DealDash Business Model: How Do They Make Money?
Auctions are as old as the human civilization. Back in the olden days, barter and auctions were the only ways of trading. According to various reports, auctions have been conducted since 500 BC. To put it in perspective, the idea of an auction is more than 2500 years old! However, you might be wondering, what does this history lesson has to do with DealDash? We cannot talk about DealDash without talking about auction. The DealDash business model is built around auctions. In fact, auctions have been part of various business models as well.
So, what is an auction? An auction is a platform where a product is on sale and various buyers bid to buy the product. The buyer with the highest bid gets to buy the product. Auctions are common when antique or rare items are being sold. A more modern rendition of auctions can be seen on DealDash, Amazon and eBay.
However, these modern renditions slightly differ from each other. For example, in Amazon, different sellers bid different prices for the same product. Amazon has a marketplace business model. You can read about it in detail over here. Similarly, on eBay, customers bid to buy a product that is listed for sale. The customer with the greatest bid buys the product. We will talk about the operations of DealDash extensively in the following paragraphs.
DealDash Business Model and Auctions
The DealDash business model is based on auctions. The company auctions its goods on a website where customers bid. The customer with the highest bid gets to buy the product and, that too, at a price comparatively lesser than its actual price.
Their business model employs the penny auction strategy. There is a bidding fee to submit a bid. However, a bid costs as low as 20 cents.
To understand the business model of DealDash, it is necessary to understand what the penny auction strategy is and how it works.
Penny Auction Strategy
Bidders need to pay a non-refundable fee to bid for an item in the penny auction strategy. It is also known as bidding fee auction. Every new bid needs to be paid for by participant in this strategy. All the bids that are bought have an equal weight. Each incremental bid raises the price of the item slightly. Moreover, the bidding time in the auction increase by few seconds.
Other rules of auction apply to penny auction strategy as well. The auction ends when there is no new bid greater than the previous bid in a predetermined period of time. This time can be from 10 to 30 seconds, depending on the setting.
Auctioneer then sells the item to the highest bidder. This strategy allows the auctioneer to make from each bid as well.
What is DealDash Business Model?
DealDash is a very good example of the penny action strategy at work. This strategy coupled with the business model makes for a platform that allows customers to buy goods at lesser prices. Moreover, the platform makes sure that the business owner does not lose any money in the process either.
The website was created back in 2009. The site allows the user to bid for an item on sale. You can buy the product for the price of the final bid. The business model is simple and intuitive.
Costs of bid ranges from 14 cents to 60 cents. The cost of the bid depends on the offers and discounts. You can take part in an auction after buying a bid. However, the bids are non-refundable. This means that you will not get your money back if you failed to win the bidding war. Moreover, if you wish to bid for another product, you will need to buy another bid.
Working of the DealDash Business Model
Here is an example of a sale from DealDash. Let’s say that there is a shirt up for sale. The shirt originally costs $10 at a retail store. However, like any other auction, this shirt will start with $0. The bidders will start bidding for the shirt. Now, the final price of the shirt will depend on the bids placed.
Let’s say that the final bid for the shirt was $6. The final bidder will pay $6 and get the shirt. The buyer saves $4 by buying through DealDash. On the other hand, DealDash makes money through the sale of the shirt at $6 and the total number of bids bought.
We mentioned earlier that a bid could cost as less 20 cents. Moreover, let’s put into account that each bid raised the price of the shirt by 1 cents. This means that a total of 600 bids were placed for that shirt to be sold for $6. Then, multiply 20 cents into 600 and that gives us $120. And not to forget, they also make money from the sale of the shirt. DealDash also provides free shipping to customers who buy from them.
What Makes DealDash Different?
However, DealDash is different from other penny auction websites. In cases where you fail to win the bidding war, DealDash offers you buy it now option that allows the customer to buy the product at the same rate as it is available in the store. Remember the example of the $10 shirt in the previous paragraph?
If you buy the shirt using the ‘Buy it now’ feature, you get the shirt for its retail price and all the lost bids are returned. This is the company’s way of making it fair trade. This particular feature means that the customer is not really losing any money when they bid for an item. Bidding gives them a chance to buy the product at a cheaper price than the market value. Moreover, in cases of loss, you can always buy the product at market value and have your bids reinstated.