Penny auctions can be considered as one of the most popular trends on the internet during the last years. The reason for this success is simple: on penny auction sites you can win new and expensive products at sometimes 90% off the normal retail price. You may have heard of people winning items like brand new iPad, LED TVs or even cars for a few pennies or dollars. This action took place on penny auction sites.
Nevertheless you need some luck to get great products at ridiculously low prices. But although luck plays a part in penny auctions, there is also a lot of skill and analysis involved. With that knowledge it’s possible to win attractive items at low prices on a regular basis and therefore getting the most of your bids. Last but not least one to mention, that it’s a huge fun with a lot of excitement involved when you bid on penny auction sites. But how does these penny auctions really work? Let’s take a closer look.
How do penny auctions work?
Penny auctions
In contrast to traditional online auction systems like eBay, the bid price in penny auctions increases only in increments (usually one cent, giving it the name “penny auction”) at a time. You can only bid one penny higher than the previous bidder, therefore increasing the price of the auctioned item by one cent. This way every bidder can decide to bid on an item as much or as little as they want. Penny auctions usually start at 0.00$ and increasing from this point aka 0.01$, then 0.02$ and so on. If no other bidder bids on the item (for instance an iPhone) after the 0.02$ bid was placed, the winning bid will be exactly the 2 cents. The result is obvious: the iPhone was sold for 2 cents to the highest bidder. An important difference of penny auctions in comparison to traditional ones can be seen in the expiration time, which is usually 2, 5, 10 or even 30 minutes. If no new bids are placed, the auction timer counts down to 0 and the auction is over. The highest bid is the winning bid in that case (in our example 2 cents). But as soon as a new bid is placed by another bidder, the timer gets reset to its original expiration time, from which it counts down again. This happens as often as new bids arrive.
On traditional auction sites like eBay you can place your bids for free. It’s obvious that this system can’t work on penny auction sites. Consequently penny auctions are not free to bid on: you need to pay for every bid you place. The amount varies for every site, but is usually less than 1$. If your bid is unsuccessful or another bidder outbids you, you’ll loose money (you have placed a bid worth 1$ or less without any impact). On the other hand, if your bid is successful, you can get expensive items with discounts greater than 90%.
How do penny auctions make money?
This system is moreover the key factor, how penny auctions can be profitable and sustainable. If for instance a new iPad sells for 100$, this means there were 10.000 bids placed on this auction. You can easily do the math: let’s assume a bid costs 0.50$, 10000 bids were placed, the penny auction site gets 5.000$. With a retail price of ca. 500$ for an iPad, that’s still around 4.500$ pure profit for the penny auction site. On the other hand you might have grabbed a brand new product for 100$ instead of 500$. You can’t find such a deal on traditional sites like eBay, explaining the buzz and hype of penny auctions.
To sum up penny auction sites offer their users an exciting way of buying products of any price range with sometimes huge discounts. Especially on expensive items you can save a lot of money with penny auctions. If you’re clever on bidding and with a bit of luck, you might find awesome deals on these sites. On the other side these auction systems can be seen as highly profitable for their operators, making these penny sites sustainable and a real competition to traditional bidding systems like eBay. In the following paragraphs we will take a closer look on tips and strategies for penny auctions.
Strategies for penny auctions
With a good strategy and some tips you can even save more money on penny auctions and higher your success rate dramatically. The best tips are listed below.
1. Less popular products
The more popular a product is, the more people will join the penny auction. On most penny auction sites you’ll find a list of the current most popular items. Take a look at these and aim for other products, which are less popular or less sought after. It makes sense to go this way, because you’ll need fewer bids to win an auction and therefore saving money.
2. Product value
Before joining a penny auction, you should determine the real price of a product. This includes the retail price online, shipping costs and processing fees. Summing these factors up will get the true value of a product. In contrast to traditional auctions you need to consider furthermore the price of the bids you’re going to use for winning the product. This can be of course just an estimation, but with time you’ll get the hang of it.
3. Bidding time
Find out which times of a day are more popular for bidding. Usually late in the evening or even at night are less people bidding on penny auctions, which can save you a lot of money and get you products at huge discounts. The rule is: the less people are online (less competition), the better are your chances of winning your desired items for a lower price. Many penny auction sites offer automated bidding, where the auction system bids automatically for you. You just enter the number of bids and let the system do the work for you. This makes it really easy for you to target auctions at night, where people are usually sleeping.
4. Bid at the end
You should always bid at the end of a penny auction. Bidding earlier will just raise the price. The rule is simple: be a sniper! Sniping or bidding very late means, you will use fewer bids while you watched other bidders approaching their bidding limits, which offsets in the end the fact that the product price might be a bit higher than previously. In the end you still saved money by snipering.
5. Beginners auctions & bid packs
Before targeting high value products with many experienced bidders, you might want to practice at beginner penny auctions. Here you’ve good chances of winning items for a lower price. Moreover you should take advantage of bid packages: the more bids you buy at a time, the cheaper these bids usually gets. For starting your penny auction endeavor, many sites offer free bid packages as well. One of the biggest and most popular penny auction sites, Zeekler, even offers 1.000 free bids to new customers.
Get 1000 free bids for Zeekler (first sign-up)
You can easily calculate the enormous value of these 1.000 bids when looking at the normal prices for bid repurchases. If you’re still unsure, go here. All in all you should practice on smaller items first and look out for beginner or rookie auctions.
6. Bid on only one item
The temptation of bidding on many valuable items may be great, but you should focus on one item at a time only. All products will become available in the near future again. This way you avoid bidding confusion, can set yourself a good strategy for your favorite item and are not in danger to run out of bids in the final auction phase.
7. Take your time
Moreover you shouldn’t rush and first read all tutorials on the penny auction site and get a feeling for this auction type. Just take a look at the kind of products you will target. Check out the other bidders, their bidding style and over time will know your competition and furthermore have a good idea of how much this item normally fetches. With that knowledge you can identify the best time to join the bidding action on products you’re keen on.
8. Don’t run out of bids
If you’re short on bids and might run out of them, be sure to repurchase enough before entering a penny auction.
9. Identify auto-bidder
Under all circumstances you will want to avoid to bid against auto-bidders. This will just eat up your own bids. Just watch the auto-bidders running out of bids by battling with manual bidders and then start your own auto-bidding if you want.
Penny auction scam
When you examine the penny auction model in more detail, you will find a lot of people calling penny auction a scam. The reason is simple: because of the high profitability of penny auctions, there are many black sheep in the industry. In the past there were some penny auction sites, that couldn’t deliver the items they promised to their customers or just ran out of money, just because their business model was not well developed. They have just seen the big profit margin in the penny auction market. Therefore it’s all the more important to highlight the penny auction sites that are no scam at all and can be considered legitimate and trustworthy. In our article about the best penny auction sites we highlight these established entities. With this knowledge you don’t have to be afraid of scams in the penny auction industry, may you be an advanced penny auctioneer or a beginner.
