Cheap auction sites…. beware

Don’t be taken in.

You may see ads around for cheap auction sites selling goods for 90% or more off the RRP. Be careful with these sites; the owners are making quite decent profits, effectively selling each item for well above cost.

Let’s take an example: This is one site (which I will leave unnamed) for which the bidding process works thus: All goods start at $0.01. Any bid increases the price by $0.01 and costs some number of “credits”, where the number of credits depends on the price of the item. For something like an iPad, each bid costs 5 credits. You can buy 1000 credits for about $90, so each credit costs $0.09; that bid for the iPad you wanted costs $0.45. (Payments for bidding credits are nonrefundable.)

Let’s say the iPad eventually sellls for $30. That’s less than 5% of the purchase price, right?

But to reach that price required 3000 bids to be placed at $0.45 each. The amount raised from the bidding price is $1350. The auctioneers get about twice the price of the new item.

Whoever wins the auction probably gets lucky. Everybody else just blew a wad on bids and received nothing. It’s basically a scam.

I was (sort of) taken in by this as the way that auctions work isn’t made clear up front. Fortunately the Commonwealth Bank declined the charge and I wound up paying via PayPal, who have an excellent disputes procedure. (Not so excellent if you’re a vendor.) I posted a request for a refund to the site a couple of days ago, so I’m about to lodge the dispute, which I expect will be granted. I’m also going to suggest to PayPal that they cut this particular vendor off…

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