The Penny Auction Model

by Penny Auction Book
in Shopping / Electronics (submitted 2010-11-09)

Penny Auctions follow a different model than traditional live auctions, reverse auctions and seat auctions. In a penny auction, the auction participant pays a nominal fee, known as a bidding fee, to participate in an auction.
However, the one thing that Penny Auctions have in common with traditional live auctions is the last bidder is the winner. The winning bidder pays the auction's end price plus any bidding fees and shipping and handling charges. In most cases, the merchandise costs much less than the suggested retail price. In fact, some Penny Auctions sell merchandise up to 90% the original retail prices. However, it is important to note that the bidding fees are non-refundable.
How Penny Auctions Work
Penny auctions have a unique way of working. With each bid placed, the item's auction price increases by a certain amount (usually one to two cents) and anywhere from 15 to 30 seconds are automatically added to the clock. This gives all bidders an equal chance of winning. The last bidder to place a bid when the clock hits zero wins the auction.
Penny Auction Revenue Generation
Penny Auctions generate revenue from bid credits. This is how penny auction sites are able to sell merchandise at extremely low prices. Some sites charges as little as $0.50 per credit, while others charge up $1.00 per bid. However, most penny auction sites sell bid packages in denominations of 20, 50, 100, 200, 400, and 500. The more bid credits a user purchases, the more of a discount he or she will receive.
Most penny auctions auction off items such as the latest electronics, computers, digital cameras and gift cards. However, there are a few penny auction sites that only sell high end products such as Juicy Couture handbags and sterling silver Tiffany bracelets. Prospective bidders should research all of penny auctions so they know which site is suitable for their needs.
About the Author
PennyAuctionBook.com is the leading penny auction resource for consumers.