penny auction sites
TRANSCRIPT
ONLINE RETAIL AUCTIONSPresented by: Chris Wilkins, Sean Zinsmeister, Michael Vlasak, Amit Bhandari, Cannon Mascarenhas
From Dollars to Pennies…
Retail
Online Retail
Online Retail Auctions
Online Penny Auctions
Penny Auction Video
How the “Penny” Auction Works Customers purchase bids, not the
actual merchandise ($0.75 per bid @ Bidcactus.com)
The purchased bids are then used to place bids on items up for auction
Bids are represented by increments of one penny during the live auction
Auctions are timed. However, time is extended as long as items are receiving bids
From Pennies Back to Dollars…
According to Bidcactus CMO about 60% of auctions produce profit, 40% produce loss
An actual Bidcactus auction result: “50 Bid-Pack”; retail = $37.50 Winning bid = $5.57 $5.57/0.01 = 557 individual bids 557 bids * $0.75/bid = $417.75
The Risk of Loss Another actual Bidcactus auction result:
Playstation 3 Slim 250GB Console; retail = $350
Winning bid = $0.43
$0.43/0.01 = 43 individual bids
43 bids * $0.75 = $32.25
Result is a loss of $317.75
STRENGTHS
SWOT ANALYSIS
WEAKNESSES
OPPORTUNITIES THREATS
Helpful Harmful
Inte
rnal
Ext
ern
al
Strengths Growing Popularity of Penny Auction websites Companies carry almost Zero inventory No traditional sales force needed No collections pending Easy to use graphical interface Can sell bids on auctions Can change products as per customer trends Tempting prices attract bargain seeking customer Less prone to scams
SWOT
Weaknesses High dependency on technology High cost of software and hardware Fewer products for auction as compared to traditional auctioning
websites Restrictions from companies on items that can go to auction (i.e. Apple –
iPod) Hard to get loans and payment gateway approval from banking
institutions Less penetration in other countries except USA Long auction time decreases the interest of customers Shipping methods are not customer friendly Limited ways of increasing customer longevity
SWOT
Opportunities Phenomenal increase in number of people looking for deals or
coupon cutters Remarkable growth in adaptation of online shopping Technology getting cheaper day by day, and more widely
available: including more bandwidth, faster connection Marketing and advertisement channels increased significantly
e.g. Google, Facebook etc. Instant customer service and feedback via social media (twitter,
Facebook, blogs)
SW
OT
Threats Increase in number of auctioning websites Easy to monitor competition and market research Rapid growth of eBay and Amazon and their evolution as a
brand name for deal seekers Customer loyalty can’t be accounted for due to increase in intra
industry competition Websites being attractive to Phishers and Hackers
SWOT
What is Unique about this Industry?
Bids are charged (75 cents)
Each bid increases the price by a penny
Only New Items get Listed (no used laptops/ipods)
Brief Time Span (4 Hours)
Customers can vote for the items on auction
Bidding is free (Don’t get charged for placing a bid)
Bidders place maximum and minimum offers
Old and New Items are listed
Bidding goes on for days
No customer voting
What is Happening in the Industry?
Increasing Competition-> More than a 100 websites in a year
Industry Leaders: Swoopo (oldest penny auction website)-> Launched 2008 (USA) and 2005 (Europe)
BidCactus -> Launched April 2009 (USA)
News: BidCactus Overtakes Swoopo for the number of visitors in just 5 Months from launch
What is Happening in the Industry?
Determinants of Profitability & Survival
-> Marketing Budgets (Keyword Advertising)-> Customer Service-> Product Differentiation (bid butler, rewards
programs, niche markets)
Future Strategies -> iPhone Applications-> Legitimize Penny Auction Websites (to
differentiate from imposters)
Segmentation
Behavioral variable BENEFITS
“Savvy Shopper”
Psychographic “Experiencer”
Targeting
Content Advertising Newspapers Gaming Sites
Keyword Targeting Google Yahoo! Bing
Positioning
CRM Email –
Newsletter
Social Media
Live Service