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Why do so many pass up a $25.00 gift card for $4 and change?

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Question of the day: Why do so many people pass up the opportunity to buy a $25.00 gift card for Walmart, Best Buy, Target, Amazon, Visa, Home Depot, etc. for only $4.00 and change?

Answer: Fear of the unknown plus a good helping of if it sounds too good to be true it is.

I will attempt to debunk the myth. For those of you who are still wondering how you can get a $25 gift card for $4.00 and change, I'll tell you. Sign up for ParadisePennyAuction.Com receive your 7 free bids for registering and bid away! Check the completed auctions and you will see the most if not all for anywhere from $0.01 to $1.02 + the $4.00 shipping and handling charge.

Want to know more about how a penny auction works? Check out these posts:

How to get a $25.00 Gift Card for $4.01

Simple explanation of how Penny Auctions work

Don't want to take my word for it? Check out these Penny Auction resources!

Paradise Quote of the Day

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Utility is when you have one telephone, luxury is when you have two, and paradise is when you have none.

Ebay & Penny Auctions Part 1: Penny Auctions As Source of Ebay Inventory

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:

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:

$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).

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

Video: Another Day In Paradise

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Break Time!

New Win Limits at Paradise Penny Auction

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Effective today the daily win limit at Paradise Penny Auction has been increased to two per day per user! We value all of the feedback from our users and we're happy to be able to respond.

In addition to the obvious, this adjustment will now allow a user who is a high bidder on one auction to bid on another active auction which was previously impossible with the one win per day limit. Now you've got two times the chance to win every day!

Stop by today for you chance to win $25 gift cards for pennies! Have fun and get what you want or need for a fraction of the cost.

Happy Bidding!

July 25, 2010 Auction Items at Paradise Penny Auction.Com - All items start at $0.01!

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Today's auction line up includes the following gift cards:

$25 Sunoco Gift Card
$25 Walmart Gift Card
$25 Bass Pro Shops Gift Card
$25 Toys R Us Gift Card
$25 iTunes Gift Card
$25 Amazon Gift Card
25 Bids
$25 Home Depot Gift Card


Today's Rookie auction is the $25 iTunes gift card.

You know the drill, all items start at $0.01 and the last bidder when the clock runs out wins! Current promotions include 7 free bids at registration for new users.

Happy Bidding!