A local start-up is looking to transform the negative image of too-cheap-to-be-true penny auctions, and change the way people shop online.
Yastic sells brand new, factory-sealed products in its timed online auctions, which generally sell for 80%-90% below their retail price.
To participate, one sends an SMS to a short code, at a cost of R5. Each bid received adds 30 seconds to the timer and 15c to the price. The last person to bid on the item before the timer runs out wins.
Founder and CEO of Yastic, Richard Craib, explains that the site was launched in February last year and received a R1 million investment from noted angel investor Michael Leeman. However, technical issues led to the creators revisiting the structure behind the bidding process.
“We were really stretched as a young start-up, and we even tried to launch internationally with just three staff members,” explains Craib.
“We paused our South African efforts to focus on the US launch. In the US, however, short codes are not very popular, so we had to look at different payment mechanisms, so the market wasn't as attractive as SA.
“SA offers an excellent opportunity for Yastic, because it allows for bidding via premium SMS,” says Craib, adding that Yastic now has an “excellent” system in place.
Legal concerns
According to Craib, the concept of penny auctions first arose online in 2005. “To me, the prospect of getting 90% off a product is really appealing.
“I also like this model because in penny auctions it's the most strategic and most persistent bidders that win.”
However, penny auctions have recently come under scrutiny in SA, following the provisions of the Consumer Protection Act (CPA) and suggestions that such auctions constitute gambling. But Craib says the National Lotteries Board has unequivocally stated that in its view, penny auctions do not constitute gambling.
“People are often concerned with the legality of penny auctions, but we are totally in the clear - while the CPA may affect us when it comes into full effect, we will simply adapt to meet the requirements,” says Craib.
“Yastic has a greater deal of legitimacy than other similar sites,” adds Craib, explaining that the company has implemented new measures to ensure transparency. A major concern regarding penny auction sites is the use of software bots to increase auction prices.
Yastic, however, now allows users to log into the site using their Facebook accounts. “You can see the names of recent winners and current bidders and link to their Facebook profiles so you can see that they are real people winning real products,” says Craib.
Embedded auctions
Yastic's latest innovation is a new function that makes auctions embeddable on partner Web sites. The first partner is social photography site Thunda.com, and the first embedded auction went live yesterday.
“The idea of making Yastic auctions embeddable came from thinking about other successful Web sites such as YouTube,” says Craib. “A major part of YouTube's success has been that ability to embed a YouTube video on any site or blog across the Web.
“We are partnering with Thunda.com to embed Yastic auctions on their site. So now when someone is browsing a particular album, they will see a fully functional auction on the right hand panel.”
Craib explains that normally, to place a bid on Yastic, users SMS the word “Bid” to a short code, but for users following the auction via a partner site such as Thunda, they will SMS the word “Thunda” and the mentioned partner will get nearly 50% of the bid revenue.
“I think it's a fun way to add the excitement of a penny auction to any Web site.”
Buy it now
Yastic has primarily been auctioning Apple products such as the iPod Touch, iPads and the iPod nano. Other items have included a Kalahari.net shopping voucher and Amazon Kindles.
According to the Yastic Facebook page, a user won an iPod Touch on Tuesday this week for just R36.15.
Craib says Yastic is looking into broadening its range of products to include items such as concert tickets for the upcoming Coldplay concert.
According to Craib, another key differentiator between Yastic and other penny auctions is its 'buy it now' feature, which allows users to put the money spent on bidding towards buying the product up for auction at retail price.
“So, for example, if you spend R500 bidding on an auction that you don't win, you can simply opt to 'buy it now' and you will get R500 off the retail price.
“You never lose - we're pushing it as an alternative to shopping, because if you're bidding for something you want to buy anyway, best case you'll win it at a huge discount, and worst case you get it at retail price.”
* Penny for your thoughts? Share your thoughts and experiences of penny auctions in the comment section below.
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