In last week’s gaming column, I blasted the practice of steep undercutting on the auction house. I did, however say that I had a couple of exceptions to that rule.
The first is price controls. I have a few markets on my server where I have essentially instituted price controls. The price is not allowed below a certain point, nor is it allowed above a certain point. How? Why?
(No, I'm not doing THAT much math...)
The how is fairly simple. I monitor the markets closely, and if the prices get below the floor I have set, I buy everything beneath that floor. Then, if prices start getting above my price cap, I start selling at that price cap. It’s not 100% control, of course, but I find that in these markets, prices tend to stay in the ranges I set.
The why is a little different. Certainly, there’s profit. This is a fairly classic case of buy-low/sell-high, but given the markets I’ve chosen, it’s a lot of work for not much gold. The justification for spending that effort has a lot to do with what those markets are.
They tend to be the materials necessary for leveling certain professions. Over half of them are herbs (for alchemy and inscription), but I also do this for various metals, leathers, and enchanting materials. The reason I got into this was my annoyance at trying to level those professions. As I worked my way up through the various materials necessary (from the low level peaceblooms up to through felweed and goldclover), I was fairly annoyed that many of the necessary items could not be found on the auction house.
Yes, I could have gone out and farmed them myself, and in some cases I did, but escaping that kind of grind was one of the reasons I got into serious WoW auctioneering in the first place. Fortunately, I discovered that it was really just a matter of timing. One week there might be virtually no mageroyal at all, just a few sprigs held out for astronomical prices, i.e. a hundred gold each, but then the next week the market would be flooded by cheap mageroyal for mere silver pieces. So, through much of my profession leveling, it was sprints and waits as the auction house supplies came and went.
Eventually I realized that smoothing out that supply variation could be a nice profit center, but I also realized it could be a public service. Yeah, yeah, play the evil music. The capitalist is trying to justify his greed by saying it’s for the public good. But seriously, it is for the public good.
I buy when someone is dumping. They’ve farmed it and are trying to get cash, or maybe they’re cleaning out bank space and just want to get something more than what the vendors offer. I give them that money. Then, when supply gets tight and some leveler really needs that mageroyal, there I am offering at a reasonable price.
Ah, but what’s that reasonable price?
And here’s where I diverge from my earlier rant against steep undercutting. In other markets, I’d say that the price should be the highest amount someone is willing to pay, but in these markets, I try to stay within reasonable bounds. Now, I’m still making a nice profit, typically 70% to 200%, but I don’t hold out those few sprigs of mageroyal for hundreds of gold. I have the price ranges I have chosen, and if someone has posted for a lot higher, that’s too bad. That market is under price control.
For example, one market I keep control on is briarthorn. I set my buy price to about 1 gold, and I set my sell price range for 2-2.5 gold. Every now and then, someone buys up the entire market and relists it at 10 gold. Well, later that day, I’m back online and posting a decent supply at 2.5 gold. Often, that other guy will promptly buy me out, so then I’ll post some more. Rinse and repeat. Eventually, he gives up as other suppliers (often farmers) come on board and post even further below me. I don’t know if all of his briarthorn ends up dumped on the market days later, or if he just chucks it all the vendor and stomps off all angry.
But the key is that folks who needed that briarthorn were able to get some at a reasonable (though inflated) price, while I made a nice profit in the meantime.
Note: I don’t set my buy/sell prices arbitrarily. Rather, the market does a lot of that for me. When I find I have too much of one item (more of a gut feel than anything mathematic), I lower my buy price. When I can’t get enough of it to maintain a reserve, I raise my buy price. When I’m selling out too fast, I raise my sell price. When I find that too many of my items are coming back unsold, I lower my sell price. That has led to several different price spreads for my various markets, e.g. 0.30 to 1.4, 1 to 2.5, 2 to 5, 2 to 6, 5 to 12, even a 3 to 9.
That last one of 3 to 9 is an odd one (Goldthorn) that is frequently needed in small amounts of 5 to 15 but almost always shows up in sporadic dumps of 60 to 200 at dirt prices. That one has been a real challenge to keep in stock because of how volatile the supply is, and that’s what led to that 3 to 1 ratio. It used to be 2 to 1, but I kept running out, leaving folks at the mercy of that one guy who posts everything at 999.99.99 hoping you’ll click by accident.
So anyway, I do price controls on some key professional leveling markets, and if you’re going to make some profit there, er, I mean, do some public service there, then I think it’s perfectly fine to do steeper undercuts.
(But don’t think it’s all charity and soup kitchens. I make 25% of my overall WoW income from these markets.)
The second area where I think it’s acceptable to do steeper undercuts is a fairly simple one. Namely, we set our prices at what the market will bear. If the cheapest thing out there is ten times the market norm, I’m not going to slip in at 9.999 the market norm. I’ll be wasting my time and my deposit. It’s not going to sell. Instead, I’ll come in at perhaps double or even triple the market norm and hope I snag a sale before everyone else comes back to undercut me.
I’ve been nailed by other auctioneers for that sometimes. Their argument was that the market could truthfully bear that price if only I would let it. One case was for netherweave bags, a staple item for setting up alt characters with enough bag room to level without investing in some of the pricey high level bags. On my server, they had been going for between 9 and 14 gold, and then someone came along, bought everyone out, and relisted for 50 gold. I shot for 19, was bought out, reposted, was bought out again, and then discussion ensued.
His argument was that the market could support that price, and that it did so on other servers. I checked (The Undermine Journal is awesome!), and sure enough, other servers did manage to sell these at 35-60 gold. However, on those servers the material cost was much higher. On my server, I can make a bag for as little as 3.5 to 4.5 gold, but on those expensive servers, I would have been looking at 10-15 gold for materials. Nevertheless, I decided to play ball for a while and convinced a few of my fellow tailors to do likewise. I figured it was worth a shot, but ultimately the price collapsed as more tailors came out of the woodwork and this fellow dumped all his inventory for under the original market prices.
So, yeah, maybe you can raise market prices, but not in one jump and not in a market with a lot of competitors. If you see someone making that jump, my best advice is to price for what the market really will bear and profit while you can from his doomed efforts.
But other than those, I strongly urge you to stick with minimal undercuts. Otherwise, you’re just hastening the race to the bottom with lost profit for everyone.