Sunday, 29 May 2011

First Growth Wines for Less than a Dollar?

Chateau Haut-Brion 1997: £0.25. Chateau Latour 2001: £1.23. No, it's not a dodgy sale by some back street peddler in China, but rather a new auction model by Unique Wine Auctions. Instead of the winner being the one who puts in the highest bid, it is the lowest unique bid that wins the auction. The site makes money by charging for each bid put in. Each bidder has an account with the company in which he buys credits which are used for bidding.

It's a bit like buying a lottery ticket, and I am sure that the owners of the business have worked their sums to see if it is a viable business. Certainly with the prices of fine wine being what they are, it is easy to see why this model would attract a lot of attention. The company even includes free delivery for UK based addresses. 

The site has been in operation since February 2011, and it seems to focus on high quality Bordeaux wines, understandably so since these are the wines that generate the most interest due to their rarity and price. To encourage people to make more bids, every time a bid is placed the system will send a response letting the bidder know if the bid is "unique but not the lowest", "not unique" or currently the "lowest unique bid". The wine currently on auction is a Chateau Gruaud Larose 2000, with a maximum bid of £9.00. That means that there are 900 unique bid prices.

I wonder how the system will handle an increasing number of members. More bids mean a decreasing likelihood of unique bids, which can be countered by either limiting the number of new members (which doesn't generate profits for the company) or by increasing the maximum bid price (which means that a bidder would have to put in more bids to try and find the "winning combination"). The worst scenario of course, would be that the company ends up broke and all the unused credits are lost. Then again, it wouldn't be a lottery without an element of risk.

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