Administrative / Plan / 7
Reducing Transaction Redundancy
The vast majority of the commodities traded in the LUGNET marketplace will travel thousands of miles from one member of the community to another, often crossing state borders and regularly crossing international waters. As the number of LEGO enthusiasts online grows, so grows the total number of parcels shipped and the total amount of money allocated toward shipping. In the past three years, for example, the average number of parcels shipped in an AucZILLA-style piece auction has grown from approximately 50 to now approximately 250. This is due in part to an increase in size and breadth of the offerings, but it is mostly due to an increase in the number of participants. The total shipping cost for all the packages in a large auction are staggering: in AucZILLA IV, for example, 183 bidders spent a total of nearly $800 to have their winnings shipped to them. The average cost for a package inside the U.S. is low -- about $3 -- but it is often much more to ship overseas, and even 12-week economy surface-mail to Australia can rise as high as $20 for a large parcel. It is unlikely, of course, that there will be dozens of AucZILLA-size auctions going on simultaneously, but it is likely that there will be dozens upon dozens of smaller auctions going on at any given time, maybe someday even hundreds. In an unorganized marketplace, shipping efforts are duplicated and costs are multiplied

     Next-day delivery companies such as Federal Express and Airborne Express have achieved phenominal success by creating hub locations in Memphis, Tennessee and Wilmington, Ohio, respectively. All packages arrive at the corporate hub from a source city via air courier and are subsequently dispatched from the hub to a destination city via air courier. This means that if there are 20 cities in the network, then there are simply 20 daily flights into the hub and 20 daily flights out of the hub. Some packages will travel 3,000 miles from Point A to Memphis and back to Point B, even if Points A and B are only 500 miles apart. But that's all right because the packages still arrive overnight. Still, even at second glance, this may still seem like overkill -- until the alternatives are considered. Consider: without the hub, there would need to be 380 flights each day if each city had to send at least one package non-stop to each other city. Now, these figures are a simplification of reality, but the basic idea is right there: hubs reduce shipping costs. A central hub saves money by reducing overall shipping costs

     Borrowing the FedEx hub concept (but ignoring the overnight aspects), a cost-effective system for delivery of large quantities of LEGO parcels within the community becomes both possible and attractive. Someone conducting a 100-participant auction out of Minneapolis, Minnesota could ship a single large package to a hub in Boston, Massachusetts, where the 100 packages could be boxed and sent out worldwide by an experienced and efficient packaging operation. This, in itself, may be attractive to both sellers and buyers, since it relieves sellers of the drudgery of packing and it relieves buyers of reliability concerns. The benefit is even greater when someone else conducting another 100-participant auction out of Dallas, Texas ships a single large package to the hub for processing. Out of two lists of 100 people each, there are bound to be quite a few duplicates, since people who buy things in auctions tend to do so again and again from whoever is selling something they find interesting. Each duplication is an opportunity to save a bit of money on shipping and share the savings with the buyer. Multiply this shipping traffic by a factor of ten and add in packages from other countries, and the overall cost savings are undeniably compelling. Mathematically, if n is the number of members in a community, then the number of parcels shipped in a hub-based community per unit of time is O(n), while in a non-hub-based community the number is O(n2). Establishment of a hub service for the community cannot be left to the wayside. LUGNET can serve the community by acting as a shipping hub
     The banking and software industries promise us a global Internet marketplace free from physical forms of money. Commonplace trade of these so-called forms of digital cash, however, will not come overnight, and to make matters worse, major players such as First Virtual, Mondex, NetCheque, NetBill, DigiCash, and CyberCash are all bent on seeing their implementation become the one true standard. Until digital cash is a reality for everyone, the exchange of bank notes or cheques in physical forms will still be routine -- and physical forms of money aren't always cheap. A personal cheque costs only a few cents, but money orders often cost as much as a dollar, and international money orders or foreign drafts often cost several dollars. And after a cheque has been created, it costs 32 cents or more to deliver. Herein lies another opportunity, then, to create a more efficient local marketplace. The centralized hub could in theory handle not only shipping of parcels (for those so inclined) but could also handle monetary exchanges (for those so inclined). If then, for example, LUGNET were to contain a bank-like core, auctioneers would no longer be forced to receive and deposit dozens of separate cheques, and bidders would no longer be forced to write several separate cheques. An auctioneer could receive a single cheque (or virtual cash) from the central core, and bidders would have only to send one cheque for a group of purchases (or to pay for them separately using virtual cash). A localized entity for currency exchange might also have the resources to handle credit-card transactions. The cost savings for such a service could be quite significant for those who choose to use it to its full potential. It is also likely that people would consider a currency transaction hub comforting as well as convenient. Exchange of currencies can also be optimized

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