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Online Resellers Hold Cards for Game Changing

Online Resellers Hold Cards for Game Changing

Getting the best deals seems to be built into our DNA.

Who can resist the big sale, savings, steal? It's part of the hunt (for bargains) and may be part of our survival mode. But as SN's cover story on competing retail channels illustrates, retailers are holding up price and value as a big lure to reel in consumers.

One competing channel not in this report is how online retailing may be changing the way shoppers buy and spend. Let's look at one small segment — online reverse auctions for prepaid and gift cards. The marketing is aimed to titillate the consumer psyches of those who like the element of chance in their bargain hunting.

Recent start-ups include:, which claims you can save up to 40%;, which claims its auction will produce the shopping excitement of a Black Friday; and, which offers bidders a chance to win a discounted gift card but in the process they can fund a good cause as well.

The reverse auction process can sometimes work in mysterious ways. I couldn't immediately figure out the Rackup process. You bid up the price of a gift card and win bonus dollars that bring down the overall cost. Others like Biddees use pay-to-play rules. The face value of a gift card is discounted $1.50 when posted on Biddees' website, so bidders get an automatic discount.

After bidders use up their three free tokens, called “Little Biddee Things,” to trial the site, bidders must pay 99 cents per bid credit to view the current price of a card. They are given 30 seconds to decide to buy the discounted card at the current price. Each time a bidder views the card price it is reduced in value by 50 cents until it is eventually purchased by a bidder. The activated cards are shipped free to the purchaser. The company says the average discount is about 10%.

Of the 99 cents that bidders pay to play, 15 cents go to a nonprofit charity. Biddees announced last week that it added Whole Foods and Safeway/Vons branded gift cards to its roster of over 40 branded prepaid cards. A company spokesperson told SN that grocery gift cards are highly requested by bidders and they are used as discounted currency. Since the website was launched in January, Biddees has sold just under 1,000 prepaid cards and has drawn about 25,000 unique visitors to its site.

Biddees and most others bypass the retailer in the whole process. Activated cards are purchased directly and at face value.

Questions arise about the financial model. It appears high user volume is key to the success of these sites.

What does this do to the retail brand, especially when the product is being resold by a third party? Rebekka Rea, director of the Retail Gift Card Association, told me that in all her years of experience, retailers have not embraced this concept because of the possibility of fraud. If there is an unsatisfactory consumer experience, it can taint the retailer's brand in the consumer's mind. This segment of online retailing is changing the way consumers view value by making it into a game that can be losing for the player.

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