Sold on the pay-to-bid model
By Karamjit Singh June 28, 2013
- Former bankers see potential in ‘entertainment shopping’
- Raising money to expand regionally, beyond Singapore and Malaysia
TAKE two former Ivy League bankers in Singapore itching to do something more meaningful with their lives beyond the 12-hour days they were putting in for their Wall Street-based employers; add a geek brother – and chances are, you’re going to get a startup that has something to do with numbers.
Indeed that’s exactly what Soldgers Pte Ltd founders Tian Qiuyan, formerly of Goldman Sachs; Angeline Tham, formerly of JP Morgan; and Tian’s brother Chan Chiou Hao did by launching their pay-to-bid site sold.sg in July, 2010 (pictured above with their team).
Tian worked on the site in stealth mode for six months, using her lunch breaks. “But that was just too tough to manage with my work-load,” she recalls.
Tham joined six months after the launch.
Their Malaysian site sold.my, was launched in late 2011. The Singapore site has 80,000 active members; the Malaysian site has 70,000. The demographics are similar, with about 65% male, 35% females.
Inspired by German-based site Swoopo, which however went bust in March 2011 despite raising US$14 million and having over one million registered users, Tham and Tian are confident they can make their model work, attributing Swoopo’s failure to an overly aggressive expansion model.
The business model is straightforward. They make money from the sale of virtual tokens, with some of the items also earning them a profit.
Having been mostly self-funded, with an infusion of cash from an angel investor, they are currently trying to raise venture capital funds to expand beyond Singapore and Malaysia and into other South-East Asian markets with their brand of ‘entertainment shopping.’
One advantage of expanding out from Singapore into the region is that every other market is going to look cheap. Plus, with the complex backend run out of Singapore, it is mainly procurement expertise that they need to hire.
For instance, they have around five people in Malaysia, all in procurement. They buy their products in the country for the sake of product warranties.
The two ladies’ banking careers have clearly left a strong mark. They are coy about sharing how much they put into the business, how much their angel investor put in, or how much they are planning to raise beyond saying it will be a “low seven-figure sum.”
And they are just as coy about even how close they are to being at least operationally profitable. “We are not that far away,” says Tian. “We are quite healthy,” chips in Tham, helpfully.
Conversely, their model is very transparent. You can tally up how much they make from every auction because the total bids are displayed at all times. Just multiply that by RM1.50, which is what every token costs.
“In fact, we do get customers emailing us about how much we make from certain auctions,” says Tian, laughing at the memory of customers calculating their profits.
The transparency is there however to get the competitive juices flowing among their ‘entertainment shoppers’ – most mostly male between their mid-20s and late 30s, with whom sometimes the desire to win a product being bid for overrides common sense. And that’s good for business.
The writer witnessed an auction of a portable hard drive where two users – ‘CrazyNut’ and ‘Sanjhiv’ – were duking it out, with Sanjhiv waiting for the clock to tick to one second before placing his bid. Living up to his moniker, CrazyNut immediately countered with his bid, not bothering to wait for the clock to tick down.
Sanjhiv eventually dropped out but with a new bidder ‘OklaTU’ coming in. With each bid only raising the price by one sen, the item went from 98 sen in the last 20 seconds to finally closing at RM2.91 (click screencap to enlarge).
Yet, even when this happens, chances are that the winners would have paid less for their products than the retail price. In this case RM102 in total was spent bidding for the item, which has a recommended retail price of RM329.
Every item starts at zero dollars and each bid drives the price up by either one, five, 10 or 15 sen – and adds 20 seconds to the clock!
Past sales included an iPhone 5, which was won with a bid of RM5.80. And this was last November, before the phone was launched in Malaysia.
A Galaxy Tab 2 went for RM2.15. “That was quite painful to see,” Tham laughs.
Calling this a job hazard, the two say you just need to get past the low prices some items go for, although Tian concedes, it is insane.
“In the early days I will be playing mahjong over the weekend while watching bidding going on, shouting ‘don’t die, don’t die’ when seeing bids about to close at low prices,” she says.
But it is no laughing matter that auction models are always open to accusations of the use of bots to artificially drive up bidding. Tian and Tham are adamant that Soldgers practises no such thing.
“All our winners are legitimate. We do not use bots and are open to audits anytime,” they declare.
The downside to this model though is that there is only one winner – everyone else who has been bidding would have lost their money. This discourages some people.
What Soldgers has done is to introduce two other options for customers. For those who do not like the notion of bidding, they can buy items for a fixed price.
The latest option came recently when they re-launched their site with a new look and feel. “We included a zero-risk feature. Essentially, zero-risk auctions allow users to bid risk-free for an item.
“If they don't win or decide to stop bidding, they have the option to buy the item outright at our retail price and they get all their paid tokens back,” says Tian. These auctions come with the ‘Buy It’ button.
Since Soldgers does not buy in bulk, it is not clear how competitive its pricing will be for a bidder to pull out and take this option. Nonetheless, it at least offers bidders an opportunity to get the product in a different manner.
For the duo, the trick is to ensure as many people as possible bid for the items they put up and the best way to do this has been to get as many of the latest items on the site for auction. Popular products give the highest margins.
Asked about the differences between customer behaviour in Malaysia and Singapore, the two say they find that a large percentage of users are credit card holders in Singapore, and that Singaporeans generally have more trust in making payments online. Between 20% and 30% of Malaysians pay via bank transfers.
Meanwhile, sales and buyers have nearly doubled in Malaysia since the end-2011 launch, which shows that consumers have more faith in e-commerce.
In terms of behavioural differences, they notice that Malaysians are a little less predictable in their buying patterns compared with Singaporeans.
“Because the two markets have slight differences, we put a lot of emphasis on market research to identify the buying trends for both. This helps us understand our buyers and makes us relevant in a highly competitive market,” says Tian.
Indeed, with enough e-commerce options in the region for consumers, it remains to be seen how sustainable the pay-to-bid auction model is. For Soldgers, raising that next round of funding will be a big vote of confidence that such a model has legs in South-East Asia.
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