Thursday, June 12, 2008

Online auctions

Flicking through my list of online comics my eye was caught by an advert for an auction site; an 32" FullHD LCD being sold at £100 will do that. Now that tiny cynical part of me thought "Yeah right, special offers or it costs £300 delivery or some such" nevertheless I decided to have a quick look as well heck you never know.

The site in question is called Telebid and the way it works is quite clever (from the company's point of view). First off there are different types of auctions - the normal pay what you bid, the fixed price, the penny auction, and a night auction. I'll ignore the last two and concentrate on the former types as they're much easier to explain.

So you find something that's being auctioned, unlike eBay all the products are being auctioned by Telebid so there's no worry about paying £150 for the cardboard box an XBox came in. Once you've found what you want you bid for it by either pressing the big Bid button or by phoning a number and tapping in a code. Now here's catch number one, each bid costs 50p, here's catch number two, each bid increases the auction end countdown by about 7 seconds. Catch three there's an automated process that bids for you according to various criteria, but does so only in the last 10 seconds or so of the auction. That's where it gets clever.

Here's one I was watching, a non-fixed price auction meaning you pay what you bid, the current bid was ~£25 with 15 seconds to go, drops to 10 and pow in comes two autoBids pushing the clock back. It ticks down and pow another set come in. So although you know that the auction has to end (in this case) on 30th June just past 9am it still might end at any time before that and once the time drops to that magic 10 second mark that's when the autobidding starts and remember each bid costs 50p.

Clever point number two is that each bid advances the total by a set amount (7p) so imagine two autobidders set to bid up to £26 on this auction that'll be 7 bids each at a cost of £3.50 to increase the price by just £1. At the current time this auction stands at £46 with roughly five bidders, so assuming sequential bids each one has used 60 bids at a cost of £30. So true cost of this auction is £46+£30+£10 P& P or £86 RRP is £180 so still worth it, but it's one of those things you really have to watch how you bid. Oh just had 10 autoBids in pushing the price up to £50 and the clock to 2 minutes.

Clever point number three is that the autoBid has a start from price too, so put in that and a limit and you can at least work out the maximum number of bids you'll use. Except if it never reaches that price you'll never bid and, lovely touch this, once the 'from' price is reached you can't stop the autoBid. So put in a too high price and you won't get squat, put in too low a price and you'll whip though your stash of bids in record time.

So sit there in front of the screen clicking bid and hoping it registers in time, stay on the phone at whatever rate it is, or use the autoBid system and hope you don't run out of bids.

The fixed price auctions look good as no matter what the price the cost is still the same, except this pushes the 'bid' price higher. One auction is at £203.98 which means it's had 2914 bids costing £1,457 for an item with an RRP of £929.99. Assume that's what was paid by Telebid add on the fixed price of £69 and P&P of £39.80 and they've made a minimum gross profit of £635.81.

I'm impressed, but I doubt I'll give it a go myself, I think the cost of bids made that will lose will outweigh savings (minus bids) made on items I'd win.

Hey the normal auction just ended at £54.88 the winner used 66 bids to win (nice they tell everyone this) so exact cost was £54.88+£33+£9.80 that's £97.68 a saving of £82.31 on the RRP. Of course if the winner had tried just three times before on the same item with the same number of bids and lost they'd be down £16.69.


Dan H said...

Nice one. I've always thought the system run by (modulo hyphenation) is pretty neat. It's primarily TV-based rather than online. Like any other teleshopping thing they have n instances of an item in stock and the salesman wants to sell them all in one go. The twist is that they start off at some ridiculously high price, which decreases over time. Stock is allocated in order of phoning in, and when all the stock is gone, they freeze the price. But then, all the people who phoned in get to pay the frozen price; that is, the price when they run out, not the price when they phoned up. So although in theory goods could go for stupidly low prices, users are encouraged to phone in earlier, because only the last person determines the price. The sooner you phone, the more likely you are to get one, but because everyone is competing for stock in this way, it means the price ends up higher. Of course they always display the stock level on the screen while it goes on, and I expect that they add a random element to how long it takes to get your order processed, to make sure people phone in earlier.

FlipC said...

I've bought things via the price-drop/bid-up channels, the time from placing a bid to it being confirmed and the stock going down has always been near instantaneous for me and others I know who've used the service. Though I and others have speculated that when they get near the end of the slot one of the producers has a anonymous bid button to finish it up quicker ;-)

As you say it's a nice twist on the standard auction getting people to bid early and keeping the price high, but unlike TeleBid they don't do the equivalent of adding more stock in if a lot of people are bidding and you don't have to pay anything if you lose.

Thinking about this I wonder if it's fair to classify TeleBid as an auction at all or whether it would be better placed as gambling. You are essentially placing a bet to try and win the right to pay for some item.

On a postscript the Fixed Price auction I mentioned finished at £446.74 that's 6382 bids or £3,191 for an RRP item of £929.99 being sold for £69+P&P. The winner made 106 bids worth £53 so if they'd competed in 17 auctions prior to this and lost with the same number of bids they're out of pocket.

Hmm it seems if you limit yourself then there are indeed bargains to be had, though I wonder how many addictive types they get 'betting'?

Invisible said...

Hmm. Trixy Hobbitses!

My dad seems to have become an eBay addict. To me it just seems perverse to see people bidding £150 for an item that can be bought brand new for £20. Clearly a sane person would stop bidding once the bid price approaches the retail price. And clearly, there are people on eBay who are interested in something other than getting a good deal…