eCommerce - Sunday, April 5, 2009
Gambling Auction Biz Swoopo Raises $10M
Cupertino-based Swoopo has raised around $10M in 2nd-round funding from August Capital. Wellington Partners had led the company’s $4M Series A round in 2006.
This is an auction site that combines ecommerce with games-manship. Let's say you are bidding on a flat panel TV and you bid well-below the price, that might cost you $1 and that buck will go towards reducing the price of the TV. If hundreds of people are losing a buck, you might actually have a chance to win that TV at a steep discount. The last person to bid wins the bid when time runs out. Swoopo claims that on average the winner saves 65% compared to the suggested manufacturer's retail price, including his used bids, but of course that means that most bidders are money losers.
The contrast to eBay is clearly that it doesn't cost you to lose a bid on eBay but on the other hand it may be less likely that you get a crazy deal. Swoopo clearly appeals then to the gambler-shopper.
Swoopo was founded in Germany and is led by CEO Gunnar Piening. It was founded by SoFina GmbH in Munich, at first under the name TeleBid. A little over two years after its launch in Germany, the
British TeleBid site was launched, and in May 2008 the portal opened in Spain. Shortly before the US-launch in September 2008, TeleBid was renamed Swoopo.
Swoopo is available in Germany, the UK, Austria, Spain and the US.
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Example of Swoopo sale: Nokia 5800 sold for $198.45 in a penny auction. Total cost for Swoopo: Nokia 5800 (with shipping and handling), from Nokia around $400. Total income for Swoopo $198.45 + 19,845 X $0.75 = $15,082.20!!!! With items selling for around half retail price there is always going to be people interested in bidding!
With the Penny Auctions the final sales price is pretty much irrelevant to Swoopo. Take an items that has a $75.= total cost price for Swoopo. To recoup their cost all they need is 100 bids @ $0.75 each, for a total sales price of $1.= (one hundred price increments of one penny each). As long as they advertise and enough people are around so that the bidding cost per participant stay low, I’m sure anything that sells for $75 in a store will get $20 at auction, meaning 2,000 X $0.75 - $75 = $1,425 profit for Swoopo. Great business model!!
Posted by: Laurens at April 29, 2009 01:18 PM
Great write up about this site, and the example given is very informative. Wish more people would come to understand first these things before participating because they end up losing their money and then blaming the site for being a scam, which i think is not.
Posted by: Steam at June 3, 2009 03:15 AM
Yes, this business model is definitely a killer. I'd almost venture to say downright unfair to the regular e-commerce retailer. Ingenious non the less.
Posted by: entertainment shopping at December 5, 2009 01:49 AM
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