Online bidding and penny auctions

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A couple weeks ago, a friend of mine came to me bragging about her brand new IPad and assuring me she got it for $50! I could only believe her after I saw her receipt, it was just incredible!

How did she manage to get such a good deal?

The answer might be surprising to some of you but she bought it by bidding on one of the many rising penny auction websites.

Quibids, Happy Bidday or ZBiddy are all part of this new trend of e-business: penny auctions.

Penny auctions are a type of pay-to-play auction format. Potential buyers must register with the penny auction site and purchase a number of bids that they can then use in the auctions. Bids commonly cost around $0.60 and most penny auction sites offer packages in which users can save money by purchasing larger quantities at one time.

What is particularly interesting is that those websites offer products varying from small gift cards to higher ticket items such as computers, tablets or TVs, however they always tend to start at very low values (often 1$) and each new bid adds one penny ($0.01) to the price.

Other than that, it's just like any other auction, people bid on items they’re interested in, and when the auction clock runs out, the final bidder wins the item for its closing price.

Another interesting fact is that some of those websites such as Quibids offer the option to buy the item for the full price if the bidder loses. That way, the bids count towards the full price, limiting the amount of money wasted on bids.

You still think it’s a scam? Well you’re not wrong!

In order to get her Ipad, my friend bided exact 453 times, at a price of 0.60$ a bid, my friend actually paid $271,8 in fees!

Considering the regular price of her IPad is around $400, it could still be considered a deal, just clearly not as appealing as the website lets it sound like.

The Washington post article linked below has a very interesting psychological view of how such websites exploit our mind.

http://www.onlineauctionreviews.org/strategies/auctions-101/

http://www.washingtonpost.com/wp-dyn/content/article/2009/07/11/AR2009071100684.html

Group buying trend

Groupon, Tuango, Linving social, Dealfinder, Dailydeal.com, all those sites are part of the big social media marketing trend that’s group buying. The trend originated in China where tuángòu or team buying allowed to get discount prices from retailer when a large group of people were willing to buy the same item. Nowadays, the whole world had adopted the trend and some of those group buying sites have had a triple digit growth rate in the past couple years.

How does it work?

The concept is fairly simple: group-buying sites contact local businesses willing to offer big discounts online. Each site sends its subscribers a daily e-mail with the deal and a description of the business offering the deal, the minimum number of purchasers required for the deal and the time remaining. If enough people buy, the deal is "on" and purchasers can use their coupons to get the service they paid for.

Why does it work?

For customers, group buying gives access to exceptional discounts that allow the coupon buyer to experience services that would be otherwise inaccessible or too expensive, it allows the customer to discover new restaurants, new spas, new shops and new activities. For the seller, it is a “free” marketing and promotional tool that allows businesses to get their business known by all the subscribers of the deal’s website and getting them to try the service or product offered for a cheap price, hoping those customer will return in the future. It also works for luxury businesses such as spas or fancy restaurants by providing them with the opportunity to fill their tables. Finally, it is a great way to get rid off excess inventory especially when the holding cost is higher than the loss from selling at a discount.

A lot of new websites are appearing everyday and a lot of people are now questioning whether the business has a future but what is certain is that group buying has definitely changed the way Canadians buy and customers now think twice before paying full price.

http://www.canadaone.com/ezine/apr11/group_on.html
http://www.theglobeandmail.com/globe-investor/personal-finance/home-cents/im-not-yet-buying-the-group-buy-trend/article4327638/
http://www.wazua.co.ke/inner.aspx?sec=groups&aid=74

Online shopping Intro

There was a time, shopping implied struggling to find a parking spot, wasting time going from shop to shop trying to find that perfect dress, waiting in line at the cash, carrying all those heavy bags and even with all that, the choice was limited and you might end your shopping trip without what you were looking for.

Nowadays, a significant number of people go online and after a few clicks, have browsed more dresses than what any brick and mortar shop could ever hold and have their order delivered to their own door.

Online shopping has been growing exponentially: in the U.S., Forrester Research shows that $248.7 billion online sales are expected by 2014. A compounded growth of 10% is forecast for the next five years. Even more impressive, online sales have increased by over 25% in China in 2012. A number of technological innovations including new security measures to protect credit card’s information as well as the improvement of shipping procedures and the increase in online deals and coupon offerings are some of the main innovations that have helped online shopping.

In this blog, I will discuss the main innovations that encourage shoppers to shop online, the main trends in online shopping, how websites like Amazon, Beyond the rack or Zappos are revolutionizing the retailing sector and how more traditional companies are trying to catch up with the trend. I will also discuss the new business models that have emerged after the introduction of online shopping and the main disadvantages of this mode of shopping.

Sources: Forrester Researh, Global times China, WWWMetrics