Would this have worked ?

[Dolby]

Thought about something towards the end of last year - but was put off carrying it out because penny pincher auctions, scams, CPA etc starting up at the time ... but curious what you would have thought?

The idea was a standard auction - brand new products through the correct channels - starting at R1.00 ... just like a Bidorbuy.

However the difference being that no one knows what the highest bid is, as it's hidden - and you're essentially bidding/submitting what you you'd pay or what you feel the product is worth. The product is up for a week or two and the highest after that point, takes it home ... whether R5.00 or R500.00.

Here's the 'catch' : You'd pay submit your offer or what you'd pay - maybe a few rand. The idea being that the cost to submit covers a fair amount of the item. The final winner covers the balance.

So - a Mede8tor retailing for R1999.00 and a cost to submit/offer at R10.00. You'd put what you feel it's really worth - maybe R1500.00 and if you're the highest, you get the product 25% cheaper.

If not, you've lost R10.00

Would it have worked and you made use of it ?

 

[CR34M3]

Interesting idea... let me just get the mechanics right:

Scenario 1 ("covering the balance"): 5 people bid low, you bid high (R100). So they all pay R10 each and you pay the remaining R50? If not, which balance is covered exactly?

Scenario 2 ("bid cost"): 500 people bid low, you bid high (R50) on an item worth say R500. Does the bid cost vary according to the number of bids, item value and highest bid?

Just wondering. Cool idea none the less.

 

[ebendl]

One problem: how do I break ties?

 

[Creag]

I like the idea. Without exploring it further, I think it's fair provided the terms and conditions are fully understood up front.

 

[DJ...]

Economies of scale are not on your side here. The greater number of bidders you have, the more unlikely it becomes to actually attain a decent discount, therefore I wouldn't pay the bid fee. Charging for the privilege of bidding won't work IMHO, especially if I'm shooting in the dark...

 

[DJ...]

Another thing is if I'm pipped to the post by R10 or even R20, the fee then seems exorbitant.

You need to think about the benefits to the sellers and the bidders - they're rather slim...

 

[Wyzak]

Sounds a lot like that other gambling site which was deemed to be illegal in SA. Be careful.

 

[PsyWulf]

Sounds a lot like that other gambling site which was deemed to be illegal in SA. Be careful.

This. Penny auction site with an extra layer of pain by the read of it

 

[Nerfherder]

Your bidding price needs to be relative to the cost of your item.

Like R10 for a R100 item is going to make you a lot of money but not going to attract bids.

and R1 on a R1000 item wont make you money


So you got to figure a good ratio of bidding price to item price.

Also you must give the bidders some info... like perhaps the total bids or the average bid. So you can see that if the average bid is R800 on a R2k item that your bid of R1300 might stand a chance... still requires a bit of thinking and not just a shot in the dark.

Then after the auction the full bidding list must be available. Also.. if you want to be fair then you could make it the highest unique bid.

 

[killadoob]

It won't work, the people losing out will be the sellers because nobody in their right mind is going to bid higher than the object is worth so they will make a loss most of the time.

The penny auction sites count on cash coming in to cover the goods and beyond where as this type of setup would not generate much profit other than selling the items at the retail price which could prove an issue. Doesn't seem viable for the sellers to run this model. They would be better off trying to sell 100 of them at 15% discount or running a special on groupon. You could get a situation where there is no interest generated in a product and a bid of 30% comes in and is accepted because no war started so i don't see how it could work.

 

[Dolby]

Thanks for the replies.

Firstly, I didn't do it purely because of the anti-gambling. I keep a keen eye on MyBB

Everything was calculated and the 'pay in' was relative to whatever was being auctioned. I had all the figures and percentages worked out. The above was purely as an example to make things easier.

Basically :

iPod for R1,000.00 ... I pay R700.00.
20 x bids at R10.00 = R200.00
Highest bidder at R500.00 = break even

It does rely on 20+ bidders and will take a few months to actually get the ball rolling - meaning there may very well be a loss at the start. However, using the above example with only 10 x bids = R100.00 plus the highest at R500.00 is only a R100.00 loss.

As soon as you're getting 50+ bidders, you're making the product cost back in the bids alone - and the highest bid is purely the profit.

Also - the idea was not to bid R100.00 on the iPod - but rather to pay 15-20% less than retail. The higher you do go to the retail, the greater the chance of taking it home. The other thing was not an impulse buy, but rather planning on buying it.

I was looking for a Med8etor a few months back at knew I'd be spend R2,000.00 in a few weeks. Paying R20.00 and offering R1800.00 means the odds are extremely great for me saving just 10%.

A penny auction is pure gambling ... is much more expensive ... and the item is typically 95% off (achieved by chance). The is would - IMO - be closer to an online store than penny auction

 

[Dolby]

You could get a situation where there is no interest generated in a product and a bid of 30% comes in and is accepted because no war started so i don't see how it could work.

... and I'd expect this situation for a few months and be prepared to take a a knock on the auctions. I'd put relatively cheap items on so that my loss may be large in % - but not monetary.

In the above iPOd example for R1,000.00, I paid R700.00. Assuming only that loan person bid 30%, I'd get his R300.00 plus R10.00 - and my loss would be R390.00. Odds of a single person bidding are almost none ....

 

[Nerfherder]

... and I'd expect this situation for a few months and be prepared to take a a knock on the auctions. I'd put relatively cheap items on so that my loss may be large in % - but not monetary.

In the above iPOd example for R1,000.00, I paid R700.00. Assuming only that loan person bid 30%, I'd get his R300.00 plus R10.00 - and my loss would be R390.00. Odds of a single person bidding are almost none ....

Just have a min bids... so if less than 10 people bid then the auction is off.

 

[Dolby]

A minimum bid was an option - and someone also mentioned a minimum bid - but I thought the less restrictions, the better.

So rather than having extra clauses and smallprint that says :

if the bids are below x, the auction is off
if the bid is less than x, the auction is off
if the x happens before y, the auction is off

I rather just have it simple and take a small knock if needed. The more transparent it is, the more credible it seems to people

 

[Nerfherder]

... and I'd expect this situation for a few months and be prepared to take a a knock on the auctions. I'd put relatively cheap items on so that my loss may be large in % - but not monetary.

In the above iPOd example for R1,000.00, I paid R700.00. Assuming only that loan person bid 30%, I'd get his R300.00 plus R10.00 - and my loss would be R390.00. Odds of a single person bidding are almost none ....

Just have a min bids... so if less than 10 people bid then the auction is off.

 

[DJ...]

All good and well running the numbers, but they're irrelevant until you can demonstrate the value to me as a bidder (considering my earlier post) and to sellers.

Or are you selling the items yourself? In which case risking sales at large discounts (which is your one drawing card for bidders) means you'll soon be out of business. Unlikely you'll cover ordinary ecommerce overheads with minute margins.

You haven't convinced me yet...

 

[Dolby]

You haven't convinced me yet...

... 90% chance of getting that media streamer at 20% cheaper?
... 60% chance of getting that iPod 50% cheaper?

Though - this is actually why I'm asking here ... to get the different views and opinions and to see if what I've missed or haven't thought of.

 

[Dolby]

Or are you selling the items yourself? In which case risking sales at large discounts (which is your one drawing card for bidders) means you'll soon be out of business. Unlikely you'll cover ordinary ecommerce overheads with minute margins.

Aside from the initial setup fee, designing the website and the back end - the overheads seem to be minimal themselves? I would only do 2 or 3 auctions at a time though - so maybe 8-10 per month.

 

[MagicDude4Eva]

i would also look at fulfillment (will you stock the products or will they be shipped from the seller), who handles warranty/CPA. Also, how will you deal with payments (and especially now with CPA customers having the option to opt out of a sale at the fall of the hammer). Then there is customer support, live-help and ticketing (i.e. Zendesk). Marketing is something you need to look at - the principle "build and they will come" does not apply anymore. Adwords will cost you a bundle on high-ranking keywords. Typically Facebook competitions or viral campaigns don't really carry much traffic.

But most importantly, your buyers will want to purchase for the lowest possible price. Security and trust in your site is key. Good luck with your initiative, will be lots of tears, blood and sweat, but I somewhat feel it will not be a sustainable/scalable business (somewhat a hybrid between bidorbuy and group buying sites) - customer loyalty/stickiness will be problematic if you don't offer a good spread of products (and also remember, that nowadays most customers want to buy something now and not having to wait a few weeks).

 

[DJ...]

... 90% chance of getting that media streamer at 20% cheaper?
... 60% chance of getting that iPod 50% cheaper?

If I was a VC listening to this pitch I'd be rather unimpressed because those are waffle numbers. You simply cannot quantify those percentages nor guarantee them. And as I posted earlier, the economies of scale would work against you. The only way to overcome this is to operate in a more closed encironment like the way car dealers now interact.

This idea needs more thinking. The benefit to me as a bidder is slim, considering I must pay for the privilege of bidding, the only difference being I cannot see other bids. So I'm being charged to see less information. Traditional auction sites already typically sell at a discount to RRP, so I'm not sure how limiting data to bidders will result in cheaper products.

Also, your costs will be far higher than I suspect you've forecast, especially if you want a stable, quality service...