This post is about losing money, buying pointless things and how you can learn from my mistakes. Read on to learn about how penny auctions work, my experience, and how to mindfully use them.
Yes, a new internet twist on an old model has emerged. We now have penny auctions. Things like iPads sell for $0.27 – and this is not a scam. In fact, it’s a (sadly) brilliant business model, given our consumer-crazed economy. I’d like to share an experiment I conducted back in August regarding how to use penny auctions to buy “things” on the cheap.
There are multiple sites that do this, but my experience was with Quibids. A warning: Internet penny auctions are addicting and, as you’ll read about, I do not recommend using them spontaneously.
Here’s how it works. First, you have to buy bids before bidding (they cost $0.60 ea). Second you go look at their auctions.
Nearly everything on the site starts for a penny. Anyone can bid. Each time someone bids, the price of the item goes up by one cent. The most recent bidder becomes the “Current Winner”. And here’s the twist: every time a bid is cast, the clock resets to at least ten seconds — giving dozens of more people the ability to bid. The auction only ends when the timer runs out because no one else bids. When the auction ends, the winner pays the ridiculously low final price of the item plus shipping.
Let’s take an actual example: An HP All-in-One Printer recently sold for $14.38. Compuxparts was the winning bidder. You can see in the bidding history on the right of the page that other people were in competition for it, but didn’t get it. Compuxparts paid $14.38 and got $260 printer. The other people got nothing.
However, the losing bidders can “Buy it Now”, which credits the amount they bid to the retail price of the auction. If you had bid 100 times, I would get to deduct $60 (60 cent bids multiplied by 100 bids) from the price. Better than nothing.
So how does Quibids make money? It’s rather ingenious. As a penny auction, that means that 1,438 bids were placed for the item. Each person paid $0.60 to bid. Which meant that Quibids got $862.80 from those bids, plus the $14.38 from the winner. Quibids made a 330% profit off that auction – and they probably didn’t pay full price for the printer in the first place!
Let’s take a look at my experience ….
Me and Quibids (or How I Spent $82 Unnecessarily)
Again, I admit, it’s addicting. It’s a very flashy website and in a way, it’s like gambling. It’s oddly exciting to see your username as “Current Winner”. I ended up winning the tiniest trashcan you’ve ever seen (a seven inch simplehuman trashcan), and losing auctions on a football and a basketball, both of which I bought with the “Buy It Now” feature.
So is it worth it? In a word: no. Not unless you use the mindful way of shopping. If you go to this site right now and decide to participate you’re going to end up spending money on and buying things you don’t need and probably never would have wanted if you didn’t click the link. My mistake was curiosity and spontaneity.
If you’re interested in the numbers (rounded for simplicity): I spent $47.00 on bids; $8 on the trashcan I won; $27 on the football and basketball. In other words, I spent $47.00 to get the chance to spent $35 on three items I never would have bought otherwise. Though I do enjoy having a football and basketball around.
Worse, the cost of these three items through Google Shopping would have cost me just under $60, significantly less than the $82 I spent on Quibids. In other words, don’t do this spontaneously — you’ll buy things you don’t need at a higher price than you would have if you just decided to outright buy them. Of course, I will admit that it was fun to do Quibids, but there are plenty of things that are more fun, which are cheaper or a better use of money.
Given all of this, how can there be a way to use Internet penny auctions like Quibids mindfully?
Mindfulness and Internet Penny Auctions
Again, I am not recommending that you use a site like Quibids spontaneously. The only way I would recommend that anyone use Internet penny auctions would be to make a purchase that you’ve already decided to make. Here’s the strategy:
1) If you have decided that you are going to make a purchase, see if it’s on Quibids. You are only going to bid on this item. And before you buy it, really consider if you need it. How is it going to add any value to your life? Are you going to want to get rid of it anytime soon? If you truly are already mindfully buying something, have at it….
2) Check the “Value Price” listed on Quibids — often it’s inflated from the retail price. The iPad linked to at the beginning of this post retails for $499, but its “Value Price” on Quibids is $624. You should probably walk away from this one.)
3) Figure out if you’re willing to spend the inflated price if you lose the auction. You have to be okay with spending that much money for the device. If you are okay and consider it a reasonable markup for the chance to get it cheaply, continue. If you’re not, walk away! Buy it on Amazon!
4) Know when to fold ’em. Calculate the maximum number of bids you should cast. The formula to do this is: The Price The Item Costs ÷ The Price Per Bid = The Maximum Number of Bids You Should Place. As an example: my basketball’s full price was $19. The price per bid is $0.60. 19 ÷ .6 = 31.6. For that auction, I knew that I shouldn’t bid more than 31 times.
This is important! After 31 bids, I should throw in the towel and just use the Buy It Now option, no matter what the price is. If I had bid 31 times and the price was $1.50 for the basketball, I should stop. I should wait until the auction ends, and take the discount (of $18.60) and buy it normally. If I kept bidding, I’m actually making that basketball more expensive than it really is — because I’m spending money bidding, plus the ostensibly “lower” price I’d spend at the end.
5) Pick your time. Once you know the number of bids you can cast, go on Quibids at an optimal time. (I found that around 8AM ET was ideal, as it’s somewhat inconvenient for the rest of the world. Most of North and South America are not yet awake, many other people on ET are commuting, it’s just after lunch in Europe/Africa, and it’s nearing bedtime in Asia/Australia.)
6) Patience is a virtue. When you cast your bids, wait until the timer is all the way to 0:01 before pressing “Bid”. You want to remove as many chances as possible that someone else would have bid right after you. In other words, you have wasted a bid if you bid at 0:05 and someone else was waiting to bid at 0:01 anyway. The most successful bidders wait until the last possible second to click “Bid”. It’s a war of attrition — but you know your limits.
7) Stay committed. Bid all the way to your maximum — don’t give up. You don’t have to bid all at once either. You can use Bid-o-matic to automatically place bids after a certain price threshold is crossed. Watch Quibids items for a few days and see how bidding works. It’s not sexy, but you learn a lot by doing research.
8) If you don’t win, remember to walk away after you hit your maximum. If you do win, congratulations. And of course, while I like figuring things such as Quibids out, I still think a better gift for your Festivus is Kiva.