What do LabelDoll, JungleCents, LuckyChic, ToVieFor and SneakPeeq all have in common?
All five were once penny auction sites launched by true entrepreneurs, and all five have transformed their business models away from penny auctions creating unique and successful businesses in the process.
LabelDoll.com launched in 2011 as a penny auction site offering high quality designer fashion items, offering handbags, wallets and other items from coveted top brands like Gucci, Louis Vuitton and Marc Jacobs. They also added jewelry pieces such as Michael Kors watches, BareMinerals makeup kits and gift cards.
However, there is a flaw in the traditional penny auction model and I think they experienced the harsh reality and ability for bidders to virtually “clean” out their site. LabelDoll.com is now an online boutique offering designer vintage and pre-loved apparel and accessories with the option to “haggle” to get an even lower discounted price.
As you can tell from previous posts, I personally loved the user experience that LabelDoll offered, but it just wasn’t enough for them to “thrive” from a business perspective. I spoke with LabelDoll.com’s founder Kelsey to share with you her perspective and why she has transformed her business:
The following is a message that Kelsey shared with bidders and then sent to us to publish:
“As you dolls know Label Doll was a penny auction website and we recently got out of that business. A huge reason why we did was because of the impact that malicious behavior was having on our company, along with advertising changes and so on. The reason for this post is to add a different perspective, as much as it is scary for you to try out new penny auction websites it was scary for us to get the penny auction “power users” to come on board to play on our website. It’s a catch 22, we want to grow and be a profitable and honest website, but at the same time we want people who never won to feel that feeling that made you stay in the game across the penny auction board. There comes a point where it’s just not fun anymore, when you realize as a user that you have dominated a website, because of a name, and because you’ve dominated you know it will shut down soon enough. What I want to know is: Is there a happy medium? For us, like you with new penny auction websites, it was not worth the risk, so for now e-commerce is our way. The reason why we got into this business was to find a fun way to give people deals and make them more fashionable along the way. We will be featuring auctions yet again, but not in the way that you think… [insert cliff hanger] We miss all of you and we thank you so much for your love and support and we hope that you come and visit our new website ? Kelsey”
Kelsey went on to tell us, “The moral of my story is I don’t want to be on anyone’s bad side, that’s why we ran Label Doll the way we did. Everything was on time, you got your tracking info 24 hours after your purchase was made and we hand wrote notes to every single person. In those ways nothing has changed, the one thing that has is that my company is now filled with 100% positivity. I now run a transparent website that still does the same thing that we did before, we bring designer fashion at a discounted price. People understand E-Commerce, but not everyone understands penny auctions. I can understand why Google limited penny auctions from advertising and marketing the same way as E-Commerce websites to only being able to use certain key words, it’s not 100% transparent, in other words people don’t get it. After Label Doll closed its doors I thought to myself “ok, we have X customers, we were good at making them happy when they received something for a low cost, let’s do that again. It was being held over my head: “not every E-commerce website/boutique with X customers waiting to see what will come. Let’s try this one more time…
There were some fears going into this (some pretty big ones at that):
1. How many people did we piss of? (excuse my language but there are people that will never shop on my website regardless if I’m giving things away).
2. X registered users minus the ones we are on their hit list equals Y, what is Y?
3. Do I want to do this again?
I want to move Label Doll in a positive direction, ALWAYS, and I want to be friends with my customers and be able to relate and give them what they want, but not at a cost to my company. This is the hugest thing penny auction’s struggle with in my opinion… what makes sense, what makes $, what’s the cost? People are demanding, especially when they know they are the livelihood of your penny auction website.
At the end of the day fashion is my passion and I want to make people excited and look in the mirror and say “I’m beautiful, I’m smart, and I can’t wait for tomorrow” whether it’s from a blog post, a Facebook quote, a ReTweet or a cool vintage item they just paid $5 for. There is a path to everything, you always learn along the way and Label Doll will continue to transform and do the same thing it set out to do in 2010: Bring deals on women’s fashion and accessories.
Keep your arm and leg shop Label Doll,
CEO and President of Label Doll, LLC”
Then there was JungleCents.com. Backed by innovative founders and a unique design interface, JungleCents was one of the early penny auction sites back in 2009. They were the first site, at least that we knew of here in the US, to offer ”seated” penny auctions with unlimited bids, so they already offered a twist on the original pay-to-bid model. They tried offering a brand new Mercedes Benz, but not enough “seats” were ever purchased to make the auction work, this seemed to have been a trend across their site. For more insight into seat auctions read our article, Seat Auctions: Is It the Waiting Game That’s Unappealing?
Later, JungleCents’ founders, entrepreneurs Sameer Mehta and Nadir Hyder shifted gears and removed the
penny auctions from their site transforming it completely. With the help of Mark Cuban, owner of the Dallas Mavericks and venture capitalist, they partnered with sites like AskMen and Complex to offer daily online deals geared towards men. The two have since sold JungleCents to Cuban and are now heading up a new startup, 12Society a subscription based retail/lifestyle experience site.
LuckyChic – From Penny Auction to Flash Sale
LuckyChic.com launched back in 2010 as a penny auction for lifestyle and designer products, predominantly geared towards women as LabelDoll was, LuckyChic offered a high volume of auctions on a daily basis for over 2 years before they shut down and turned into a private flash sales site for fitness, health & beauty, and outdoor products. By chance I actually ran into someone who worked for the company, he told me that the owner poured a ton of money into the site (not sustainable) before they shifted gears.
Peek to save with Sneakpeeq
Sneakpeeq.com is a real personal favorite and is a perfect example of just how transformative social commerce can become. Like JungleCents, Sneakpeeq was also around during the early days of penny auctions.
Sneekpeeq launched in the summer of 2009 as CircusPop.com by three Stanford Graduate School of Business alumni. CircusPop was backed by a prominent Hollywood executive, and founder of an iconic retailer and tech entrepreneur who previously took her company public on the NASDAQ.
CircusPop provided consumers with the opportunity to decrease the price of a popular product just by clicking on their “see price” button for a fee “bid cost” with each click. A year later CircusPop became PennyDrop, a popular app/shopping game on Facebook that teamed up with brands like Forever21, Sephora and Drugstore.com to give users the chance to click to decrease the price of gift cards, apparel, accessories and other items.
Wildly popular, they yet again transformed to become SneakPeeq – SneakPeeq.com, which has grown to become a very successful e-commerce brand offering daily sales on anything that SneakPeeq finds interesting, from blown glass art and gourmet popcorn to wine aerators, portable speakers, mini sculptures, beach towels, apparel, accessories and so much more.
SneakPeeq really has perfected their brand, combining gamnifying elements such as awards and badges offering free items and discounts to free credits for sharing items with friends on Facebook, and again, eliminating the pay-to-play participation model that really had inhibited the growth of their original site. To date SneakPeeq.com has received over $10.1 million in funding.
“The reason ToVieFor failed is the same reason almost all businesses fail: we did not build something that people wanted.”-Melanie Moore
ToVieFor launched in late 2011 at TechCrunch Disrupt and was a pay-to-play “Dutch” penny auction site for designer handbags and other fashion accessories. Not a lot unlike CircusPop’s model, ToVieFor offered handbags and accessories from brands like Coach, Burberry, Alexander Wang, and Ray Ban.
How it worked was users purchased a membership of about 2-3 bids at $0.99 per bid which gave them the opportunity to, thanks to collective buying power, reveal a discounted price with each reveal and then could purchase the item on a first-buy basis.
“On the surface, we shut down because we ran out of money,” Moore in an interview with BetaBeat. “However, the root cause of this was a flawed business model. We were attempting to compete solely on price in a world where brands not only do not compete on price, they have essentially formed an oligopoly and set prices (vs take prices). As a result, it was incredibly difficult to convince brands to allow us to change up their pricing structure. And in retail, having those brand partnerships is critical to survival.”
I e-mailed Melanie to get her input by asking her 1. What interested her in starting ToVieFor on the pay-per-bid platform and 2. Why she ultimately shut the site down. She said,
“1. I saw the success of Swoopo initially, and being a former Economics geek, I really loved the idea of playing on the theory of sunk costs. I also thought that Swoopo was not paying much attention to the fashion space, and that the few sites that were focusing on fashion, were not doing a great job in my mind.
2. We shut down ToVieFor mainly because we failed to make something people wanted. I wrote post-mortem blog post about the entire decision process here.
We did change the business model as we were going through TechStars, mainly because we realized that the pay-to-play model is really unappealing to luxury brands. We changed the model to use a pricing method similar to Priceline’s: opaque discounts and a name-your-own-price method to perfectly match demand to supply. This satisfied the luxury brands, as any discounts given were not made public. We began to on-board some very big luxury brands like Proenza and Lanvin, but then we realized our usage numbers were taking a nosedive. The “pay-to-play” customer base that we had built were most decidedly not the luxury customer. We also realized that the luxury customer is generally not interested in playing a game in order to shop – the two activities actually activate totally different areas of the the brain – and we found that gaming and shopping mix like oil and water. “
A recent trend is monthly subscription box clubs, from BirchBox, that for $10/month sends out boxes filled with beauty, health and cosmetics products to clubs for snacks and other necessities, and consumers are loving it.
What’s Melanie doing now? She’s founded elizabethandclarke.com, a seasonal custom tailored “perfect white basic” shirt subscription box club, offering varying subscription packages with prices ranging from $20-29 per shirt.
The making of a true entrepreneur is someone who is receptive to change and embraces it, always seeking to fulfill a specific need or offer an innovative service.
“Innovation is the specific tool of entrepreneurs, the means by which they exploit change as an opportunity for a different business or a different service. It is capable of being presented as a discipline, capable of being learned, capable of being practiced. Entrepreneurs need to search purposefully for the sources of innovation, the changes and their symptoms that indicate opportunities for successful innovation. And they need to know and to apply the principles of successful innovation.”- Peter F. Drucker, “The Father of Modern Management”
I really am inspired by all of the above true entrepreneurs.
Does this mean that penny auctions in the present state are destined to fail?
We look forward to hearing what you think!