Wednesday, January 2, 2013

Should you Bid on Quibids? A Case Study

It is profitable to bid on QuiBids? What are your chances of winning and losing? I will try to answer a few questions in this post through a case study.

As part of year end blog posts at QuiBids, they released this blog post which talks about the "biggest wins" of 2012. I couldn't find anything about the "biggest losers" of 2012, so I thought I'll go find some auctions where this disparity is high. I don't have access to the full database of course, so this is more of a trail and error for me. If you have a better example, let me know in the comments.

First off, the product: Panasonic Massage Chair. There are several models but QuiBids doesn't mention that on the auction page for some reason. To make sure I was looking at the right model, I Googled for the reviews posted at QuiBids and went to the appropriate Amazon page. Here is that product at Amazon:

As you can see, at Amazon the cost of this chair is $2037.98 with free shipping. I am also noting the shipping costs because these definitely add to your final price that you as a consumer pay. If there were no QuiBids i.e. you are not looking to purchase this at a regular ecommerce website, chances are you'll go to Amazon and spend $2037.98 for this chair.

Now, enter Quibids. You either have a chance to win this product at a discount, which can range from ridiculously cheap to barely scraping a profit. How competitive the auction is impossible to predict because every auction is unique. Here are two extreme scenarios -

Here is an auction that ended ridiculously cheap so the winner ended up with a huge discount.

The product sold for $1.85, i.e. 185 bids in all. Valuing voucher bids the same as regular bids, the total revenue through bids for this auction was 185X$0.60 = $111. The winner used just 7 voucher bids! Most certainly, QuiBids lost money on this auction. However, the beauty of this model is, on an average, QuiBids comes up on top.

Here is another auction that ended ridiculously expensive for the same product above.

In the above auction, bidders placed a total of 34,462 bids. Valuing voucher bids the same as regular bids, the total revenue through bids for this auction was 34,462X$0.60 = $20,677.20. QuiBids made a killer profit here. The profit from this auction would have covered them from ten of above auctions that ended up cheaper.

The more astute among the readers would now ask, what about Buy Now? That is a great question because we, from the outside, will not have statistics for how many people end up buying the product at its full retail price after bidding on the auction. This is never revealed by QuiBids. I don't want to make an uneducated guess at this number.

However, let me claim something better - QuiBids makes a profit irrespective of how many people exercised their Buy It Now option! Look again at my first picture, where I show this chair at Amazon. Now look at the QuiBids Buy It Now price - it is invariably higher.

By buying in bulk, I assume QuiBids gets a better discount, but the purpose of this post isn't to try to figure out how much money QuiBids makes but how much you can save. So your best bet is the Amazon price. Here are your options, then assuming you didn't win the auction and want to use the Buy It Now feature at QuiBids:
1. Buy at Amazon and spend $2037.98
2. Buy at QuiBids and spend $2185.99 + $29.99 (shipping) = $2215.98
A difference of $178.

This means if you use the Buy It Now feature, even then you end up losing $178 on this product compared to the market price. I haven't even tried to explore things like flash sales, other discount online stores in addition to Amazon, and other options. I don't know what the best deal online would be.

In a nutshell, for this product, you are paying $178 for a chance to win it at a price lower than the retail price at Amazon. Whether this is good or bad, I leave such judgments to you. It worked out really well for the winner in the cheaper auction and still worked out quite alright for the winner of the second auction, but not so well for all the other bidders who lost.

Also, lets not forget a time investment. In the second QuiBids auction, a total of 34,462 bids were placed. Now I don't know the average time between bids because it depends a lot on the bidding strategies that people are using. I didn't personally follow the auction either to know how long it lasted. Assuming an average of 3 seconds between bids, the total time investment would be 34,462X3secondsX1hour/3600seconds = 28.72 hours. That's a lot of time spent by a lot of people (of course not everyone will stay from the beginning to the end).

This post also highlights the role of luck no matter how much you know your QuiBids strategies. Of course, the real strategy is first to shop and bid wisely - know what you want and don't want and look up its price on alternative sources. Know the risk you are taking and make a judgment whether it is worth it or not.

What are your thoughts on this?