Are Penny Auction Sites Really Seen On TV?

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If you’ve been in the least captivated by the mystery of the disappearance Malaysian Airlines Flight 370, you’ve undoubtedly tapped into CNN to get the latest updates (or speculation) on its fate.

If so, you’ve probably seen ads for auction sites like DealDash.com and Gankit.com where – they say – you can buy an iPad for $ 37 or a 55-inch TV for under $ 30. Ads promise you can save up to 99% on tech products, sports equipment, household gadgets, and a variety of branded products.

Can you really? May be.

(FOLLOWING: No guarantees on penny auction sites)

99% off the retail price?

The could being amazing bargains for a lucky few buyers who have the time, are willing to give their luck, and have learned how these sites work. But for most online shoppers, penny auction sites are money-wasting pits that could be awful.

As penny auction guru Amanda Lee wrote on her site, PennyAuctionWatch.com: “You could almost lose money if you try penny auctions, there’s no question. (Lee learned from personal experience and launched his site to monitor the industry and speak out against abuse.)

The reason why it is so difficult to close huge deals is simple: unlike other auction sites on the internet, such as eBay, where bidders don’t pay a cent unless they win, auction bidders must pay for every bid they make, even if they lose to someone else.

How Penny Auction Sites Work

Here’s how penny auction sites typically work: Before you can start bidding, you need to register and purchase a set of “auctions,” ranging from 50 cents to $ 1 per auction (auction prices vary from one site to another). At DealDash, you can buy a pack of as low as 60 bids, or up to 1,000, for 60 cents each. At Gankit, auctions cost 55 cents each, with packages starting at $ 22 (or 40 auctions).

(FOLLOWING: 6 times we spend too much money)

Once you’ve purchased your auction package and can start bidding, items typically start selling for $ 0.00 and go up by a dime each time someone bids (although it costs much more than a dime to make an offer). So if you are determined to win an item and keep bidding on someone who has also placed a bid and increased the price by a dime each time, you could end up bidding 20 times or more – that’s is easy to do since the “winning price” seems so low.

So if you pay $ 1 per auction, you just spent $ 20 on the auction.

That might not seem like a lot of money for, say, an iPad. However, experts say most people don’t make 20 offers. They often do notes auction for very popular items, dragged down by low auction prices and caught up in heated bidding wars. QuiBids.com says that for items that retail for between $ 100 and $ 500 on its site, where the average bidder places 26 bids, the winning bidder places an average of 66 bids to score the item.

Additionally, there is usually no cut-off time for the end of auctions on penny auction sites, as each new auction extends a bid by at least 10 seconds. Therefore, you cannot time your auction to be the last winning bid.

Winning the auction also doesn’t mean the buyer actually won the item – just that they won the law to purchase the item at the final auction price plus shipping and handling charges.

What about those who haven’t won? They usually lost not only the right to purchase the item, but all the money they spent on the auction as well.

What consumer advocates are saying

Penny auction sites have been around for about five years. But recently, as the ads illustrate, they have become more aggressive in their promotions, touting the sites as entertaining ways to earn good deals.

“It’s funny. It’s easy and you can win,” says the ad from Gankit.com, its first national ad, which began airing earlier this year and is airing on Fox News among other places. CEO John Arnold says it is designed to engage “everyone’s bargain hunter”.

Since their earliest years, auction sites have sparked a multitude of consumer alerts from law enforcement officials and law enforcement officials. consumer advocates.

The Federal Trade Commission for example, has a online advice describing these types of sites as “more like a lottery than a traditional online auction”. As the review notes, “Your winning bid of $ 50 for a camera might seem like a good deal, but if you placed 200 bids, at $ 1 each, you actually spent $ 200 on auctions, $ 50 plus for the right to buy it, plus shipping and handling and possibly transaction fees. ”(My note: if it costs $ 1 per auction penny, that winning price of $ 50 means that the site raised $ 5,000 from bidders for the camera.)

“You need to understand how these sites work and determine the total price of the product, not just the bid price,” says Charles Harwood, director of the FTC’s Seattle regional office.

The “Buy It Now” Opportunity

Some sites, including DealDash and QuiBids, now offer losing bidders a ‘Buy It Now’ opportunity to purchase the product they were unsuccessfully bidding on, but at full retail price, the less money they’ve already spent on their deals.

But, notes Harwood, that retail price is set by the auction company and may be more than what you would pay on retailer sites or in physical stores. “For many products, it can be cheaper – and easier – to buy at a local store,” or online, says Harwood.

The National Consumer League‘s Fraude.org The project published perhaps the most blunt assessment, “warning consumers to avoid them altogether.” As John Breyault, director of Fraud.org, recently told me, “I’m sure there are legitimate auction sites out there, but given the shady business models – almost akin to online gambling – and the complaints that we’re getting, I’m not comfortable telling consumers they should consider using them no matter how careful they are.

Another reason for caution: There appears to be relatively little oversight of the penny auction industry, just a handful of state enforcement actions.

Bid against bots

Several state attorneys general have found sites using software “robots(Or computer programs) to automatically outbid legitimate bidders. Since many sites extend auction times by 10 seconds or more if there is a last minute auction, a bot auction turns the clock and often causes a bidding war. In this case, the bot appears to be another user, but it really is a friend to the site.

Harwood of the FTC says it’s not easy for the federal government to go after auction sites. “As long as the sites aren’t deceptive and adequately disclose the ways that consumers will end up paying for a product,” the FTC won’t act, he says.

In recent years, auction sites have taken a number of steps to deal with complaints.

In addition to the “Buy It Now” options, some sites, including DealDash.com, have implemented “riderless” auctions, closing auctions to new players when the bid price exceeds $ 5. This way, long-time bidders don’t need to compete with others who haven’t spent any money to bid from the start.

Despite these steps, consumer advocates say you should still approach these sites with caution (if you don’t approach them at all). Here are seven ways to protect yourself:

1. Check the legitimacy of the site before you start bidding. Can you find an address and phone number if there is a problem? Otherwise, don’t bid.

Also, do an Internet search for the name of the company with the word “complaint” to see what others have said about the site; consult the site file on Penny Auction Watch (on its forum and its directory) and at Better Business Bureau (BBB) ​​website.

Read the BBB site carefully, going beyond the overall “rating”. QuiBids has an A rating, despite 1,108 complaints in the past three years.

2. Understand the auction conditions and how the site works. Read the fine print to determine the actual costs, including Shipping and handling and any transaction fees if you win. Also check if you have the option to use the money you spent to buy an item that you won’t earn.

Watch a few auctions of similar items before you bid, so you have the land.

3. Research the retail price of the item you want before bidding. This way you will avoid paying too much.

4. Take time to bid once you start bidding. The auction process can take hours (sometimes days, for popular items). So if you really have your heart set on an item, don’t walk away or start bidding when you have a meeting or date.

5. As with the game, prepare to lose and walk away. Figure out how much you are willing to spend on the auction and quit once you’ve reached your limit, even if the auction price is still low.

6. Consider limiting your bids to sites that have a “Buy It Now” feature. While you might not get as much as you hoped for with this option, you won’t completely lose the money you spent on bidding.

7. If you have any problems, report them to the authorities. Good places to start are Federal Trade Commission or the Attorney General your state, the state where the site is located, or both.

You could get help and prevent others from getting burned when they bid.

Caroline Mayer is a consumer journalist who spent 25 years working for The Washington To post. Follow her on Twitter @consumermayer.


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