In Thursday’s reader mailbag, a reader asked me about my opinion on Quibids, an auction site where you have to pay for your bids, but bids only make the auctions go up in $0.01 or $0.02 increments. I told them, basically, that my back-of-the-envelope math makes the site not worth your time.
Several readers wrote to me immediately afterwards, bragging about various items that they got at a steep discount and urging me to reconsider my perspective on it, so I decided to give the site a fair shake.
I signed up for an account there. When signing up, you have to purchase a starter package of 100 bids for $60. All of their bid packages cost you $0.60 per bid – that’s the standard price.
After purchasing that package, I participated in four auctions and watched several more.
Auction #1: I bid on a $25 Staples gift card plus 10 bids. In this auction, I bid 13 times but didn’t win, costing me $7.80. I spent 20 minutes bidding on it, but I had to use the restroom and lost the auction. I debated for a while on whether to buy the package anyway – the “buy it now” feature basically allows you to buy such items at their face value minus your bids plus shipping – but the “buy it now” cost was $23.20 plus $1.99 shipping, meaning I would have just received a gift card I didn’t really want that badly for a net loss plus a few free bids.
Auction #2: I bid on a $10 Target gift card plus 5 bids. I bid 16 times on this auction ($9.60 in bids) and won it. Shipping on the item cost $1.99 so I essentially paid $13.39 ($3.79 directly and $9.60 in bids) for a $10 Target gift card and got 5 bids back, a net loss of $0.39. Not really much of a win. The biggest problem is that I lost track of how much I had actually bid to this point. This bidding took about fifteen minutes.
Auction #3: I began to think of a different strategy, so I bid on a $25 Wal-Mart gift card plus 10 bids. I bid 47 times ($28.20 in bids) and lost, so I used the “buy it now” option to recoup some of my losses, getting the item for $4.79 – $1.99 shipping plus the $2.80 face value of the auction once it became a loss for me to continue to bid.
This ate through most of my bids – I had used 76 bids of the original allotment.
The total cost of the bids used to this point – 13 bids + 16 bids + 47 bids – at $0.60 per bid, was $45.60 spent on bids.
The shipping and “buy it now” costs totaled $6.78.
Thus, my total cost for a $10 Target gift card and a $25 Wal-Mart gift card was $52.38 at this point – that’s not a win.
Of course, I did have fifteen “free” bids, which I used in an auction for a $25 Target gift card. I used all 15 bids, then bought the card for $15 plus $1.99 shipping
So, my total cost for the bids and the shipping was $69.37. For that $69.37, I got a $25 Target gift card, a $10 Target gift card, and a $25 WalMart gift card. Not only that, I spent an hour actually bidding and another half an hour reading auction listings.
Siply put, it was not worth it at all.
There are several points worth discussing about this experience, however.
The ads you see for the site, where they talk about people buying MacBook Pros for $180 or Kindles for $25, don’t include the amount people spent on their bids. It’s impossible to know how many bids people threw at these items, but I do know that people in various news reports have mentioned spending three or four hours bidding, which means they did have to spend a significant number of bids along the way. If you add in that additional cost, the “discount” isn’t nearly as steep.
The sunk cost fallacy is at play all over the place here. Quibids (and other sites like it) are just an e-commerce shop at their core with an interesting “auction/game” mechanism on top of them. The vast majority of bidders in an auction will not win that auction.
The reason people keep bidding, though, is the idea that they need to recoup some value from what they’ve already sunk into that auction. “I’ve already invested 20 bids and thirty minutes into this auction, so I need to get something out of it,” they think, so they keep bidding. I saw a lot of people jump into an auction, bid until they apparently reached the point where it was more cost-effective to just “buy it now,” and then drop out. In fact, the site seems to have a lockout mechanism at some point where it informs you that you’re better off just buying it now.
Thus, the only reason to use the site is if you’re willing to pay face value for an item that you actually want or can actually really use. If that’s the case – and you don’t mind paying the standard retail price for an item – then you might actually get some benefit out of sites like Quibids, because, in the end, the auctions there are akin to a lottery, where you have some fairly small chance of getting a steep discount on an item. If you don’t hit that chance, then you’ll be paying MSRP for the item.
For me, though, I’d rather just shop around for a better deal on the item. If I can find a particular item for 20% off with fifteen minutes of searching, I’d far rather take the guaranteed 20% discount than a small chance at some uncertain level of discount.
Of course, the real winner here is Quibids. They’re basically able to sell a lot of merchandise at the normal retail price online. They also get to pick and choose what items they’re selling, which means they’re likely choosing the ones where they know the difference between their wholesale price and the retail price is low.
This model, of course, only works if there are a lot of users on the site. If you only have one user who is able to win items for $0.01 consistently, then the site model doesn’t work. From what I’ve seen, they have a pretty solid user base, likely thanks to their strong promotional work.
The more users using Quibids, the better the equation shifts in their direction and the worse it gets for you, the end user. Your chance at a big discount on a specific item becomes very small indeed.
My recommendation, in the end, is to just shop around for items you want instead of gambling – and likely paying retail price – at Quibids.