The Gemz iPhone app

Loyal Elmwood shoppers, get out your iPhones!

A new Berkeley company has started a neighborhood merchant loyalty program that they hope will entice people to focus their spending in the Elmwood district.

Gemz, which formally launched two weeks ago, is like a digital version of the Peet’s coffee card (buy 10 cups of coffee, get one free), only it can be used among a number of merchants.

The idea is that a shopper can download the Gemz app and then buy some wine at Vintage Berkeley and get some Gemz points electronically, take their laundry to C & C cleaners and get some more Gemz points, and then redeem those points for something, like a sandwich at Ashby Market or a new picture frame at Frame-O-Rama. Earned points can be used anywhere among participating merchants.

“You get your free stuff faster,” said Eoin Russell, a longtime web and mobile phone developer and one of Gemz’s founders. “Instead of having to buy 10 sandwiches to get the 11th one free you can go to a bunch of merchants.”

So far eight merchants have signed up for Gemz including the ones named above and Boss Robot Hobby, Filippos, College Cleaners and Bill’s Trading Post and Gem Gallery. Gemz officials hope to eventually bring in a large number of the Elmwood’s 117 merchants.

Numerous companies have sprung up in the couple of years to try and snare the local advertising market, estimated by some economists to be $100 billion a year. Most seem to be discount sites like Groupon, Living Social and Facebook Local, that send daily deals by email to hundreds of thousands of people.

But those kinds of sites can be expensive for small merchants, as they use deep discounts to lure in customers, many of whom regard the bargain as a one-time-thing. The coupons don’t necessarily create return business, which is the backbone of a small store’s economy, said Ted Shelton, one of Gemz’ founders

“The more we dug into Groupon and deep discount daily spaces the more it became apparent how terrible it is for local business,” said Shelton. “Yet it is being grasped by local business as a marketing technique because it’s effectively getting people in the door. … But many of the shoppers don’t become loyal customers. They don’t return to the shop.”

The Gemz founders, who include Shelton, a serial entrepreneur who lives in Berkeley, Sam Perry, a former Reuters journalist and frequent investor in Silicon Valley start-ups (who had a moment of fame when Oprah Winfrey cried on his shoulder at Grant Park in Chicago when Obama acknowledged he had won the presidency) and Russell, held a soft launch party last week at Vintage Berkeley to show off the Gemz app. People milled around, sipping a selection of either rose, Malbec, or Zinfandel wine and talked about doing business in a tough economy.

“It seem like it (Gemz) has gotten some traction,” said Matt Stevenson, the wine buyer for Vintage Berkeley. His store offers 1,500 Gemz points for every two bottles of wine sold and 18,000 Gemz points for a case. “Anything that rewards customers for shopping in your neighborhood, either with you or one of your neighbors can’t be bad. I am all about having a healthy neighborhood so we might as well incentivize people to do it.”

Ted Shelton, one of the founders of Gemz

Shelton rolled out Gemz in the Elmwood district because it is close to his house and he frequents the shops. The company plans to expand into downtown San Carlos soon and is looking for another shopping community along the 680 corridor, he said. Gemz wants to test-market its product and collect data, both to help the merchants in the program and to have a track record they can bring to venture capitalists, he said.

Merchants will buy Gemz points for a certain amount from the company. When customers redeem those points, the company will buy them back, making about a 10% profit, said Shelton.

For those who don’t have an iPhone, Gemz will soon have a traditional paper loyalty card and will send out local deals via email.

Russell also thinks that Gemz offers an opportunity to create a third social network. People use Facebook to communicate with their friends and LinkedIn to forge professional relationships. Where is the place for neighbors to talk about where to find a good babysitter, what events are happening, where prices are best? There’s not a great mechanism for that, and Russell thinks Gemz might be the vehicle to do that.

Frances Dinkelspiel

Frances Dinkelspiel (co-founder) is a journalist and author. Her first book, Towers of Gold: How One Jewish Immigrant Named Isaias Hellman Created California,...

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8 Comments

  1. This is a great idea. Anything that promotes local commerce is great, and it’s awesome to see technology promoting these aims. We’ve gotten so caught up in global consumerism that we’ve lost sight of the specific benefits of local goods. I’m looking forward to seeing other apps that support local communities like this.

  2. Hopefully they will add in Nabolom, Sweet Dreams, the Beanery, the shoestore, Jeremy’s, Gordo’s, the sushi place, the Beauty Center, the movie theater, Roma, ici, that little market on Ashby, the donut shop, Papyrus, and Mrs. Dalloways…because those are the places I shop in the Elmwood! Eight businesses just isn’t enough.

  3. The Gemz company sells 1$GMZ for 1$USD and buys 1$GMZ for $0.90USD — but only with participating Elmwood vendors.   This raises all kinds of interesting possibilities.   One nifty example:

    Imagine a hypothetical on-line “hyper-local” blog — call it “Elmwoodside”.  Elmwoodside  gets some of its revenue from voluntary subscriptions, and some from selling ads.

    One possibility is for Elmwoodside to sell subscriptions for, let’s say,  9$USD — but include as a premium gift, with every subscription, 10$GMZ.   In other words, the price of a subscription is -1 dollars.  You earn a dollar just by subscribing!   Imagine that: a newspaper that pay you to subscribe.

    Of course, there’s a catch.  For subscribing to Elmwoodside, you give up 9 US dollars and get back 10 GMZ dollars.   GMZ dollars are only really “good” at participating Elmwood merchants.    If you are inclined to shop with those merchants then the “free dollar” that comes from subscribing to Elmwoodside is a good deal!

    Elmwoodside isn’t losing money by giving away dollars like that.   Instead, it works this way:

    You (subscriber) give Elmwoodside 9$USD and they give you back 10$GMZ.   The question is: where did Elmwoodside get that 10$GMZ and how much did Elmwoodside pay for that 10$GMZ?  If Elmwoodside can buy 10$GMZ for less than 9$USD, then even while they are paying people to subscribe, they can still earn revenue.

    Elmwoodside can buy 10$GMZ for a mere 8$USD if they sweeten the deal with some advertising space on the web site.   A participating Elmwood merchant can buy 10$GMZ for 10$USD from the Gemz company — then it can sell that 10$GMZ to Elmwoodside for 8$USD plus some advertising space.   That 8$USD is guaranteed to eventually be spent at some participating vendor.

    In the end, the subscriber got 10$USD worth of goods and services in Elmwood for only 9$USD.

    Elmwoodside collected 2$USD for its operating expenses.  It also had to run an ad.

    Some participating Elmwood vendor paid a net 2$USD for a 10$GMZ exquisitely well targeted ad.

    (This general scheme of things is part of why there is such excitement these days about related efforts Groupon and BitCoin.)

    Sunday coupon sections worked along similar lines, back when, in printed papers.

  4. Cool idea and I am going to try it out.  One small nitpick though: their icon looks really ugly on my iPhone’s app screen.  I’m on the iPhone 4, which has a retina display.  It looks like they didn’t think to include a higher-res icon for the retina display.

  5. Gemz is, in some sense, a local currency – call it $GMZ. 

    The Gemz company serves as kind of a “central bank” for that currency.   They guarantee that (at least some) people can buy 1 $GMZ for 1 $ USD.  They also guarantee that (some) people can sell 1 $GMZ for 0.90 $ USD.  

    Gemz, the company,  needs to add value to the currency — give some reason why it is better to use 1 $GMZ instead of 1 $USD — to justify that 10% loss when selling $GMZ into $USD.   They do this by constructing a geographically regional bias in the currency:

    Gemz will only buy and sell $GMZ from a select group of Elmwood Vendors.  When a participating Elmwood Vendor gives away 1 $ GMZ as a purchase rebate, that is like giving away a coupon for $0.10 off, good at any participating Elmwood vendor. 

    Gemz may as well circulate freely like ordinary currency.   The “added value” of Gemz is at the point of their issue and their redemption:  only participating Elmwood vendors get to receive newly minted Gemz and only those same vendors can sell them back for $USD at ninety cents on the dollar.   Free circulation wouldn’t hurt those issue and redemption “choke points”.  

    For the average person:

    Barring unusual circumstances,  the cheapest way to get your $GMZ will be from a participating Elmwood vendor;    the cheapest way to spend your $GMZ will be to spend them at a participating Elmwood vendor.

    The participating vendors are, in that sense, the “member banks” of the Gemz “central bank”.

    Everything else about the firm is their particular “financial services” — how they justify taking that 10% cut on selling.

    It’s very interesting.

    An interesting difference between this form of “central bank” and, say, the fed is that the “member banks” in this case don’t actually own  / control the currency.   The ministerial role is privatized.   I’m not sure that’s optimal but it’ll be a luxury when that question matters.

  6. @B_Waxman:disqus- Thank you for your question.  Currently you can only use your Gemz with a merchant who has a Gemz offer.  However, we are always implementing new features and will keep you updated as they are launched.

  7. Question: 

    Are Gemz points freely transferable?   For example, if I have some Gemz points can I give them (at basically no cost other than their intrinsic value) to my wife or my neighbor?     Or, instead, may I only ever transfer them to a Gemz vendor or the company itself?