In its second-largest acquisition, Amazon buys the company for $970 million.
Merchants bid for sales, and shoppers take home some of the bid fees.
Online marketplace Tappocity, which launched this week, aims to put a unique spin on the way web shopping portals operate. Merchants will compete to sell a consumer the item she wants, and the shopper will get a portion of the fees merchants pay in the form of a rebate.
The process starts with a consumer typing the item she wants to buy. Then merchants with matching or similar products make bids in small dollar amounts set by Tappocity for that customer to persuade her to buy from them. When she selects one and buys, she receives half of all the bid fees spent by merchants vying for that purchase; Tappocity collects the other half. The bidding merchants don’t pay anything if the shopper doesn’t make a purchase.
For example, if a customer was shopping for a television, Tappocity might set the fee for merchants to bid on her at $6. If 20 merchants then make bids for her business, she could select and buy the lowest-priced TV set, as well as receive a $60 rebate, with Tappocity collecting the other $60 in merchant fees.
Aside from the cost of bids, there are no further costs for merchants selling via Tappocity. To begin using the marketplace merchants must create an account with a minimum balance of $50 that they use to pay for bids.
Bids include links back to the retailers’ web sites, which is where consumers complete their purchases. That means that Tappocity leaves payment processing to the retailer, which Robert Thomas, Tappocity’s founder, says will help shoppers feel more comfortable using the marketplace. When consumers create a profile on the site they are asked to select how they want to receive their bid refund, Thomas says. The options are check, direct deposit or PayPal.
Tappocity will rate consumers based on their purchasing history. For example, if someone lists 100 items he wants to buy and purchases 80, his rating would be 80%—a high rating that would encourage more merchants to bid for his business.
Electronics retailer Archos is one of two merchants who plan to sell on Tappocity. The merchant put a popular 10-inch Android tablet in the marketplace’s system to test it, says Craig Terblanche, director of marketing at Archos.com. “It really made sense to me in terms of my number one goal of e-commerce, which is conversions,” he says.
Terblanche likes that Tappocity has almost no risk for merchants, aside from time and effort, he says. The only question is whether the site will gain enough traffic to be worthwhile, he says.
Merchants are also able to set up automatic offers with Tappocity that place bids as soon as a buyer announces she is looking for an item the merchant has already listed. If many consumers shop the site, Thomas estimates this could lead to 10 or 15 instant offers for some consumers whenever they list a product.
Terblanche will examine traffic and sales that come from Tappocity. If the site proves profitable he foresees allocating 1-2% of what he spends on advertising and promoting Archos.com to Tappocity.