Ask Stacy: Can I Really Buy an iPad for $23.73?

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Here’s an interesting question I got over the weekend…

Dear Stacy,
Seems like every time I turn on the TV, I’m seeing a commercial for one of those auction sites where they name all kinds of stuff and say it sold for practically nothing. Is it true? And if it’s not, how can they say that on TV?
– Dan

For those of you who aren’t familiar with what this reader is asking about, here’s a Quibids ad I found on YouTube.

They’re called “penny auctions.” In addition to Quibids, there are other sites doing substantially the same thing, including BidCactus, HappyBidDay, and dozens more.

Back in August, the FTC issued an alert about these types of sites, and Consumer Reports also did a recent write-up explaining how they work. Here’s what you need to know in the fewest possible words.

Penny auctions: how they work

Penny auctions differ from regular auctions in several important ways.

  • You’re buying stuff from the auction site itself, not a third party. In other words, eBay is an auction site that matches buyers and sellers. Quibids is like a store: They’re selling things they own.
  • In a traditional auction, only the winner pays anything. In a penny auction, win or lose, you pay to bid. Before you can participate in a penny auction, you’re required to pay for a packet of bids, with a minimum total cost of $25 to $60. Once you bid, your money’s gone. Some sites allow you to get refunds for unused bids, some don’t.
  • While the price of the item you bid on may move up in increments as little as one cent, each bid can cost as much as one dollar. So when something like a $500 iPad sells for $23.73, each penny of that sales price might represent as much as $1.00. In that example, the bid site didn’t get $23.73 for their $500 iPad, they got $2,373.00.
  • Each bid adds to the remaining time. Penny auctions start with a clock that winds down – the person with the highest bid when it hits zero wins the right to buy the item at the winning bid price. But as people bid, more seconds get added to the clock. Auctions can theoretically be extended for days.
  • You can pay retail if you lose. Many sites allow you to apply your losing bids to the retail purchase price, should you decide to buy the item anyway.

Add up all these differences between penny and traditional auctions, and you can see that penny auctions aren’t really auctions at all in the traditional meaning of the word.

Should you try one?

If you’re about to pay retail for some item that you actually want, one might argue you have nothing to lose by trying to buy the same item at a bargain price from a penny auction site. Maybe, if the retail price the website charges is as low as you can find the item elsewhere. (They also typically charge shipping and handling – some also charge a restocking fee if you return it.) But you also have to consider the hassle of signing up and the possibility, however remote, that you’ll get carried away and spend more than the value of the item.

Before you attempt a penny auction, plug the website name and the word “complaints” or “rip-off” into your favorite search engine and see what comes up. You might also check out a website called Penny Auction Watch for reviews. And above all, watch a few auctions and see how much people are actually paying for these “bargains.”

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Comments & discussion

We welcome your opinions, but let’s keep it civil. Like many businesses, we reserve the right to refuse service to anyone. In our case, that means those who communicate by name-calling, racism, using words designed to hurt others or generally acting like an uninformed bully. Also, comments that include links to email addresses or commercial websites typically aren't posted. This isn't a place to advertise your business.

  • http://pulse.yahoo.com/_KQCEHPHFSSEPTSI23XFCZRMHLE Kathryn

    Great article, Stacy :) We absolutely agree that consumers need to do their research before choosing to join a penny auction site. We always remind them to check for reviews, left by real bidders, on reputable penny auction forums and review sites, such as the PennyBurners Penny Auction Forum, PennyAuctionHelp, PennyAuctionList, and PennyAuctionScore.

    We believe that the negativity about the penny auction industry stems from a general lack of understanding. Consumers do not understand what a penny auction site is, how to play and win, and how to determine if a site is legitimate or a true scam. Many consumers file complaints simply because they did not fully understand what they were getting into, or because they experience Buyer’s Remorse after bidding and not winning. We have seen many reviews left by disgruntled bidders who have stated, “I invested $20 and didn’t win anything! It’s a scam!”

    Unfortunately, there _are_ bad apples in the industry. And, as with any collective, the minority’s sins outshine the majority’s virtues. However, there _are_ sites that are dedicated to transparency and honesty, with stellar customer service, desirable items, a fair playing field, great communication, and fast shipping. As with anything
    involving money, diligent research is required before investing.We suggest that consumers first:

    1. Look for reviews on the site.
    2. Read their Terms & Conditions, Rules, FAQ, and any other
    literature available on the site, and make sure you fully understand the concept.
    3. Watch the auctions and bidders for a while. Are there certain strategies employed that are successful? What time of day is best for cheaper auctions? Which bidders are willing to go all the way?
    4. Set a budget and stick to it.
    5. Start small. Don’t expect to win an iPad 2 or 3D TV right off the bat. Start instead with a $25 gift card, or other lower-valued item.
    6. If you don’t win, re-evaluate your strategy and your fellow bidders. Chat with other bidders on the PennyBurners Penny Auction Forum. They’re always willing to give tips on strategy!

    As to how penny auctions work, Stacy I think you covered that pretty well :) Many people are always looking for a “trick” to winning at penny auctions. Unfortunately, there’s no real trick involved. Winning a penny auction requires patience, timing, strategy, and yes, skill. Once again, we recommend that you do heavy research into a site, its auction formats, and its bidders before deciding to invest.

    If you are new to a penny auction site, we suggest that you take advantage of their Beginner Auctions. These will allow you to bid against other “newbies” only, and gives you a better chance at winning an auction while learning how to play. Most sites also give new members free bids which they can use to bid before deciding to invest in the site. Also, it is important to remember to be flexible. You must be willing to readjust your strategy at the last minute and realize that nothing is a “sure win”.

    We believe that when consumers are armed with proper information, and when they exercise intelligence and caution before giving away their financial and personal information, they will find that penny auctions are just like any other game. They can be fun, entertaining, exciting, and if played right, even rewarding.

    If you have any questions, Stacy, we would be happy to answer them. The same goes for your readers. We are here to help! :)

  • Anonymous

    I invested around $50 before realizing that Wavee.com was fraudulent.  Several times my “winning bid” was not recognized by their system.  On many occasions I realized that the same names kept popping up as “Winners” (In hindsight, obviously shills).  When I got down to around 100 bids remaining, I decided to try and get at least something, and bid on a cheap clock radio.  Surprise! I won.  A month later, after not receiving the radio, I emailed the company.  By return email I received a message stating that computer problems during the two week period in which I had won my auction (and dropped around $49 in failing bids) had necessitated the “voiding of all auctions taking place during this period” and a refund check for 82 cents was being sent to my PayPal account to reimburse me for the cost of the radio.  I responded by asking for a full refund of the other $49 since they stated that they had voided all auctions that I had participated in.  I never heard back again.  The link below leads to a short video explaining the company had closed.  I would never participate in a penny auction again.  Better to spend your money on online gambling where your chances of winning are considerably greater.

    http://www.11alive.com/news/article/197304/40/Wavee-Shuts-Down–Agrees-to-Pay-Customers

  • Anonymous

    Excellent article, story, information and a heads up on special online auctions.  You could say, they are almost a ‘scam’.  They are right on the line or border of being one.  As for me, with the information in the article.., I’ll pass.   Mike in Montana

  • http://www.facebook.com/people/Rab-Neutrino/698949234 Rab Neutrino

    It’s not shopping or an auction, it’s gambling and odds are you will lose. 
    This has some good info on Quibids and their involvement with fake blog acai pill scams: 
    http://www.pennyauctionwatch.com/2010/06/quibids-ceo-allegedly-behind-misleading-weight-loss-marketing-testimonial-sites/

    http://getoutofdebt.org/28732/quibids-com-penny-auction-site-investigation-is-it-a-scam-or-a-scheme-why-so-many-complaints