A website that will sell me a brand new games console for £10? Surely there must be a catch?

Yes, it’s true. You can buy a brand spanking new games console for £10, and there are hundreds of websites that will all give you these great prices… but of course there is a slight catch! Welcome to the world of online auctions.

Over the last few years, online auction sites have been popping up all over the internet and have become extremely popular amongst people searching for a bargain, even more so during these troubled financial times. To date, thousands of happy customers all over the internet have been bagging brand new Playstations, flat screen televisions, cars and many more high quality items for minute prices. You’re probably wondering how all this is possible, and it’s quite simple really. The idea is, hundreds of people pay a small fee in the hope of getting a bargain price on that item they have always wanted. These ‘small fees’ completely cover the cost of the item, enabling the company to sell the item for buttons.

“Great! So, where’s the catch?” Well, only 1 person gets to buy it. The other few hundred have lost out, but never mind, what’s a couple of hundred pounds between a couple of hundred people? Maybe £1? Which let’s face it, is nothing when you have a good chance of gaining so much more! Sadly, on the vast majority of these auction sites, this isn’t the case....

Let’s take a look at 3 different online auction websites, each using a different auction method. Let´s start with possibly the worst offender – Swoopo.

Swoopo estimate that they sell around 30,000 items a month, at sometimes up to 90% discount off retail price, but are still making a massive profit! How? Let’s see how their “penny auctions” work.

1) All their item prices start off at £0 and have a countdown timer of 24 hours.

2) Users must place bids on an item. A bid costs 50pence.

3) When a user places a bid, the item price goes up by 1 pence, and, if the timer reaches zero, the last user to place a bid wins the item for the displayed price!

Great, that sounds simple enough. I just place a bid when it´s on 2 seconds, right? Er… wrong. When a user places a bid, the timer jumps back up. For example, if an auction has 5 seconds left and someone places a bid, the timer jumps back up to 20 seconds. This creates a mad bidding war between several users, all determined to get that Playstation for £10, so they keep bidding, and bidding, and bidding. That´s it, you´re hooked! Get prepared to start spending pal, because now you´ve placed 40 bids at a cost of £20, and you´re not going to just let your investment slip away like that, are you? (On a quick side note, the people who are bidding against you might not even be sitting at their computers as Swoopo lets you use a function called “Bid Butler”. This is an automated bidding service that just keeps bidding for you as soon as the auction is about to end whether you’re sat at your computer or not).

So, going back to the earlier point that a couple of hundred people lose a pound each to fund this great deal for one lucky winner is not normally the case with Swoopo… it’s more like 20 desperate users engaged in a frantic bidding war - desperately trying to win the auction in order to justify their actions for spending so much cash who are covering the cost of the product.

If a Playstation 3 (RRP £240.00) sells on Swoopo via a penny auction for £20.00, it has taken exactly 2,000 bids. With bids costing 50 pence a pop, Swoopo take £1,000 in revenue in this example. Swoopo buy the Playstation and send it to the winner. They have made £760.00 profit from a few hours of bidding wars - good business for Swoopo, you have to agree!

Swoopo is 100% not a scam. It’s an extremely clever business model. If you play wisely, and don’t over commit yourself, you may very well get a great bargain. Bear in mind though, the larger Swoopo grows, the more people are bidding. The more people bidding, the harder it is to win.

Conclusion – Be extremely wary…. On second thoughts, don´t go anywhere near it!

Now let’s take a look at another auction method. This one is called “Lowest Unique Bid” and out of the many sites where you can find this method in place, one is called Bidster.

Bidster’s auctions normally run for around a week, but can be 2 months for the mega expensive items such as cars, in order to make sure they get enough bids to make a worthwhile profit. The lowest unique bid method is an old one, and quite simple. Many people place bids on an item from 1 pence upwards. Users cannot see other users’ bids. When the auction ends, the person who has made the lowest ‘unique’ bid is awarded the item for that particular value. E.g.

1 pence - Dave, Mark not unique, more than 1 person placed this bid
2 pence - Susie, Jeff not unique, more than 1 person placed this bid
3 pence – Bob Lowest unique bid! Winner!
4 pence – Sonya unique, but not the lowest bid
5 pence - John, Mary, Jane not unique, more than 1 person placed this bid

Bob has the lowest unique bid, and therefore, gets to buy the auction item for 3 pence.

At Bidster, when you place a bid it tells you the status of your bid as you place it. “Not unique”, “unique, but not the lowest” or “the lowest unique bid”. This entices you to try again, and again, and again. What more, you can place what are called “interval bids” – you nominate a low bid, and a high bid, and Bidster will automatically place a bid for you on every number in between the two. This is a great way to snipe an auction when it is near to closing…. or maybe it´s a just a time-saving thing so you don´t need to place all those individual bids manually? Or maybe, just maybe, it´s a way for Bidster to get you to eat up those bids a little quicker! Either way, this is definitely the way Bidster makes the majority of its profit. Let´s face it, who the hell would sit there placing manual bid after manual bid to keep getting the message “Not unique”. Not exactly an encouragement to keep bidding, is it?

An Apple Macbook worth £899.00 recently sold on Bidster for £13.53, taking a total of 10,232 bids (which cost 50 pence each to place), which totals to £5,116.00 in bid revenue. Add on the £13.53, take away the price of the product and Bidster are left with a profit of £4,230.53p.

Conclusion – Still a money eater, but nowhere near as addictive or dangerous as Swoopo. No continuous “about to end!” timer and although it has its “suck you in” factor, it´s not nearly as great as Swoopo´s. Place a few bids, if you get lucky, great!

The third and final auction site I will be looking at is called Spree4. It´s a fairly new site, and I don´t even know what I would call their method of auctioning as it´s one I´ve not seen before. Price drop auction? Hidden price auction? I´ve no idea, but let´s take a look at how they work. (Taken from their how it works section).

1) The prices of all items on the site are kept hidden from all users.
2) To see the price of an item, all you need to do is click the ‘Show Price’ button!
3) Every time a user views the price of an item, the price drops by 30p, so the price of the item is constantly falling!
4) If you like the price of the item, you can buy it! It’s that simple!

For your info, clicking that ‘show price’ button costs 1 “credit” (which has a value of £1).

Now, it might be worth mentioning that Spree4 also run “£10 auctions”, which cannot be bought until the price hits a value of £10 or lower.

For every product listed, they tend to have 2 normal “buy when you like” auctions and 1 £10 auction. “If you don’t like one price, check the other” is the idea behind this, although it´s probably just another way to get you to use your credits that tiny bit quicker.

Now in principle, this is much like the other sites in the sense that many people contribute a small amount so that one person can gain, but when you think about it, this site arguably offers much more value:. I think we need to look at this site from a different angle.

1) Out of the 3 sites mentioned, Spree4 is the only site where you know 100% you can buy the item straight away if you like the price (bar the £10 auctions, of course).

2) You don’t get sucked in. Place 1 bid, just 1, and if you like the price, snatch it up! Don’t like the price? Simple, check back a few days later and see if it’s more to your liking.

3) Unlike the other sites, the more it grows and the more users it gets, the quicker prices drop and the better chance you have of finding a genuine bargain or a price to your liking. This is a massive point, as it’s completely the opposite case for the other mentioned sites.

Now, for those £10 auctions: I’m sure the site will get many critics who may say that Spree4 will also make a lot of money from these low sales prices, and they are 100% right – but let´s be honest, in this case, the saving really is spread out over many users all paying £1 each, and not 20 users spending an astronomical amount for nothing. Say you check the price of a £10 auction, and the price is £150. You check a day later, and the price is £120. You now have the knowledge that if the price is dropping around £30 a day, you should check back in a little over 3 days and try to be the one who makes it drop to that £10 mark. That’s an investment of £2 over the space of 2 days that may just give you the knowledge to win a £500 item for £10. At other auction sites, you spend £2 in under 1 minute, and much more.

Conclusion – Spree4 may also be another online money making machine, but they have adopted an auction style which provides big savings and mixed it with a relaxed laid back style of shopping. I think this is going to become a big thing, and online shopping may have just taken a step forward. Really want to step into the world of online auctions? Try this option, your cash will go a lot further here.

Sources:

www.swoopo.co.uk

www.bidster.co.uk

www.spree4.com