Penny auctions are believed to have started in Europe. This web phenomenon has led to hundreds of startups looking to jump in on the popularity. Unlike websites like ebay, the merchandise is being sold by the owners of the website, not third parties. In addition, the bidding process is completely unique.
A potential buyer pays a fee for every bid that they make. This fee typically falls within the range of 50 cents and a $1. As the bidding war begins, each bid that is made bumps the price from zero up by a small amount – hence the name, “penny auctions”.
Some have felt that these auctions are the epitome of “if something sounds too good to be true, it probably is”. Many have been placed in situations where they spent much more than they intended to; they left feeling that maybe the deal wasn’t quite as good as it initially seemed. Many who have tried out penny auctions have even compared them to gambling.
Here are some tips on what to watch out for when bidding:
Bid Bots is a program that bids as many times as it takes on a single item to obtain enough money to pay for it, then it is released to a real bidder.
Scams occur when the bidder pays for an item but never receives the item that was won.
Shills occur when owners, employees and/or friends make bids in order to attract more customers.
Spending. Be conscious of how much you’re spending. Similar to a slot machine, you can reach a point where you will never see a return.
We’ve considered what bidders must watch out for when participating in penny auctions, but what must businesses consider when starting out in this industry? The penny auction industry is considered “high risk” by traditional lending sources. Because of this, startups will have a really hard time securing the services they need to get started.
Fortunately, there are providers that specialize in working with business that have been categorized as “high risk”. Consider a penny auction merchant account from emerchantbroker.com, for example. This merchant account will provide the safe payment processing solutions you need to run your business without the hassle of endless documentation requirements and credit checks.