ONLINE RETAIL AUCTIONSPresented by: Chris Wilkins, Sean Zinsmeister, Michael Vlasak, Amit Bhandari, Cannon Mascarenhas

From Dollars to Pennies…

Retail

Online Retail

Online Retail Auctions

Online Penny Auctions

Penny Auction Video

How the “Penny” Auction Works Customers purchase bids, not the

actual merchandise ($0.75 per bid @ Bidcactus.com)

The purchased bids are then used to place bids on items up for auction

Bids are represented by increments of one penny during the live auction

Auctions are timed. However, time is extended as long as items are receiving bids

From Pennies Back to Dollars…

According to Bidcactus CMO about 60% of auctions produce profit, 40% produce loss

An actual Bidcactus auction result: “50 Bid-Pack”; retail = $37.50 Winning bid = $5.57 $5.57/0.01 = 557 individual bids 557 bids * $0.75/bid = $417.75

The Risk of Loss Another actual Bidcactus auction result:

Playstation 3 Slim 250GB Console; retail = $350

Winning bid = $0.43

$0.43/0.01 = 43 individual bids

43 bids * $0.75 = $32.25

Result is a loss of $317.75

STRENGTHS

SWOT ANALYSIS

WEAKNESSES

OPPORTUNITIES THREATS

Helpful Harmful

Inte

rnal

Ext

ern

al

Strengths Growing Popularity of Penny Auction websites Companies carry almost Zero inventory No traditional sales force needed No collections pending Easy to use graphical interface Can sell bids on auctions Can change products as per customer trends Tempting prices attract bargain seeking customer Less prone to scams

SWOT

Weaknesses High dependency on technology High cost of software and hardware Fewer products for auction as compared to traditional auctioning

websites Restrictions from companies on items that can go to auction (i.e. Apple –

iPod) Hard to get loans and payment gateway approval from banking

institutions Less penetration in other countries except USA Long auction time decreases the interest of customers Shipping methods are not customer friendly Limited ways of increasing customer longevity

SWOT

Opportunities Phenomenal increase in number of people looking for deals or

coupon cutters Remarkable growth in adaptation of online shopping Technology getting cheaper day by day, and more widely

available: including more bandwidth, faster connection Marketing and advertisement channels increased significantly

e.g. Google, Facebook etc. Instant customer service and feedback via social media (twitter,

Facebook, blogs)

SW

OT

Threats Increase in number of auctioning websites Easy to monitor competition and market research Rapid growth of eBay and Amazon and their evolution as a

brand name for deal seekers Customer loyalty can’t be accounted for due to increase in intra

industry competition Websites being attractive to Phishers and Hackers

SWOT

What is Unique about this Industry?

Bids are charged (75 cents)

Each bid increases the price by a penny

Only New Items get Listed (no used laptops/ipods)

Brief Time Span (4 Hours)

Customers can vote for the items on auction

Bidding is free (Don’t get charged for placing a bid)

Bidders place maximum and minimum offers

Old and New Items are listed

Bidding goes on for days

No customer voting

What is Happening in the Industry?

Increasing Competition-> More than a 100 websites in a year

Industry Leaders: Swoopo (oldest penny auction website)-> Launched 2008 (USA) and 2005 (Europe)

BidCactus -> Launched April 2009 (USA)

News: BidCactus Overtakes Swoopo for the number of visitors in just 5 Months from launch

What is Happening in the Industry?

Determinants of Profitability & Survival

-> Marketing Budgets (Keyword Advertising)-> Customer Service-> Product Differentiation (bid butler, rewards

programs, niche markets)

Future Strategies -> iPhone Applications-> Legitimize Penny Auction Websites (to

differentiate from imposters)

Segmentation

Behavioral variable BENEFITS

“Savvy Shopper”

Psychographic “Experiencer”

Targeting

Content Advertising Newspapers Gaming Sites

Keyword Targeting Google Yahoo! Bing

Positioning

CRM Email –

Newsletter

Social Media

Live Service