Penny Auctions have generated a great deal of interest in the last year, and with this many people have been asking about how to create and run a Penny Auction website. It’s time to develop to stop being the bidder and start being the auctioneer!
In this blog, we will aim to help you devise a Penny Auctions strategy, a tactical look at what you need to setup your own version.
Run your own penny auction: Money!
Before starting any kind of business venture, it is always sensible to consider the risk and reward involved. Creating a website such as this is no different; in short, it takes money to make money. Whilst the internet has given a platform for penniless college guys to make millions, these people remain in the minority. To run your own penny auction will require initial setup money, and the amount you have available may well determine how successful you will be.
The first thing to consider is the level of competition you will face in the online marketplace. In the UK, there are roughly 5 or so ‘main’ penny auction websites. Of which the largest two are the biggest by far. These companies have significant ad budgets that are probably much higher than yours. The reason for this large advertising budget is simply to attract new customers. Which = more money = more ad budget = more customers etc etc. Another thing to consider is why would people leave their current penny auction website, where they may have developed a specific strategy / invested time to come to yours. Assume for the minute that the items being bid on are the same (usually the latest must have technical products. eg Nintendo Wii’s and Plasma TV’s) what does the website that you run have that is special? The simple answer? Lower priced bids.
The real answer? The simple answer is not the way to go! As a startup you will need a higher profit margin, and lowering the prices of the bids whilst retaining the same number + level of products as your competitors is a problem. Therefore, levels of growth will be limited unless you have substantial initial investment for advertising and the ability to operate on lower bid prices that are of good value to the end user. Stay tuned for the next post about how to run your own penny auction website where types of free marketing will be examined and we will try to develop a good strategy to use.