Swoopo is an interesting find for me. The basic idea is that of an auction site. They feature primarily tech stuff/video games/personal electronics. OK, nothing new there.
However, they boast that these items are selling at ridiculously low prices. An xBox 360 just went for sub $20, most items are 50-80% off retail. How do they have such good bargains? Is it just that nobody’s heard of them yet so they’re getting away with a steal?
Not exactly.
For one, this isn’t “peer to peer” auctioning where consumers sell to consumers. The products being auctioned are actually posted by Swoopo. Then how do they keep the prices so low? Simple. They sell the right to bid. Every bid you submit sets you back $1. Well, that could be quite the bargain, right? I mean, you bid $1 and get a Wii for $70 (a $250 value for about $80 shipped). Not bad indeed. But then the caveats come crashing in:
First, every time you bid you extend the clock. That means no swooping in at the last second on an auction so you avoid the bidding war. eBay has us trained to believe that when there’s only a few minutes left and the price on an auction is still low, that’s the time to strike a bargain. Well, the time remaining on Swoopo is always low, encouraging bidding. The bids then extend the length of the auction up to a month or so from the time listed, meaning an auction can have less than a minute left for days, in theory.
Second, you don’t have the option of placing a high bid (but one that would still be a good bargain). For example, let’s say I want to bid $200 in a single bid at the last second for a Wii that’s currently listed at $45. Not so fast. Bid increments are set at $0.15. What? Well, yeah, that keeps the prices ridiculously low on expensive items. Meanwhile, remember that every time somebody bids, Swoopo gets $1. Not going to be around for the end of an auction? They have an automatic bidding tool that will take care of it for you. The problem? If somebody else has that tool, they will, in just a matter of seconds, burn through all the bids (remember, each worth $1) they’ve been allotted.
Some quick math for you (numbers may not be exact, but the principle’s the same). Let’s suppose they sell a Nintendo Wii for $45. At 15 cents/bid, that’s 300 bids. At 1 dollar / bid, that’s $300. Add that to the $45 plus about $10 shipping and they get $355 for a system they could buy retail for $250. One person gets a good deal on a Wii, but lots of people lose money in the process.
The long and short of it? Swoopo’s going to make bank. It’s a clever setup. It appears to feed on human competition and bargain hunters. I just hope whoever’s behind it has completely shrugged off their conscience so they can sleep at night in their bed of bid-bought-booty.
Update:
This is a little delayed, but Gadgetell posted an interesting interview with Chris Bauman. It kind of reminds me of ‘Thank You For Smoking’ - if Swoopo does get sued out of existence, I think Chris might make a great lobbyist for the tobacco industry. Just my opinion.
