Washboard wants you to pay $15 to get $10
It used to be that, margin-wise, making money off of money was one of the most lucrative games in town. From currency trading to capital gains to straight-up usury, the business of skimming cash off financial transactions has been one of the most tried and true paths to riches.
But the margins once considered lucrative in that financial game were probably nothing compared to the 5000 basis points at the heart of the business model of the new startup, Washboard.
The service, which launched on Thursday, and is not a hoax, bills itself as helping you "put getting quarters on autopilot so you never have to worry about it again" when you want to go to the laudromat and clean your clothes. To allay those supposed worries, Washboard "provide(s) 2-day shipping on every shipment of quarters" straight to your home so that you always have coins at your disposal.
The catch? A $10 roll of quarters costs you about $15.
Of course, in the banking world, financial firms often have to wait a bit to make money off money - interest, after all, accrues over time. Washboard, by contrast, is predicated on the immediate 5000 basis point yield that comes with taking someone's $15 and instantly turning it into $10.
As markups go, that trick makes Coinstar look like a bargain. After all, those machines at the local grocery usually charge you only (read: "only") 11 percent just to convert your coins into bills. In reverse engineering the process and turning your non-coin money into change, Washboard asks you to submit to a 50 percent markup on the price of your own sweet moolah - all so that you can solve your alleged laundry problem.
The key word, of course, is "alleged" because, as the Boston Globe points out, "Most laundromats offer change machines, and anyone could go to a bank or supermarket customer service desk to get some quarters."
The Globe notes that Washboard founders say they "only pocket about ten percent of the cost as profit—the rest goes to cover shipping." Still, in a VC world where the industry standard 2-2.5 percent management fee makes can make a smart firm millions, 10 percent is a nice net that would likely be quite attractive to investors - assuming that the company can somehow convince lots of consumers that it is a good idea to pay $15 in exchange for $10.
[Image credit: Yannick Trottier (Creative Commons)]