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Sites Ask Users To Spend To Save - Swoopo

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Some people will stop at nothing to snap up a bargain — even if it means paying too much.

That is the paradoxical principle behind Swoopo, a Web site that offers a seductive and controversial proposition to online shoppers.

The site, which started in Germany and was recently introduced in the United States, sells appliances, electronics and other products in auctions that typically top out at a small fraction of the retail price.

This month, a new 40-inch Samsung TV, which normally sells for $1,500, sold for $67.92, and a white LG refrigerator with a price tag of $1,498 went for a cool $77.90.

But there is a catch, of course: Swoopo users are charged 60 cents every time they bid, and those charges add up quickly.

The complicated machinations behind Swoopo and its online imitators are drawing attention from critics who say they prey on human foibles, like the tendency of people to overlook the small increments of money they spend to pursue alluring discounts.

These critics also say that players face long odds in Swoopo’s auctions, where they must compete against people in the United States, Britain and Germany. And they say that Swoopo is making a nice profit on each item when all the bidding fees are tallied.

Competing bidders spent a cumulative $2,337 in their losing effort to buy the $1,498 refrigerator, for example.

Swoopo says it must spend much of that revenue to advertise the auctions and attract customers to the site, which it says had 2.5 million visitors in July, double the number it had a year earlier, and a total of 2.5 million registered users.

“In aggregate, consumers trying to obtain these products are overpaying,†said Glen Whitney, a mathematician and a former quantitative analyst at the hedge fund Renaissance Technologies, who was asked to evaluate Swoopo. “Unless you have an edge over other people who are bidding, and you can get them to subsidize your purchase, you shouldn’t do it. It’s a chump’s game.â€

Executives at Entertainment Shopping, the German company that runs Swoopo, counter that the auctions are fun and challenging while offering the possibility of a killer deal.

“We are combining elements of online auctions, skill games and traditional e-commerce,†said Gunnar Piening, the company’s chief executive. “We are trying to bring back fun and excitement into shopping, which hasn’t been there in a long time.â€

Swoopo recently acknowledged that one aspect of the game is not much fun: spending money to bid on products that someone else wins. Last month the site began allowing American users to apply that money toward buying the product at full price. Swoopo’s retail prices are marginally above those offered by sites like Amazon.

Mr. Piening says that auctions have lost much of their luster online. EBay’s marketplace, once a mainstay of e-commerce, has been shrinking for years amid complaints of fraud and the proliferation of automated bidding software that allows people to win auctions at the last possible moment.

Swoopo avoids fraud by selling all of the products itself, often shipping them directly from suppliers. Bidding starts at zero, and players can bid up the auction price only in small set increments, like 1, 2 or 6 cents. Swoopo also offers its own automated bidding tool on the site, called Bid Butler. There is no possibility that users can “snipe†an auction at the last moment, because a few seconds are added to the clock with every new bid.

That, incidentally, creates the impression of Swoopo auctions that are about to end but last for hours more, a feature of the site that critics say is subtly misleading.

Nevertheless, Swoopo’s spin on the Internet auction appears to be suddenly in vogue. This spring, August Capital, a Silicon Valley venture capital firm, invested $10 million in Entertainment Shopping, to help it expand worldwide.

Seems like a clever pyramid scheme.

I certainly wouldn't bid on something I have no chance of winning.

Seems like something for chumps.

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Seems like a clever pyramid scheme.

I certainly wouldn't bid on something I have no chance of winning.

Seems like something for chumps.

its gambling, saying its an auction is wrong, i think the gambling commission needs to have a look, its no different from that house raffle etc that was covered on here

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