Beware of points based shopping services

InflationI have just reviewed BarterBee yesterday, an online marketplace for swapping videos, music and games, and after giving it some thought today I decided that there was one aspect of BarterBee that I haven’t stressed out well enough, and that is the fact that the website uses points as a way to make trades between users possible.

All points based services have an important disadvantage compared to money based ones — the value of points is supported by your faith in the service and its owners, and sometimes that value can go down. The reasons can be different but the result is similarly unpleasant.

One recent example is MyPoints, a points based rewards program, that I mentioned in the past. Back in April 2007 they devalued reward points by approximately 5% and people who had large amounts stashed in their accounts were not happy about the money they lost.

In the case of BarterBee, the points value is backed by new users who join the service and offer their DVD’s and CD’s for trade. If for some reason offers start to decline, points will have lesser value for you since you will have to give more of them to pay for the same items. In the ultimate case, if all users were to abandon the website, all points you accumulated would have become worthless (BarterBee Terms of Use specifically mention that Points “may not be redeemed for cash, and have no value outside of”).

I don’t mean to say anything negative about BarterBee as a company. They have been running the business for some time and have done a good job adjusting the model to keep the supply fresh and users happy (the service was originally subscription based, then $1 transaction fee replaced subscription, earlier this year BarterBee abandoned all fees). Nevertheless understanding drawbacks of the system you will be part of is important so you can make an educated decision about whether you want to join it or not.

Do you know other points based services? What was your experience with them, good or bad?

Photo courtesy of tico24 at Flickr

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2 Responses to “Beware of points based shopping services”

  1. 1 admirer Jun 5th, 2007 at 8:17 am

    I know another points based service: , its just OK..the stuff they have is pretty worthless to me, but it may be good for others.

  2. 2 Yan Jun 5th, 2007 at 10:19 am

    Thanks for the tip. PoshPoints appear to be free to use and are offering 15 points sign up bonus. Sometimes I wonder how these businesses maintain a quality pool of offered items while giving out bonuses at such high rates. Oh well, this is their puzzle to solve, meanwhile I picked up a nice book from the place. ;-)

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