In this series of posts I'll be comparing and contrasting Ebay and penny auctions/entertainment shopping sites and discussing the various ways penny auctions and Ebay can benefit consumers and Ebay sellers.
Penny auctions are an excellent inventory source for Ebay veteran Power Sellers and newbies alike.
For example, Paradise Penny Auction.Com offers gift cards to top national retailers, Visa and Amazon in its nightly pay per bid auctions. A review of Paradise Penny Auction's auction history for August 1, 2010 shows the following:
Penny auctions are an excellent inventory source for Ebay veteran Power Sellers and newbies alike.
For example, Paradise Penny Auction.Com offers gift cards to top national retailers, Visa and Amazon in its nightly pay per bid auctions. A review of Paradise Penny Auction's auction history for August 1, 2010 shows the following:
Auction Item - Ending Auction Price
$25 Amazon Gift Card - $0.48
$25 Victoria's Secret Gift Card -$0.15
$25 Walmart Gift Card - $0.05
$25 Disney Gift Card - $0.07
$25 Best Buy Gift Card - $0.02
When you factor in Paradise Penny Auction's shipping and handling charge of $4.00 per item that equates to a final total selling price of between $4.02 and $4.48 for a $25 gift card based on the sampling above. That is an 82% to 84% discount off the retail value of the gift card.
Now, let's look at Ebay's completed auctions for the same gift cards based on the last three weeks of sales data as compiled and reported by Terapeak:
Now, let's look at Ebay's completed auctions for the same gift cards based on the last three weeks of sales data as compiled and reported by Terapeak:
$25 Amazon Gift Card - Average sales price of $28.51 with 75 listings sold
$25 Victoria's Secret Gift Card - Average sales price of $19.00 with 13 listings sold
$25 Walmart Gift Card - Average sales price of $25.37 with 35 listings sold
$25 Disney Gift Card - Average sales price of $24.51 with 6 listings sold
$25 Best Buy Gift Card - Average sales price of $30.86 with 69 sold
Note: I have no reasonable explanation for why $25 gift cards are selling for over face value on Ebay. The data is what it is.
As you can see gift cards have a high sell through rate and on average sell for at, slightly above or slightly below their retail face value.
In this example an Ebay seller could obtain the $25 gift cards at an average cost of $4.15 plus the cost of the bids used to win the auction (average 10 @ $0.75 each) for a total average cost of $11.65. They can turn around and sell the card for an average price of $25.65 resulting in an average profit per card of $14.00 or 56% (before Ebay and Paypal fees).
As you can see gift cards have a high sell through rate and on average sell for at, slightly above or slightly below their retail face value.
In this example an Ebay seller could obtain the $25 gift cards at an average cost of $4.15 plus the cost of the bids used to win the auction (average 10 @ $0.75 each) for a total average cost of $11.65. They can turn around and sell the card for an average price of $25.65 resulting in an average profit per card of $14.00 or 56% (before Ebay and Paypal fees).
Pros:
Low Cost Inventory
Minimal Start Up Cost
High Sale Rate/Inventory Turnover
Easy Listing
Easy Shipping
Inventory does not require a lot of storage space
Cons:
Winning penny auctions can be time consuming
You are not going to win every auction you bid on
Bids must be purchased up front (many penny auctions offer between 3 and 10 free bids at registration with no purchase necessary)
Win limits - most penny auctions have daily and weekly win limits per person
Most penny auctions end in the evening/late into the night
