What is penny auction site?
How about buying a $2,000 Apple MacBook Air at $100? It’s made possible by a new kind of online auction. These days, there is a niche in online auction business that gains in popularity: Penny auction.
Penny auction, in essence, is an auction in which everyone registered can make a bid literally in pennies. Bids are usually start at one penny and will go up – also in pennies – each time someone makes a bid. As the auction timer counts down, each bid made by bidders will add a certain amount of time to the countdown timer.
There is something with penny auction that makes it beneficial for online auction site owners and bidders. For the auction site owners, they can get profits from registration fees and bid payments (bidders need to pay a small amount of money for each bid they made.) For bidders, they can get items much lower than the market price of the items.
However, there is a catch… and a dark side of penny auction; read on…
How does penny auction work out – business-wise?
Different from the traditional eBay-like online auction, bidders participating in penny auction are required to pay a certain amount of money each time they make a bid – usually around 60 cents to 1 dollar for each bid.
Watch this video from one of popular penny auction sites to give you an idea or two on how the online auction works:
This is why this business is lucrative – consider this scenario:
Let’s assume you run a busy penny auction site. For a particular item, say, Apple MacBook Air, you start off bid at 1 cent. You set the timer to 10 seconds; every penny auction site has its own timer settings. You charge $1 for each bid.
Here’s how it works: Every time someone makes a bid, the 10 seconds will be added to the counting down timer, making it a bit of an endless bidding for a popular item.
If a popular item, such as the Apple MacBook Air, priced at $2,000 retail (purchased at, for example, $1,600) were bid by 3,000 bidders (at $1 a bid) and won at $100, then your profit is: $3,000 + $100 – $1,600 = $1,500… in other words, you “loss” $1,500 in product sales but gain $3,000 in service revenue with $1,500 profit. A big business, indeed.
And if you think the 3,000 bids example were unrealistic, consider this: There are some auctions so popular that the bid counts go over 10,000 bids.
For a bidder, winning the Apple MacBook Air at $100 seems like a bargain – or is it? If he’s only bidding 10 times, then his overall cost would be $100 + $10 = $110. A real bargain! However, this only a very rare case; usually, bidders – even the pro ones, bids hundreds if not thousands of times. So yes, your Apple MacBook Air could cost you more than $2,000 if you get yourself caught in the gambling game and don’t know when to stop!
Some caveats
Penny auction is actually an online business offering a win-win solution that will benefits both business owners and auction winners. However, if we really think about it, it’s really benefiting the business owners well – perhaps too well in such a way that there are plenty of scam penny auction sites today.
Scam? Yes – bidders are often can’t control themselves and becoming greedy – this is capitalised by scammers to take their money and run away. How about bids that were run by a script or bots, pretending to be the real bidders in order to increase auction prices; so real bidders on the scam sites are competing with… “robots.” I’m not sure they can win a bargain this way! How about some penny auction sites were established just to scam people by getting the bid money with no actually items delivered?
Those being said, there are some trusted penny auction sites today. As an auction bidder, you need to do your due diligence. You need to check online reviews, testimonials, ratings and such.
Of all I observe, BidsTick is one of the trusted penny auction sites, getting 4.3 star rating on Google Products and plenty of testimonials. You should have a look at such site to give you some ideas on how to start a trusted penny auction site.
Final words
Penny auction sites are very profitable. If you are interested in establishing one, be sure to run ethical ones. There’s a huge market open for ethical penny auction business, as many are scammers.
A good business, either online or off line, will benefit customers while making profits by offering the benefits. So this is your real opportunity to create profit and offer benefit to your customers at the same time.
If you are reading this article because you are looking for information on how to bid on penny auction sites, you’ve been warned – bid responsibly and you might won items you really want at bargain prices.
Ivan Widjaya
On ethical online auction business idea