Thursday, July 30, 2009

The wages of SIN

For several weeks, German customers of Swoopo have been allowed to use their expended bids as credit against the purchase of the auctioned merchandise, calling it Swoopo It Now (or "SIN"). Today (or recently -- I do have a life and Swoopo doesn't seem to send out press releases), they extended that courtesy to American bidders as well.

Of course, the merchandise is sold at MSRP, but if you lose big, you can salve your wounds a bit by buying the item for a not-terrible price. Say you blow 100 bids in a failed attempt to get that flatscreen TV -- Swoopo will give you $60 (100 bids at 60¢ each) off list if you buy it outright (and spot-checking a few items against Amazon suggests that Swoopo "list" is a pretty reasonable price).

Several issues:
  1. There's a tight time-limit: you only have an hour to redeem the bids
  2. You can do it while the auction is running -- but then you automatically lose.
  3. Free bids are excluded, of course.
  4. It isn't clear from the terms whether bids you buy at auction are valid: "vouchers" are excluded and auctioned bid packs are sometimes, but not always, referred to as "vouchers" on the site.
It's my analysis that SIN will drive up the price level. A bidder who has already expended more bids than the difference between "list" and what the product is worth to him has no incentive to stop bidding, since every 60¢ bid saves him 60¢ on the purchase if he doesn't win, and he might win.

Of course, that assumes that there are a lot of bidders out there who think like I do. We'll see.


  1. I like your last point. It seems to me that to keep bidders from excessively bidding because their sunk cost is no longer sunk they should only get a percentage of the cost of the bid back to use toward the SIN. If they got 40 cents for each bid (which costs 60 cents) then they would have an incentive to restrict their bids. If, like you point out, users have bid enough times so that MSRP - bids placed < Amazon price than users have no incentive to stop bidding. This means auctions will be harder to win and also that Swoopo makes more money.

  2. "This means auctions will be harder to win and also that Swoopo makes more money."

    Well, Swoopo only makes money because they are perceived as a low-cost option. When that is no longer true, why would people go to Swoopo instead of Amazon?