CHICAGO (Reuters) - Weronika Cybulska never intended to stray from the corporate path. But when the recession hit and she lost her marketing job with a New York jewelry manufacturer, the recent MBA graduate set her sights on entrepreneurship, replicating an online auction site she saw thriving in her native Poland.
The 28-year-old émigré and her husband Krystian, a computer programer with expertise in financial services, invested six months of sweat equity to develop BidRodeo, an auction site that offers popular items such as iPads, electronic games, appliances - even gold - to the highest bidder.
“I think Americans are really big bargain hunters,” said Cybulska, who runs BidRodeo out of her Jersey City, New Jersey apartment. “So we decided to give it a shot.”
BidRodeo just reached its one-year anniversary - an eternity in the world of online auctions where sites quickly come and go. It hosts 10-12 auctions daily, up three-fold since its launch. The site boasts 25,000 registered users and active bidders each spend a minimum of $10, with some paying as much as $340 for packages that allow them to bid on more popular items. Ten bucks gets ten bids, while purchasing a bigger package offers discounts on the dollar.
“With online retail and online auctions, I think there is huge growth potential,” said Cybulska, who is projecting BidRodeo sales in excess of $1 million for 2010. “The sky is the limit.”
BidRodeo joins a growing universe of so-called penny auction sites, including names like Swoopo, BidBoogie and others. They offer those with a penchant for risk the opportunity to purchase a wide range of consumer products at competitive prices. Some, such as Bigdeal.com, have drawn venture capital backing.
Unlike traditional auction sites such as eBay, penny-auction sites charge users for each bid they make. So the minimum $10 package buys you the ability to make 10 individual bids that can be used up in a single auction, or spread out over a variety of auctions. One recent BidRodeo winner used a total of 451 bids at a cost of $306 to claim a 16-gigabyte iPad - a savings of roughly 35 percent, or $172, off the retail price.
“It’s all about the bid packages,” said Cybulska. “We make our money on the bid packages.”
Cybulska’s husband and another partner built the site themselves. The couple has since bought him out and Cybulska runs the site full time.
She is somewhat secretive about the procurement of merchandise for the site, but admitted BidRodeo has developed relationships with U.S. distributors. Those vendors provide the business with volume discounts and ship the merchandise directly to the winners with a promise of 10-day delivery.
Mark Griffiths, a professor of gambling studies at Nottingham Trent University in the U.K., has studied online penny auctions and likens them to gambling. That’s one of the main reasons users continue to bid even when they don’t win, said Griffiths.
“When I gamble, I’m buying entertainment,” he said. “When you’ve nearly got something but didn’t get it, one way to get rid of the frustration is to get straight back into the activity. Near wins are psychologically arousing and reinforcing.”
To date, penny auctions remain unregulated. What keeps people coming back to a particular site is trust and “street cred” more than overt forms of advertising, Griffiths said. That’s one reason Cybulska spends a good deal of her time interacting with bidders at her site, answering queries, ensuring that auctions run smoothly and assessing whether BidRodeo is providing the most desirable goods.
“Their customer service is next to nobody,” said Rick Barr, 47, an out of work tool-and-die maker in the Cleveland suburbs and longstanding BidRodeo user. Barr spends at least four hours a day on penny-auction sites and has made a hobby of winning electronic gifts such as PlayStation and Wii for his family members, typically around 30 percent less than he’d pay at retail. He said shady operators are quickly exposed by the bidding community, which can put disreputable companies out of business fast.
“The biggest thing to being a bidder is being patient, you need to let the clock run down,” he said, referring to the frenzied action that ensues just before an auction ends. “Pick your battles against a bidder you think you have a shot to beat.”
BidRodeo takes some of the frustration out of the process for first-time bidders by hosting rookie auctions where only those who have never won before can place bids.
The company is planning to push into new categories in the near term, such as luxury handbags as well as other niche products, Cybulska said.
Whether or not BidRodeo has longevity in a market that has seen the death of what appears to be hundreds of fledgling sites remains to be seen.
Amanda Lee, a blogger who operates the website Pennyauctionwatch.com, believes BidRodeo is over the hump, having sustained a steady user base over the course of its first year.
“I do think they have staying power,” she said.