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Online auctions are not new. Tophatter, DealDash, HiBid and the granddaddy of them all, eBay, have been doing them for years. But they all follow the same playbook: bidding starts low and rises over the time allotted.
New Zealand and now Miami-based DropIt turns that model upside down, with prices starting high and dropping each second over the course of the live 60-second auction until someone swipes out and makes the deal. It is described as the “gamification” of retail.
Founded in 2015 by brothers and co-chief executives Brendan and Peter Howell, the company is expanding its mobile app-based platform in the U.S. through sport stadium partnerships with Daktronics, which operates most of the nation’s stadium screens, and moving into travel experiences with Resorts World Bimini.
But any luxury good or experience brands are game for DropIt’s reverse auction. Prices start at manufacturers’ list price and go down from there, with a typical starting price of $500 or more.
For players, Peter Howell says it takes “nerves of steel,” to wait long enough for the prices to go down, but then to swipe fast enough to win against all the others waiting too.
This pressure is what turns DropIt from an ordinary auction site into a gaming experience. “ From the outset the focus was always to create a great gaming experience for shoppers ,” Howell said. Through March, DropIt has hosted 83,000 auctions with plans to reach 600,000 by March of next year.
For the brands listing products on the mobile app, DropIt says its “adrenaline-pumping excitement” builds brand engagement and “unforgettable live experiences.” For luxury brands, the DropIt model starting at list price is security against threats of losing luxury brand status through discounting.
For example, a Ducati Panigale 959 motorcycle worth $20,900 sold for $5,301 at a Phoenix Arizona baseball match and a $30,255 list price Mitsubishi Outlander Sport went for $15,200 at a Cactus League training event. At the lower end, an iPad mini originally listed from $495 sold for $273 and a $550 GoPro camera sold for $147.
For consumers DropIt offers a once-in-lifetime chance to get a luxury brand that is rarely or ever discounted . For luxury brands it gives them exposure to thousands of new potential customers that they may rarely if ever met, like those in ball parks.
Multiple revenue streams
At the outset, DropIt made money from companies listing their products on the site. But in 2017 DropIt took its auction-gaming platform out to the real ball game through a partnership with Daktronics, which reportedly owns about 80% of all stadium screens.
“Our venues and teams are hungry for interactive content, and DropIt offers an ideal opportunity to better engage with fans, given the quick breaks in action during games,” said Josh Howardson at Daktronics. “The DropIt platform can be easily integrated across the hundreds of professional and collegiate global venues we operate within, and we’re excited to partner with DropIt to bring a game-changing experience to fans.”
When the action on the field stops, the DropIt action on the screen starts. “One of the challenges sports teams have is keeping their audience engaged during the breaks,” Howell said. “The auctions are timed not to interfere with the game. This way it provides advertisers with an interactive and engaging advertising platform.”
Once the fans in the ballpark tune into the featured auction, advertisers gain valuable data that they wouldn’t otherwise get. “The value comes in increased revenue generated post-game day as a result of valuable purchase intent data gathered throughout the process,” Daktronics said in a statement.
“Fan engagement is an overused term in the sporting industry; everybody is talking about it, but nobody can clearly define what it means. DropIt combines technology with psychology to create a truly immersive fan experience that we measure with data,” Brendan Howell said. “We gather data that teams, venues and sponsors currently have no access to, all while creating adrenaline-pumping brand loyalty from fans.”
It is reported that DropIt license fees start at $50,000 a month.“We’re chasing companies that have at least one million downloads,” Peter Howell explained. “We’re talking billion-dollar companies that we’re working with.”
Unicorn in the making?
While working with billion-dollar companies to becoming one is a leap, it is one that the Howell brothers believe is DropIt’s future. “We see it it as a $1 billion exit within the next three years,” Peter Howell said.
A new believer is former Netflix’s marketing director Joel Mier, who just joined the company’s board of directors. Currently working as a marketing lecturer at University of Richmond in Virginia, Mier was introduced to the DropIt concept at a conference and immediately saw the potential in the disruptive startup.
“The question is, is there enough space in the e-commerce space for a ‘gamified’ e-commerce platform, and I think the answer is yes,” Mier said. “What I really like is the integration of e-commerce and gamification and the engagement they have built into the auction. I think there is a sizeable part of the market that is going to find this extraordinarily compelling.”
The Howell brothers feel secure that they can go the distance because of the big head start they have against any competitor that might follow. “Someone in their garage couldn’t replicate this,” Peter said, noting the complexity involved in conducting reverse auctions fairly with 100,000 people swiping their phones at different times and on different mobile platforms.
“Even a big firm would be at least 12 months behind us and they will want to see us be bigger than now before putting a whole team of people on building a competitive product,” he shared.
Note: Upon first publication, the Ducati was incorrectly identified as a automobile.
