How Penny Auctions Work
The concept of a Penny Auction is simple and so is the process of participating in and winning auctions. The following points illustrate the basic flow of how the Penny Auction process works.
Step 1: People register to become members of our sites, which will allow them access to all auction items up for bid. In order for consumers to participate in auctions, they must purchase Bids or Bid Packs. We will sell individual bids for $0.60 to $1.00 depending on the quantity of bids purchased in packs at one time. Bid packs can consist of 10, 25, 50, 100 or more individual bids. The term “bid pack” merely refers to a collection of a set number of bids.
Step 2: Members locate auctions of interest on our site and start placing bids for one or more items. For each bid that is placed (i.e. spending one of their bids worth $0.60 to $1.00 each) it raises the price of an auction item by just $0.01. This enables the items to potentially sell cheaply (i.e. the winning bid price) while making a profit for the company. It is important to note that once a bid has been expended, the bid fee is not returned to the consumer.
Step 3: The auctions are timed; smaller items may only be ten-minute auctions while larger items may be longer (hours and maybe up to a couple of days). There is an eventual end time on all auctions should they run excessively long just to ensure all auctions will end with a winner being named. However, it is rare for auctions to last more than 24 to 48 hours.
Step 4: For the sake of simplicity, each time an item is bid on, ten seconds are added to the bid clock. So the closing seconds of an auction can last however long people want to bid on an item(s) – helping to escalate the final price of the item(s). When the time expires on the clock, the highest bidder wins the auction at the stated price.
Step 5: Members who have won an auction are then directed to proceed to “check out” to pay for the merchandise they have won (i.e. the closing auction price) and arrange for shipping. Most items are simply drop-shipped from our vendors directly to our members and often the company will cover the shipping costs.
The following is an example auction:
The following auction represents a flat screen Toshiba TV. With bids averaging $0.60, the amount the company has collected so far is $2,577.00, with the retail price being around $500.00. Therefore, the profit thus far is over $2,000.00 and the auction is still in progress.
- The number in red represents the time left in the auction as the time clock counts down.
- The dollar amount in green represents the current auction price of the item.
- Since each bid adds $0.01 to the price of the auction, the total number of bids placed so far is 4,295. ($42.95 x 100)
- The name “Rapdog” represents the member’s auction name and the fact that they are the last (and highest) bidder on this auction.
- Members can bid on auctions via a website or in some cases using their mobile phone or other similar mobile devices.
Penny Auction companies typically collect 150% to 800% of the value of a product that has been auctioned. As noted, once a member purchases a bid pack, they are free to cast their bids on any active auction. However, the company makes money at the time a member purchases a bid pack, but it’s easy to compute average revenue levels on each item that is being auctioned as described above. Also, in order to maximize our profit, we strategically analyze the auction data to determine how many higher-end to lower-end merchandise auctions to host on an ongoing daily, weekly, or monthly basis.
It’s important to note that every single auction will have a winner if just a single bid has been cast toward that auction. The highest bidder always wins the item when the clock timer has run down to zero.
Some of the items that will be via auctions will include, but are not limited to:
► Flat screen TVs
► MP3 players
► High end home theatre electronics
► Home décor items and kitchen electronics
► Small scale consumer electronics such as iphones, ipads, and other mobile devices
► Gift cards
► Cruises and other vacation packages
► Services (flying lessons, scuba lessons, NASCAR driving experience, etc.)