Is it possible to create an auction marketplace at a $0 buyer’s premium? Let’s try to answer that question by first analyzing the buyer’s premium. It’s pivotal that companies only concentrate on the core concepts of the product. In other words, only work on the core capabilities of the auction site, and outsource hard-to-reproduce in-house services like analytics, sockets, and hosting.

What is included in the Buyer’s Premium?

Payment Transaction Fees

Most payment processing companies charge an over-the-top 2-3% transaction fee, and if you intend to use onboarding services, you will also need to pay another cost to the merchant.

• Solution #1

ACH Payments: with ACH payments, you are hitting two birds with one stone by ensuring the bidders can afford the lots and the meager transaction fees. For example, you win a $5000 car at auction and only pay a low $5 transaction fee.

Advertising

Without advertising, there is no growth, and you can’t grow without making an income unless you are venture-backed, but you will have to monetize these services to grow even more.

• Solution #1

You can let the auctioneers pay a fee to have offsite ads and or let them create blog posts on their accounts. For both SEO purposes and community building.

Hosting Fees

Although fees have drastically decreased with considerable help from Amazon Web Services, the payment is still due. So previously, you will have to adjust the buyer’s premium to afford the server bill.

• Solution #1

A subscription model to remove all the ACH transaction fees altogether. That comes with a customizable email list of all followers.

Notification and Sockets

When you run an auction site, you will need to ping each bid to the server to update the count on each user’s interface without needing to reload.

• Solution #1

Try to bundle it up with the subscription revenue until you can build it in-house.

Support

Most people would be against the $0 buyer’s premium due to the Groupon dilemma. They race to the bottom by acquiring the bottom bunch of customers that no company wants: high chargebacks, requiring too much support, extra.

• Solution #1

Have an extensive FAQ page and try to rely on chatbots as much or until the user wants to email you. Which is the best option? You then update the FAQ page and resolve the issue.