What they're doing is most probably not illegal. What they are doing is leveraging a lot of little things to make themselves good cash.
Let's be very clear - they use auctions. This is not a lottery. At the end of the day, the high bidder "wins" and pays the amount of the high bid to win the auction. Then Swoopo adds the (.75 * number of bids placed) to that figure. It's not inconceivable that that sum is less than MSRP.
At the end of the day, you can ensure that you win by placing the last (and highest) bid. Because there's certainty of winning - it's not random - it's not a lottery, and as such, doesn't need to be state-sponsored (as is the case with lotteries in most jurisdictions).
What's fascinating about that is that very few retailers use auctions to sell goods that they own/control/are obligated to ship. Auctions historically have only really been done by venues - eBay doesn't sell their own goods on the site; neither does eBid; and neither did Yahoo Auctions or Amazon Auctions (remember those?).
So Swoopo reinforces online marketplace psychology and eBay-style dynamics by having auctions. This is even though Swoopo is the retailer and has to ship the good (whether Swoopo's dropshipping or not is irrelevant; they still make sure the high bidder gets the item or its nearest equivalent).
On Dawdle, we initially launched with a structure that eliminates the "sniping" problem that you have with eBay. We had a structure where you could name your own price and any seller that had what you wanted could sell to you. However, your offer was blind to the seller and the seller's minimum price was blind to the buyer. It was very similar to the Priceline model, except that on Dawdle, the selling price was limited to the amount of the next highest offer + a bid increment. So when the listing ended, the price that the item sold for was the 2nd highest amount + bid increment. (On Priceline, whatever the offer is is the selling price; we wanted to give the impression to the buyer that they were getting a deal as they were paying less than what they had offered.)
I bring this up only to show the difference between having a different kind of auction structure (like Dawdle did, and we retain in a limited fashion with our StandingOffer technology) and what Swoopo is doing. All Swoopo is doing is charging people to bid, setting the bid increment, and being a retailer disgused as a venue.
The question is, can this last? Given the limited amount of differences between Swoopo and eBay, my guess is probably. They'll have a branding issue if people keep attacking them, but at the end of the day, it's transparent.
"Its not an auction if bidding costs money regardless if you win or not. Its more of a raffle."
Show me the law that says this and I might begin to believe that you have a point here ... but right now I do not. I don't know much about auction laws, but I've never heard of it being illegal to charge for participation, and if it is in fact illegal then there must be someone online who has complained about it or files a case somewhere ...
But you are buying the right to bid. One could argue that it's a separate service altogether, like a costco membership that's graded on how much you buy.
Except you CANT guarantee yourself a win, and you certainly can't guarantee yourself a win at any price. It IS essentially random what the bidders competing with you do in response to your "last" bid.
>Except you CANT guarantee yourself a win, and you certainly can't guarantee yourself a win at any price.
Of course you can. Every time you bid you extend the auction, therefore if you're willing to pay the most you will win. (Now, that amount may be worth more than buying the item in a store somewhere, but that's beside the point really)
For the purposes of this message, I define "pay" as "money out of your pocket, including the money spent 'purchasing' 'bids'."
In a real auction, if you are willing to pay twice the market price, you are almost (but not quite) guaranteed to win, and you will almost (but not quite) certainly be paying less than 2x market value. The only person who can beat you is someone willing to pay 2x+change. (When you lose, you don't have to pay anything, but that's not directly related to your point.)
In a Swoopo auction, if you are willing to pay twice the market price, you are only slightly more likely to win, rather than reasonably assured, and you can be beaten by anybody willing to put up $1+current bid, which, if you've poured twice market value into the bids, is still fairly low. (And when you lose, you still pay.)
An auction has a rational mechanism for manipulating the probability of your winning in proportion to your desire to win, as expressed by the money you're willing to pay. Swoopo's system is far, far less rational, and you can pour massive resources into an "auction" and be beaten at the end by somebody paying a mere fraction of what you are paying, even though they end up with the product.
It's a night-and-day difference. One system is rational and what most would consider mostly fair. One is crazy and what most would consider a scam.
"One system is rational and what most would consider mostly fair. One is crazy and what most would consider a scam."
The term "scam" requires that the person being scammed was not given the facts upfront. This is not a scam by any stretch of the imagination since the company posts the technical details plainly and clearly on their website. You may not like the way the business is structured, but it is certainly no scam.
Well, there's two aspects to that. One is that they tell you exactly how it works. The other is the marketing, where they all but promise you cheap goods.
Is it a scam? Is an advertisement for a beer a scam when it promises you women will throw themselves at you if you drink their product? You can play the internet "difference minimization through copious verbiage" game all you like, but I still think there's a qualitative difference.
Let's be very clear - they use auctions. This is not a lottery. At the end of the day, the high bidder "wins" and pays the amount of the high bid to win the auction. Then Swoopo adds the (.75 * number of bids placed) to that figure. It's not inconceivable that that sum is less than MSRP.
At the end of the day, you can ensure that you win by placing the last (and highest) bid. Because there's certainty of winning - it's not random - it's not a lottery, and as such, doesn't need to be state-sponsored (as is the case with lotteries in most jurisdictions).
What's fascinating about that is that very few retailers use auctions to sell goods that they own/control/are obligated to ship. Auctions historically have only really been done by venues - eBay doesn't sell their own goods on the site; neither does eBid; and neither did Yahoo Auctions or Amazon Auctions (remember those?).
So Swoopo reinforces online marketplace psychology and eBay-style dynamics by having auctions. This is even though Swoopo is the retailer and has to ship the good (whether Swoopo's dropshipping or not is irrelevant; they still make sure the high bidder gets the item or its nearest equivalent).
On Dawdle, we initially launched with a structure that eliminates the "sniping" problem that you have with eBay. We had a structure where you could name your own price and any seller that had what you wanted could sell to you. However, your offer was blind to the seller and the seller's minimum price was blind to the buyer. It was very similar to the Priceline model, except that on Dawdle, the selling price was limited to the amount of the next highest offer + a bid increment. So when the listing ended, the price that the item sold for was the 2nd highest amount + bid increment. (On Priceline, whatever the offer is is the selling price; we wanted to give the impression to the buyer that they were getting a deal as they were paying less than what they had offered.)
I bring this up only to show the difference between having a different kind of auction structure (like Dawdle did, and we retain in a limited fashion with our StandingOffer technology) and what Swoopo is doing. All Swoopo is doing is charging people to bid, setting the bid increment, and being a retailer disgused as a venue.
The question is, can this last? Given the limited amount of differences between Swoopo and eBay, my guess is probably. They'll have a branding issue if people keep attacking them, but at the end of the day, it's transparent.