How Do Penny Auctions Work?

Welcome to a new series about penny auctions. I will be talking about the basics of how penny auctions work and taking you on a tour of some of the most popular penny auction sites over the next several weeks. I hope that when we are done you will have enough information to make an informed decision about whether penny auctions are even right for you, and which site or sites you will decide are the best fit for your auction style.

How Penny Auctions Work


Don't make the mistake of thinking that penny auctions work like eBay. The only part of a penny auction that is slightly like eBay is when a particular penny auction site offers a "Buy It Now" option, and the similarity ends with the name. Not every penny auction site actually offers this option, which I will talk about in a minute.


The most significant difference between penny auctions and regular bid auctions is that you have to buy the right to bid! This is accomplished by purchasing credits that you will use to bid. Credits vary in price, but may cost anywhere from 25 cents to 75 cents or more.  Many sites offer discounts if you buy packages of bid credits, and others offer a certain number of free bids to get you started.


Most penny auction sites start each auction at $0, and every time there is a bid the price of the item goes up by $0.01. Depending on the penny auction site, the the increase in price could be  anywhere from $0.01 to 25 cents every time a bid is placed.   Every time a new bid is placed, the time remaining in the auction is extended, typically less than 10 to 20 seconds.   Some sites will add as many as 30 seconds to the clock and others have turbo features where only 5 seconds is added to the clock.  The last bid before the clock runs out wins, just like in a regular auction. After you have won, you can pay immediately and provide your shipping information.


Plundr, QuiBids and BidRivals offer a "Buy it Now" option.  If you were bidding on an item you wanted badly enough to pay the full retail price, "BuyIt Now" could make sense for you.  Some sites will deduct the value of your bids from the total cost of the item, giving you an instant discount.  Let's say you bid 25 times on a $100 gift card. Your bids were $0.50 each, so that would be a total of $12.50 that you spent on bidding. In a "Buy It Now" scenario, you could purchase the gift card for $100 - $12.50, for a total of $87.50. 

The Total Cost

With a penny auction, you could win a great item for a tiny price - but be sure you don't forget to include the cost of the bids when figuring how much you really paid.  Let's take our example above of the $100 gift card. If you win the $100 gift card for $15, don't forget the 25 times you bid on it that cost you $12.50.  That makes the total for your gift card $27.50 - still a fantastic savings, but an expense that is easy to forget about when figuring up your real costs and savings.

Your Best Strategy

The best thing you can do for yourself is set a budget that you are willing and able to afford, and then stick to it. Don't bid on things that you don't really want just because they are cheap.  It doesn't matter if you saved 75% on an item worth $500 if you cannot actually afford to spend the $125 + bids that you paid.

If you create guidelines for yourself and stick to them, you can have great fun and save a boatload of money on products you might not ever consider purchasing otherwise.

Use Ebay’s Buy It Now Feature to Your Advantage

Online auction sites like Ebay are very competitive. Sellers do whatever they can to make sure buyers bid on their items rather than a competitor’s. The lengths they go to include keywording, careful auction timing, and the use of Ebay’s many features which make life easier for buyers and sellers alike.

One of Ebay’s most popular features is the “Buy It Now” option. With Buy It Now, bidders can choose to purchase the item outright at a predetermined price. This option is best suited to buyers who want the item and don’t want to risk losing it to a higher bidder. Its appeal comes from its limited availability: once a bid has been placed, Buy It Now is no longer an option. Buyers will be tempted to make the purchase right away, before someone else places a bid.

But some pros caution sellers to be careful when deciding whether to use Buy It Now on their Ebay auctions. Should you offer this option? If so, how should you price your products? Are there times when you shouldn’t offer Buy It Now?

Buy It Now can be risky for sellers. If an item is listed for its full course of seven to ten days, it has the chance to attract watchers who will place bids at the last minute. But if someone comes along and snaps up the item at its Buy It Now price, the seller will never know how much money the item would have generated otherwise. They might even wonder if they should have listed the item at a higher price.

Sometimes it makes perfect sense to use Buy It Now. Holiday shoppers in particular are going online to look for gifts, and many won’t want to wait for auctions to run their course. Additionally, the holidays are a time when impulse shopping is at its peak. By using Ebay’s Buy It Now feature over the holidays, you’re allowing buyers to make purchases before they change their minds.

When should sellers avoid Buy It Now? If you’re selling an item of uncertain value, it’s best to let that item remain on the auction block for a full seven to ten days. For example, let’s say you’ve got some collectible plates but aren’t sure how much they’re worth. If you put them up with the Buy It Now option, you might be asking for much less than the plates’ actual value. Keen collectors would certainly buy the items right away, but you would have made a much larger profit had you forced buyers to place bids.

Ebay sellers should do some research before listing items with the Buy It Now feature. Search completed auctions to see how similar items have been performing. It’s a safe rule to price your items slightly on the low side, since Buy It Now makes it much more likely that they will be purchased quickly. But take care not to price items so low that they’re no longer profitable! Keep an eye on market trends by doing frequent searches for items in similar categories. If the market is saturated with items of this type, you could set your Buy It Now prices low, or switch to different items until the market recovered. If demand outweighs supply, go ahead and set your Buy It Now prices higher than normal.

Buy It Now is a useful feature when used correctly. Take this advice to heart and you’ll have no problem deciding which of your auctions should incorporate Buy It Now.