dampoo said:
http://www.smartmoney.com/spend/family-money/how-penny-auctions-work-1300313918147/
Bubbles said:
I thought with these auctions the sellers only received the final value bid, while the auction site received the money for the bids made. So, the auction site could end up making more than the actual seller on the transaction.
Now, if the "auctioneer" is also the FFL then yeah, they'll really make a killing on the sale.
The latter is closer to the situation in every penny-auction I've seen. Unlike eBay, the public at large can't list items, just the site itself. You may notice the gunbidder.com site says nothing about selling.
As you saw in dogtown tom's post (posted after yours, of course), bidgunner is the purchaser of the guns from Bud's. As with most sites of this nature, the auction isn't a service brokering a deal between buyers and sellers, the auction is actually an interface to a retail site.
You guys don't think Bud's should sell guns to bidgunner????
I missed where anyone said that. I think people might be disappointed that Bud's is associated that Bud's was promoting this kind of site.
Just a quick review of how this sort of site works vs a regular auction.
Regular auction:
Seller lists something with the commitment to sell to highest bid.
Auction service facilitates auction, taking a cut.
Buyers make offers at no costs, with the commitment to buy if their bid is the highest.
Simplified example:
Seller lists for Glock 20 starting at $350.
Bidders bid in whatever increment they want, bids costs nothing. Auction ends at a certain time (or so long after the last bid, depending on the format).
Let's say 20 people bid on the Glock 20 and the price ends at $550. 19 of those people have not incurred a cost, 1 now owes the seller $550.
Seller owes auction service a fee, say %5. Seller pays auction site $27.50.
Final score:
Winning bidder gets Glock 20 for $550 + shipping or whatever.
Seller gets $527.50
Auction site gets: $27.50
-----------
Penny auction:
Seller and auction service are same entity.
Bidders buy bids to make offers on item. Item goes to highest bidder.
Simplified example:
Simplified example:
Seller lists for Glock 20 starting at $.01.
Bidders bid in penny increments, bids costs a certain amount (based on video, about $.60). Auction is extended after each bid.
Let's say 20 people bid on the Glock 20 and the price ends at $59 (90% of retail!). Assuming bids are distributed evenly, 19 spent $177 (265 bids @ $60) to bid. The winner paid $236 for his Glock 20.
Final score:
Winning bidder gets Glock 20 for $236+ shipping or whatever.
19 non-winning bidders paid $177 each.
Seller / Auction site gets: $3776
It appears that gunbidder lets you apply your bid price to buying the item at the retail value. So, if you were one of bidders who didn't win, you could opt to buy the Glock 20 (likely at the full retail price of $590), applying the $177 you already spent to it. Sunk costs and all.
One of the keys to these sites is they spread it out among lots of bidders, so you have instead of having 20 bidders on an item, you have 200 or 2000 to spread out the cost.
In the end, if people understand what they are getting into, whatever. I just think it is important that people know how they work and really don't think that every gets to walk way with a Glock for $59.
