March 16, 2010
UI student finds penny profits by starting Web auction business
There are penny stocks and penny slots, and now, penny auctions.
A University of Iowa business student and two alumni recently started a new business called Dibzees, an online auction site where buyers bid up the price of merchandise one cent at a time. Shoppers can bid on a mix of items ranging from gift cards to stores like Wal-Mart, Best Buy or Starbucks, to higher end items like Kindle readers, iPods and Coach handbags.
The business was developed by Casey Everts, a senior in the University of Iowa's Tippie College of Business and alumni Andy Wright and Robert Hu. Started in 2009, the site already has more than 2,000 registered users and more than 500 of them have purchased an item. Everts said Dibzees has been so successful that it showed a profit in its first quarter of existence, though the company's business plan forecast a year's worth of losses.
Everts said Dibzee's primary demographic is women and college students in the Midwest. When the company started last year, more than half of the site's users were from the Iowa City area, but after less than six months in business, that number is down to less than 40 percent, with bidders coming from as far away as Arkansas, California and Hawaii.
The company recently won an additional $5,000 in investment seed money by taking first place in the statewide John Pappajohn Business Plan Competition. The award was presented for a plan that Everts initially wrote for a class, Entrepreneurial Innovation, offered through the university's John Pappajohn Entrepreneurial Center.
Everts said Dibzees is modeled on a German auction site that offers similar low price, low stake auctions that draw bidders who are as interested in the fun of the chase as the bargains themselves. He said gift cards that they purchase for $25 regularly sell for just a few dollars, and an iPod Touch they bought retail for $200 recently sold for just $8.
The business is able to make money with transaction fees, he said, as bidders pay 50 cents every time they bid up the price of the item by one penny. As a result, the $200 iPod that sold for $8 generated more than $400 in auction fees, providing a $200 profit to the company.
The risk involved for Everts and his co-owners is that if an item doesn't sell for the price they paid for it, they're stuck with the loss. But Everts said that with the fees generated by the bidders, even a slow auction can turn a profit.
"There's not much downside," Everts said. Unfortunately, bidding up the price one penny at a time doesn't make for huge profits, either, so Everts still holds down a full-time job, along with attending class at Tippie.
In the meantime, Everts, Wright and Hu are looking for ways the company can grow. They're planning trips in the coming months to colleges and universities in states adjoining Iowa to plug the site to students through guerilla marketing and are exploring partnerships with businesses that can provide high-end items at a discount that they can sell on the site.
"We're hoping that someday, we can sell merchandise like cars or luxury vacation packages," Everts said.
Dibzees can be found online at http://dibzees.com.
STORY SOURCE: University of Iowa News Service, 300 Plaza Centre One, Iowa City, Iowa 52242-2500
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