The success stories are all over the internet about this latest rage in commerce. Buy what ever you wish for just pennies. Sounds like a novel idea doesn't it? But is it all true, does that age old saying; "If it sounds to good to be true then it usually is" ring as true today as it did then. What better way to find out than to conduct our own study!
To understand the answer we must first understand what these sites do/offer. Im sure we all know how or what they do in theory but lets see if we can find out what and why they do it.
These "Penny" sites seem to have originated in Europe and operate very differently than sites such as eBay. The merchandise that is being sold is sold by the owners of the site, not individuals like in eBay. The auctions also have an announced ending time, also like eBay, but the biggest difference is the bidding process. As a potential buyer you pay a fee - typically between 50 cents to a $1 - for each bid you make. Now heres another way these sites differ, with each additional bid made in the last 20 seconds the auction timer gets reset back to 20 seconds remaining. So how does this all work then?
Bidders can purchase "bid Packages" Heres an example of what a bid packages is, a bid package contains 100 bids for $50. An auction is announced on the site, lets say for an iPad2, and the ending time, bid price, and other details of the that auction are detailed. For this iPad lets say the auction is set for 6 hours with each bid adding 1 cent to the price.
Bidding is often slow to start with, as with other bidding sites, its near the end of the auction where the magic happens. Lets say theres 20 seconds to go and the top bid is only $1. But every time the clock nears zero another bid comes in resetting the timer back to 20 seconds. So finally there is only one bidder that remains and he or she will win the iPad2, which has a listed price of $499, for what ever the final bid was which could be as low as $25.
So wait, you get the iPad2 for only $25, what do these sites get out of it, its starting to sound a little suspect. Well not really, since every bid costs 50 cents, and it took 2,500 bids to reach the $25 winning price. The auction site takes in $1,250 add the $25 for the iPad2 and you get a total of $1,275! ( if we assume they paid retail price for the iPad then thats an astounding $776 in profit! ) But you actually don't get the iPad2 for $25, remember you agreed upon paying for each bid you made. So lets say you used $50 dollars in bids, you're actually paying them $75 plus shipping for the iPad. Sill pennies considering the original retail price of $499. Thats a $424 savings, before shipping!
So to the victor goes the spoils, but if you do lose, you still must pay for the bids you made. So be warned, and be smart. And don't forget to pick up those pennies, don't toss them away anymore, for they might just add up to a new toy if you bid smart.
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