Auction Site Bids Success on $5 Wii Units
Aaron Plaat sold a Nintendo Wii console for $5.21, but still made a profit.
Now he’s wondering how little he can get for a Lamborghini.
Plaat, an Ohio State University student, knows his online auction site, swipeitup.com, is bound to raise eyebrows. But the business model, he said, is proven as a profitable venture for operators and a place for consumers to find bargains.
“People think it is too good to be true, but it’s not,” he said. “Once people figure that out, we think the business will take off.”
Swipeitup is not turning a profit, but Plaat expects that to change soon. The site has attracted more than 800 members a little more than a month after its launch and is approaching $1,000 in sales a day. Plaat thinks in eight months he’ll be pulling in $5,000 to $10,000 a day, generating up to $3.6 million in annual sales.
Not bad for $10,000 invested initially by Plaat and a silent partner, most of which went toward buying merchandise to auction on the site.
“We want to make a profit and comfortably supply products to the site,” he said.
The 21-year-old also hopes money generated from Swipeitup could help fund other ventures, including a wireless Internet service and work on a project for an alternative energy company.
How it works
There are key differences between Swipeitup and a traditional online auction site. First, all items up for bid are first purchased by Swipeitup. Also, bids increase by 1-cent increments, which typically results in low final prices for winning bidders.
Those bids are where Swipeitup makes its money. The site charges 50 cents for bids, which are purchased in bundles of up to 250 bids. Bidding on items starts at zero, with each bid raising the price by 1 cent and adding 15 seconds to a countdown clock. The final bidder when the countdown expires is the winner.
So, that Wii that sold for $5.21 netted Swipeitup $265.71 – 521 bids plus the final price. The winning bidder got the item for $5.21, shipping and handling and whatever they spent on bids. The game system’s retail price is $250.
Swipeitup’s initial product push is high-end electronics – game systems, iPods, laptop computers, high-definition televisions – but Plaat said the plan is to cast a wider net for bidders by adding high-dollar fashion merchandise such as purses and accessories to the site.
“We’d like to provide items to people who otherwise might not be able to afford them,” he said.
One of those items is a Lamborghini sports car. Swipeitup is offering to pay up to $199,000 of the cost of a new Lamborghini of the winner’s choice. With that auction scheduled to end Dec. 31, Plaat is confident he’ll recover costs. The site also is auctioning $25,000 toward a 2009 car.
Marketing efforts will target a college-age crowd. Plaat is even hand-delivering items to Central Ohio winners in an effort to bolster the site’s reputation.
Swipeitup will have at least 10 auctions ending per day. Many auctions will be timed to drive traffic at peak times, such as between 8 and 10 p.m. during the week and between 4 and 5 p.m. on weekends.
The idea isn’t original. Other sites use the auction method, the most well-known of which is Swoopo.com.
Plaat said that was the model for his business, but he lowered bid prices to 50 cents from 75 cents and is coming up with ways to avoid the major complaint about the international competitor – that it became so popular that auctions became too difficult to win.
Among his ideas are to institute “high roller” auctions, which will have higher-end merchandise reserved for those bidders who have won several auctions. He may also institute beginner auctions, open only to members who haven’t won one.
Plaat also said he plans to add a marketplace where users can sell their own items, with Swipeitup acting as the middleman.
Swoopo, started in Germany in 2005 as TeleBid, expanded to the United States in September and last month received $10 million in venture capital from Menlo Park, Calif.-based August Capital.
But the company, which bills what it does as “entertainment shopping,” has taken heat for its model, which leaves losing bidders empty handed but also with lighter wallets from the pay-to-bid design. Some industry observers have equated the model to gambling rather than an auction.
“Swoopo is a great business with an innovative and straightforward business model that has successfully merged entertainment and shopping categories,” Howard Hartenbaum, August Capital general partner, said in a release. “More than ever, consumers are looking for a bargain and looking to have fun.”
Plaat echoed those sentiments.
“We want to get as many members as we can and see where that takes us,” he said.