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The Truth Behind Penny Auctions

Toby Lambert, November 4, 2022November 4, 2022

Online auctions are the craze these days as people simply want to purchase items at fantastic attractive prices, while the sellers want to make big money by selling either new items or anything that they no longer need at home. Some people consider penny auctions as a form of gambling but there aren’t any regulations at the moment that restrict them. But regardless of whether they are considered morally or legally wrong, are these penny auctions are as good as they claim? What is the truth behind them?

For starters, you need to know how most penny auctions work. People who want to bid on an item need to purchase bids. These bids have prices that start from $0.50 and can go up to $1.00. Of course, the more bids you purchase, the higher the chances of securing the item. Occasionally, discounts are given if you buy a certain number of bids.Kansas City Auction Companies

Now let’s think how the penny auctions make company. Surely they cannot be making a loss by selling items one-tenth of the retail price, right? Say if everyone bids for an iPhone that retails for $1,800 in the market that finally sells for $150 to the winning bidder, would the penny auction company suffer a loss of $1,650? Of course not, for no one would set up such a business if that was the case!

The sales price of the $150 came from 15,000 bids. If each of those bids were sold for $0.50, the penny auction company would have obtained $7,500. Buy an iPhone for $1,800 and the company makes a profit of $5,700 for just that iPhone. If the bids had been sold for $1.00 each, the company would have made more money. And multiply that amount by the number of items put up for auctions on the sites, and you’d see how much money the company would rake in.

So is it worth playing on these penny auctions sites? If you are the winning bidder, then it is. If not, then it is up to you to decide whether you want to contribute to the wealth of the penny auction companies. Bidding is actually quite a fun and cheap way to obtain something. Just think about the scenario above where you have the chance of purchasing a gadget for a couple of dollars. Even if you don’t get it, all you stand to lose is a couple of dollars and some of your time and effort monitoring the bidding.

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