Penny auctions are part of a booming online frontier. Some sites make fantastic claims of average savings, of 80 percent over retail, which may or may not be true.
Penny auction sites can have initial sign up fees and confusing terms and conditions. Be aware of the company’s specific:
· Sign up fee (or lack thereof);
· Ongoing subscriptions/membership fees;
· Minimum bidding activity;
· Maximum prize amounts;
· Refund policies; and
· Full contact information (legal name, physical address, phone number, etc.)
The penny auction industry currently has little in the way of industry safeguards or oversight.
Un-reputable penny auction site operators will find programmers to write code which will cheat consumers. One of the most common ways to do that is by deploying "bots". Bots look like human bidders from the outside but are, in fact, computer programs created to bid up the item price and possibly even win it, so that the auction operator doesn't actually have to part with any merchandise.
Only use auction sites that have express safe guards against shill bidding. Shill bidding is bidding that artificially increases an item's price or apparent desirability.
Some key things to know about penny auctions compared to other auctions are:
· You buy the bids as either part of a registration fee or in packs, of all denominations going up to hundreds of dollars.
· When someone bids on an item, the price of the item goes up by a uniform increment, as in a regular auction, but each bid also adds a set amount of time to the clock. This is explained as giving everybody else a chance to bid again and again; similar to the process to the "going ... going ... gone" phase of some live auctions.
· When you place a bid it is used, no matter if you win or lose the auction. This means a failed attempt to win an item can cost you as much as a successful attempt.
· Some sites offer a "Buy it Now" option to frustrated bidders on most items. This means that if you lose an auction, you can actually buy another of the same item for a quoted retail price minus the amount you bid. Sometimes the "buy it now" function can be a good indicator of whether a site is legitimate or not. Also consider how much traffic the site gets, if they have a large number of items up for bid and the company’s reputation with other consumers.
In theory, you could snag your desired item for a fraction of its retail price plus shipping. In reality, you're probably going to be squaring off with other bidders for hours, or competing with bidding software.
Remember to check out the BBB's reports on these companies, watch their site for a few days, look for mentions of the site online by other consumers and find a site that has items you want to buy. When in doubt, check it out.