September 27, 2012 7:22am by David Farrar

Wheedle

Mainfreight co-founder and Rich-Lister Neil Graham is taking on Trade Me with a new online auction and classified site, Wheedle.co.nz, that officially opens for business on Monday.

New Zealand cyberspace is littered with the train wrecks of online adventures that tried to take on Trade Me but which failed to crack the “chicken and egg” problem of attracting a critical mass of buyers and sellers.

It is very hard to gain sellers unless you have a critical mass of buyers, as sellers know the more buyers, the higher the likely price. However as Trade Me increases fees, it opens up the probability that sellers will judge that probability of a lower auction price is exceeded by the certainty of lower fees. But I don’t think they are there yet. The other factor is that some people may go elsewhere just so there is competition to keep fees down.

But Graham said Wheedle had the management experience, technical expertise and “firepower” to become a long term success. His personal wealth was put at $65 million in NBR’s 2011 Rich List.

Wheedle will launch a television, radio and online advertising campaign on Sunday to promote the site. Chief executive Carl Rees, one of three other shareholders in the business, would not disclose how much it would sink into the campaign, but said it had a multimillion dollar war-chest.

The venture had been two years in the making and will run off 40 servers in IBM’s Auckland data centre, he said. “We are not doing anything by halves. Our infrastructure is huge to run this.”

Rees said Wheedle had 10 staff in Christchurch and another 12 in India who had been developing software for the site and who would be involved in another undisclosed venture. …

Wheedle aims to undercut Trade Me, charging a flat-rate $1 fee on items that sell through the site for more than $20. The fees will be waived and the site will be free to use until November 29.

It is not clear what fee if any will apply for under $20. Sellers won’t like a fee if it does not sell at all. But the fees are a lot cheaper than Trade Me. However the major factor is price. Say your item sells for $50. Then it is $1 on Wheedle and $3.95 on Trade Me making it a net $49 vs $46.25.

But if you get $50 on Trade Me and $45 on Wheedle, then Trade Me is a net $46.25 and Wheedle $44.

But they sound well financed, so may be able to take the initial losses to build up enough critical mass. Free fees initially is a very good idea, but the problem is if people are selling one item, they can not auction it on both sites to see which site gets better results.

Another competitor, List Sell Trade has also been launched. Their model is a $10 a month subscription for all site listing services. Can’t see it flying. Sella continues to exist. They have no listing or success fees, just enhancement option fees.

Sella has 654 listings for historical fiction books which is a lot. However I note almost none have bids on them – they are basically all listed with buy now prices equal to reserves, so it more like a 2nd hand service than an auction. Trade Me has 4,214 historical fiction listings and a mixture of buy nows and proper auctions.