Wednesday, 22 June 2011

Financial Crisis

What do you do when the bubble bursts and someone ruins your fun on the Auction House? – PANIC!

black_tuesday_2Dealing with a competitive market environment on the Auction House is a topic which comes up a lot in the various blogs and sites which look at how to make gold in WOW.  It’s something which I’ve had to deal with on numerous times over the past few weeks and poses a constant dilemma.  Do you undercut other sellers, if so by how much, at what point is it not worth your while to undercut?  do you undercut aggressively (i.e. by a large margin) or do you stick your items up for a few silver less.  Or as I’ve been doing with potions do you go for the mid price, knowing that unorganised panicking raiders will probably buy them.  Do you just back off and leave it for a few days if there are a lot of low priced items in your area, or do you go on the offensive and actively buy up low priced items and relist them at a higher price?  The trouble with WOW is there’s no real way to differentiate your wares, its a fact that there can only ever be one, and no more than one, lowest cost operator in a (real world) economy, all the other operators operate, for whatever reason, at a higher cost level so, if competing on price alone, would either have to accept lower profit margins or go bust.  What actually happens is people compete on other things, why are Audi’s more desirable than Volkswagens? which in turn are more desirable than Skoda’s – they’re all made by the same company, surely they’d sell for the same price? things like brand perception, value added services, addons which are over and above the basic needs; in WOW the only thing you can compete on is price.  This means you’re valuing your time in terms of gold, how much gold is half an hour of your time worth? What’s the most profitable way of farming gold?  If playing the Auction House becomes so unprofitable that you can make more gold per hour than grinding then why bother at all?

Where am I going with all this I hear you ask? well, a strange thing happened on the AH last night, someone listed a job lot of glyphs for 24g99s, in stacks of 5, I don’t mean just a few of the cheaper levelling Glyphs, I mean pretty much every glyph possible.  Now on my server the median average (i.e the most common) range for the higher end glyphs is 85-100g, the lesser glyphs tend to go for a bit less, some go for upwards of 200g all depending on the current supply.  As a rule I don’t sell for less than 50g, I always undercut by 5s for anything less than 100g and always by 25g for anything over 100g up to 250g – on a rare occasion you’ll see a glyph listed for a silly amount, I won’t just undercut that by 25g because 5 minutes later someone will come along and undercut me.  On a daily basis I sell between 5-10 glyphs and bring in between 500-1000g which isn’t too bad at all, I’d estimate about a 75% mark up if I were to have bought the mats, but as most of them are collected it’s pure profit.  More often than not, the glyphs which don’t sell are the ones which someone has undercut you on, not a problem, you just relist them using the rules you’ve set for yourself when the auction expires.

Now the same guy has listed hundreds of glyphs, all at 24g 99s, some will cost far more in terms of mats, so he or she would have been better off listing the raw mats on the AH and selling them.  So I can only assume that they are farming the mats and listing them, so on the face of it they are making 25g profit per sale, but actually I could make far more from questing than they could possibly ah pricesmake from grinding herbs, milling them, making the glyphs and listing them.  This got me thinking, what are they trying to achieve?  they’ve listed 5 x every glyph at the same price, in a normal (real) economy you might use this tactic to force the competition out of business (assuming your pockets are deeper than theirs) and then once they've gone bust, artificially inflate the price of your goods to make more profit in the long run.  This is WOW, people don’t go bust, so it can’t be it.  This has me puzzled, I can’t for the life of me think what they are trying to achieve.  My only guesses are, they’re a Chinese gold farmer and have far too much time on their hands, but as their aim would be to make as much gold as possible, this doesn’t wash;  they could be setting out in the glyph business and not understood how the market works, but again given they’ve clearly gone to a lot of trouble to build up the profession, used a decent addon to pick all the glyphs priced over 25g and listed their wares this doesn’t make sense to me either.  The only plausible answer that I can think of is they’re happy with a reduced profit level and going for mass sales at a low mark-up rather than profitable sales.  The only two remaining options which are less likely that I can think of are worrying; either it’s a fellow blogger doing an ‘experiment’ like myself and trying to steal my thunder, or they have more gold than sense and they’re just doing it to upset other sellers.

I’m actually planning on mailing the guy tonight and asking what the hell he’s playing at he’s trying to achieve, I’m genuinely curious as to his motives, and it should make for an interesting blog post.  I’ll let you know if I hear back (I suspect I wont) In the mean time, I’ve bought one of every glyph and banked them, I’m going to be largely retired from the glyph selling business for the foreseeable,  until the market returns to normality that is.

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