Amazon, for example, meant competing against Amazon itself. Additionally, some game publishers had adopted a Direct-to-Consumer (DTC) strategy, bypassing retailers altogether.
Solution: Niche Specialization
Specialization appeared to be the best approach. If I could become the exclusive seller of certain board games, price comparisons would become irrelevant. Importing rare European board games into Brazil could allow me to sell high-value items, maintain healthier margins, and reduce storage costs.
Problem 3: Where are my customers?
If I successfully scaled my inventory and sold thousands of board games over the years, I should have built a sizable customer base, right? Not necessarily.
Marketplaces act as intermediaries, preventing direct relationships between buyers and sellers. Customers perceive their purchases as transactions with Amazon, not with "European Rare Board Games Inc." This dependency created two long-term risks:
- Limited customer retention. If I wanted to launch my own website in the future, I would still face the same user acquisition problem.
- Lack of strategic flexibility. Without direct customer relationships, introducing new product lines would be significantly harder.
Solution: A Community-Driven Approach
Around this time, I was studying customer-centricity and its potential for building sustainable businesses. I realized that a marketplace model centered around engagement and interaction—rather than passive transactions—could help solve these problems.
Enter Whatnot
In September 2021, I came across Whatnot, a U.S.-based startup that had just raised $150M in its third funding round of the year. Whatnot introduced a live shopping model, where verified sellers host real-time video auctions, turning e-commerce into a more interactive and engaging experience.
"...The app captures a trend that had been growing popular on platforms like Instagram in the U.S. (and was already hugely popular in China): live shopping. Verified sellers can go on the air at any time, hosting on-the-fly video auctions for their goods..."- TechCrunch
Rather than competing purely on price, sellers on Whatnot built relationships with their customers, fostering loyalty similar to content creators on YouTube, Twitch, and Instagram.
At that moment, I had a realization: if Whatnot had been available in Brazil, I would have used it. But what if I could create something similar for the Brazilian market?
The Goal
The objective was to validate a live commerce marketplace model tailored to Brazil. The hypothesis was that live auctions could improve buyer retention, increase engagement, and provide an alternative to price-driven marketplaces. The key challenge was testing this concept without incurring significant development costs.
Building the MVP
The process began with thorough market research among collectible enthusiasts, which helped identify their main challenges. I then engaged with sellers who answered the research asking them if they want to participate with products in a live auction. On the first seller I got my Yes!
At that time, I noticed some channels doing live commerce using known platforms as Instagram but suffering from high ping (around one minute of delay) between the streamer and the chat messages which cause in a lacking experience. Even found a person doing auctions but in this situation, looked impossible to do a proper show.
So I started testing other platforms to find the best suited to mimic a live commerce show. After deliberating over Twitch and YouTube, they got ditched because of the low level of accountability bidders could have. I wanted Whatsapp but lacked the video streaming feature and, at the time, have a hard cap of 256 users per private group. My research led me to Telegram, which have the video streaming inside private groups, a higher limit of users per group and a ping measured in seconds or less.
After setting the platform, I moved to set up the communication channel, building a straightforward website to funnel interested individuals to the private Telegram group where the live auction would take place. Mercado Pago amoung others payment platforms got chosen to handle transactions (Pix, credit cards, installments accepted since day one), Google Forms was selected for data collection, and operational tracking, while local couriers managed logistics to ensure the products went to the live show studio (a small room on the store of our first customer). The first seller selected a person who worked there and had previous streaming experience to held the first show.
In less then a week, our MVP was ready to roll! In december 14 of 2021, we performed our very first live show, almost two months after the Whatnot news.
Results
The MVP yielded great results, confirming the viability of the live commerce model even though revealing challenges. The inaugural live auction resulted in R$4,200 in sales and generated R$336 in revenue with an 8% take rate. Over the course of one year, we conducted 320 live auctions that collectively generated over R$850,000 in sales. The initiative expanded to include more than 20 sellers and over 1,000 buyers, with 60% of these buyers buying in multiple events. The organic growth of the Telegram community, starting with 120 members and achieving an NPS of 10, evolved to a group of more than 2,000 members — validated the interested of the market in this model and the effectiveness of the low-investment approach.
On the price gravity problem axis, we noticed a detachment from the price comparison but with some users reporting the minimum price in the chat and even sellers showing the prices in marketplaces to display cheapness. The auction component was an important force to keep the prices low and only in a few times allowing the products to be sold for more than the market offers, a result relatable with the amount of watchers. The bright side here was that we sold 97% of more than 10,000 products sold in this period, demonstrating the channel capability to merchandising turnover.
On the customers axis, we noticed a better picture, with 30% of users buying in live auctions acquiring more products with the seller to offset the shipping costs, demonstrating that live commerce is a way to take offers. Also, we noticed complains when a given host was changed demonstrating that some people were there also because of them.
Reflection
On the customers axis, we noticed a better picture, with 30% of users buying in live auctions acquiring more products with the seller to offset the shipping costs, demonstrating that live commerce is a way to take offers. Also, we noticed complains when a given host was changed demonstrating that some people were there also because of them.
The experience has been so impactful that I have been invited to share these insights at Insper in their entrepreneurship post graduation course, further cementing its role as a good example of how to prototype and test a business idea.
- MVP Validation The live commerce model proved to be an effective alternative to traditional e-commerce and marketplace approaches.
- Operational Learnings Highlighted the importance of live engagement, the dynamics of auctions, and the necessity of a minimum audience size for successful transactions.
- Customer Relationship Demonstrated that a more interactive live format can foster stronger bonds between sellers and buyers, enhancing customer loyalty.
- Cost-Efficient Innovation Confirmed that creative use of existing tools can successfully validate a business model without heavy financial investment.
- Academic Recognition This case has since been featured at Insper as a real-world example of agile entrepreneurship and innovation.