Though this idea was new to me, I found out that penny auctions have been around for a while. For those who don't know what a penny auction is, allow me to explain. Penny auctions work like this: You must start off by signing up for an account and purchasing bids. These bids are purchased in packs and the individual bids are what you use to bid on the auction of your choosing. Each bid costs a certain dollar amount, usually anywhere between $0.50 to $1.00 and the bid packs are sold accordingly. Once you buy your bid pack you are ready to go! You pick an item that is up for auction and begin to bid. There is a timer attached to the auction that usually begins to count down from about 20 hours or so. Once the timer reaches approximately :20 seconds, that's when the real bidding begins. Each bid raises the sale price of the item by $0.01 and each bid also resets that timer to to usually anywhere from 30 seconds to 10 seconds depending on the auction. This gives others another chance to bid again. Once the timer actually runs out to 00:00, the last person who bid wins that auction. If you are not the winner of the auction, some websites will give you the chance to purchase the item at full retail and put the bids you used on the auction toward the purchase price of the item. Again, each bid has a value amount attached to it. Pretty simple concept right?
I went to a well known penny auction site and watched the auction items on the site for several hours to observe how the system worked. I was amazed! I was watching these high dollar items be auctioned off at a fraction of the cost that the local retailers were charging. I wanted in on the action, so I decided to give it a shot. I purchased a pack of 100 bids for $60 which appeared to be the smallest one I could get. I started by bidding on a bid pack of 15 bids. After only putting in one bid, I couldn't believe it when the timer ran out and I actually won. I then set my sights on a $25 gift card and began to bid. The auction stopped at $0.04 and I won again! How exciting, "this is too easy", I thought. I then went for a bigger item. I put a bid on the item while it still had a couple of hours to go. I watched the clock count down and run out. I couldn't believe it, I won for the third time!
The next day I jumped online and set my sights on a $100 gift card. Well this is when I began to wonder if my winnings the previous day were a total fluke. The timer got to :20 seconds and the bidding began. The bidding went on for what seemed like hours. I decided that I would only spend a certain number of bids on this item and then I would cut my losses there. Well, that number came and went and I was still in it. Before I knew it, I had spent $48 worth of bids trying to win this gift card and I was still being outbid by people who I am certain had spent more money in bids than the card was even worth ( I figured out later that these bidders were using "voucher" bids, which cost them nothing so they had nothing to lose). Not to mention all the new people jumping into the auction late. There does not appear to be any maximum number of bidders at any one time on any one item and bidders are free to leave and enter any auction at anytime during the bidding. I decided that rather than spend all my bids I would just buy the gift card and put that $48 I used bidding toward the full purchase price.
This auction went on to close at over $11.00! So that means that the penny auction company made over $660 on an item valued at $100. Wow! I am in the wrong business! Meanwhile the VERY SAME valued card for the VERY SAME store sold for $4.00. Of course, I wasn't bidding on that one. I looked at the bidding history and it looked like the majority of bidders who were in that auction were in mine as well. I guess that's just how the chips fall sometimes. So at this point I decided that I am not going to purchase anymore bids, but I still had some bids left. I figured why not participate in some auctions for small bid packs? I couldn't catch a break! Every time I made a bid, five other people would bid on top of mine. Even on the smallest packs. There could be nobody that had bid on the pack, but as soon as my bid went in, numerous others poured in on top literally fractions of a second after I bid. There was no pattern to it either. I would bid with random times left on the auction clock and still I would get out bid right away. I ended up using the last of my bids and felt kind of dumb. I thought I was going to keep on getting some killer deals!
All in all, I didn't lose any money. I got $125 in gift cards for $118 ($118 is the total I spent on bids, shipping and paying for the rest of the $100 card). These cards are for a store I generally spend $200 a month at anyway. On top of that, I got a free talking alarm clock. I have since participated in several penny auctions and have so far come out on top. I don't win every time, but I have made out with some good merchandise for cheap and I have not yet spent more than I have gained. I have learned some things though and that is what I want to share with you.
MY TIPS IF YOUR GOING TO TRY A PENNY AUCTION:
- Read all the disclosures on the site. Each site is different with different rules. Reputable penny auction sites tell you everything you need to know if you just take the time to read it.
- Buy the smallest bid pack to start out. That way if you try it and don't like it, you didn't blow big money on the bid pack.
- Always go into an auction expecting to buy the item at full price. If you can't do this, then maybe penny auctions aren't for you in the first place.
- Because you are willing to pay retail, always compare an items "value price" on the auction site to what local or Internet retailers are charging for the same item. I have noticed some differences in pricing. (For example: Right now there is a 16gb ipad on a site that they value at $569.99. A leading retailer has the exact same ipad listed at $529).
- Even if you win right off the bat a few times, don't think you are going to win every time. It's an unrealistic expectation and it just doesn't happen.
- Know your limits and STICK TO THEM. If you tell yourself you are going to stop at a certain point in an auction and cut your losses, stick to that plan and don't keep thinking that "just one more bid" is going to win it for you.
- Last, don't think you are going to make a killing on ebay from all your penny auction winnings. IT ISN'T GOING TO HAPPEN!
In my opinion if you are looking for good deals on consumer products and you are willing to pay the full price for them then why not try your hand at a penny auction. Just be realistic and willing to accept the things I have mentioned. Worst case scenario is you have to buy the item for full price, which is what you planned on doing anyway right? Just make sure what you are getting is authentic brand name merchandise and that the price is reasonable to you. You will find tons of reviews of people who think that penny auctions are a scam or a ripoff. Some people accuse these sites of rigging the auctions. I have no idea if that is true or not. The sites disclose all the information about the process. I think in general most negative comments are made by people who lost their money in a penny auction. In my opinion it is peoples' unrealistic expectations that let them down. You can't win every time and you cannot expect a company to sell $1,500 items for $25 all day long or they would be out of business in no time. Ultimately everyone is looking for a great deal, JUST BE REALISTIC. Penny auctions can be fun, and you can get some smokin' good deals!