Everyone is looking for a deal. Today there are two categories of Internet sites that promise product savings of up to 95%. Deal sites like Groupon (www.groupon.com and www.socialliving.com ) and Penny Auction sites ( www.bidonx.com and www.quibids.com ). The question is, which type of site offers the best deal most consistently? I have spent time on both types of sites, and purchased a number of different products; while there is a difference in the mechanics of the different sites, the focus of this article is strictly on value. Or more specifically, which type of site can save you the most money.
Groupon has become the fastest growing Internet company of all time, and today there are literally hundreds, if not thousands of Groupon-like knock offs out there. It is not a surprise especially when you consider that the average deal saves consumers 50% or more. The sites basically pre-negotiate special pricing on specific products and services with businesses and vendors, generally in very small geographic areas. These special deals are made available to consumers registered within that geographic territory, and a different deal is offered each day. If the consumer likes the “deal of the day” they simply purchase the coupon. It is then the responsibility of the consumer to contact the vendor/small business to redeem their coupon.
In my experience, living in Orange County, California, the deals are usually about 50% off of the retail price. As a subscriber for many months I received an email each day with a new offer. After a while, however, I experienced what I will call Groupon fatigue. The daily emails started to feel more like I was being solicited rather than receiving deals for my benefit. This resulted from the fact that I rarely came across a deal that was of particular interest to me. Groupon did not know me, my tastes, my interests, my dislikes or my price tolerance. As a result, I was getting crazy offers like the one with an offer to purchase pole-dancing lessons for 60% off of the normal price. That just wasn’t my cup-of-tea. The value was good for those of interest, but for me, the deal was at best irritating, and at worst, offensive. Another downside to these type of sites, beyond the fatigue factor, is that some of the deals will expire if you don’t use them within a specified period of time (usually 6 months). That may sound like a long time, but there are countless blogs out there from former Groupon or groupon-like customers who had experienced trouble with expired deals. If a thousand people purchase a house-cleaning service, for example, they may discover a 6 month waiting list when they call to schedule their cleaning.
Groupons also encourage consumer games where the consumers attempt to reverse the groupon system. Instead of buying one per individual, they buy several, which will cause the small business suffer financially. The goal for the small business is to attract new customers through aggressive pricing…not offer a few customers lots of discounts. In general, the value of the deal promoted through groupon-like sites is in fact significant, but you may have to wait a long time to find deals you find interesting. You will have to move quickly to protect your deal from expiring as well. If you do this, you will in fact save money.
On the other hand….
A penny auction is an online auction where consumers buy a package of bids for a specified price (For example, you might pay $25 for 50 bids). Those bids are the penny auction site’s currency and can be used in any number of different product auctions. Most penny auction sites auction off incredibly extravagant products including high-end electronics, huge flat-panel televisions, cars and even homes. Unlike Groupon, penny auction sites offer multiple product auctions every minute, every hour, every day. It is very easy to find what you might want to purchase. The deals are consistently better than Groupon’s as well. Consumers regularly save 80%-99% on leading brand products. From a pure value perspective, penny auction sites are in a class by themselves. But they too have a down-side.
Whereas Groupon-type sites offer their deal to virtually anyone within the geographic area, penny auction sites only offer the winning price to one person in each auction. Moreover, you may end up spending a lot of money trying to win a product and ultimately fail at the auction. Some of the more reputable sites do allow you to apply the cost of your bids towards the retail purchase price. So lets say you are bidding on an iPad worth $600. You spend $25 in bids trying to win the product, but in the end…you lose. Certain penny auction sites will allow you to purchase the iPad at the retail price of $600 minus the $25 you spent bidding on the item. Your total cost is still $600 but you did get to participate in a chance to win the iPad at a massive discount. It takes time, patience, determination and a solid bidding strategy to be successful at penny auction sites. The value of the penny auction is indisputable, there is nothing else on the Internet that consistantly delivers products to consumers at such huge discounts.
Finally…..
There is a new breed of penny auction site that goes a long way towards addressing the challenges of traditional penny auction sites, and they are tournament auctions. These auctions increase the number of winners per auction, reduce the amount of competition for each auction, max the out of pocket cost on each auction, and offer participants complete bidder transparency. Tournament penny auctions are the evolution of penny auctions and will likely overtake traditional penny auctions in the near future. The savings are greater, the prizes are bigger, the risk is lower, the competition is less and there are more winners in each auction.
Penny auctions clearly have a bigger value advantage over Groupon-type sites. In addition, penny auctions are becoming a shopping sub-culture online and should dominate for years to come. The coupon sites are only for certain people, which means you may be excluded from their party. However, penny auctions are for anyone, and can be very entertaining.
If you want to be a part of the biggest wave in online shopping, now is the time to get in on the action of the Penny Tournament Auctions. Happy Bidding!