Greedy Goblin

Monday, April 13, 2009

Can't have everything

The AH is full of possibilities. Hundreds of pages, 10-30K items on different servers. If we assume that 20% is underpriced, and can be resold for higher, can be vendored or disenchanted, it means that 2-6K items are out there to be processed. Every single day.

While this huge number holds great possibilities for great profit, anyone with sense can see that it's way too much to handle for one person. You can try it and you will fail. There are 3 factors that make it sure:
  • Competitors. An item bid and overbid is a waste of time. An item bought, auctioned, undercut by competitor and returned is a waste of time and money. There are lot of competitors out there. The Auctioneer addon is more and more popular and it's still possible to make smart decisions without it.
  • Market changes. Not all underpriced items are really underpriced. Changes in the price happen every time when demand and supply changes. If you buy these items with the old price in your mind, you will end up bags full of waste. A good businessman knows the changes. But you can't know the changes of hundreds of item groups.
  • Investment. To resell an item, you have to buy it first. It needs money. The item will not sell in a minute, you will need at least a day but possibly a week. The item still valuable but it is not money. Until it sells, you not only lack the profit, but also the investment. If you run out of cash, you can't make further business. You simply can't afford to buy 3500 items. Don't forget that you have to be prepared for saturated days. These are the days when someone sells something in your field in huge quantity. Most probably he is power-leveling his profession. These days you cannot sell anything, unless you undercut the dumper. You simply have to wait until the dump is sucked up and the market returns normal. But during this waiting you cannot use your money what lies in the recently unsellable stuff.
  • The market is constantly deflating. Every item that collect dust in your backpack is an item that has less and less chance to be sold for profit.
You have to select a field that suits you. For me it's bags and glyphs. They fit to my tradeskills. Other may choose high level enchanting materials. Eternals, lvl60 epics, twink epics, titansteel bar, rare recipes, whatever.

But to keep your business managable and profitable you must choose your field. Study this field. It's the easiest when you're present in the field anyway. If you are a lvl19 twink, you can easily traffic lvl19 twink BoE-s.

If the next patch will change your field, you shall be the first to know. For example 3.1 will encourage players to buy lots of glyphs in the first week, so I will prepare with lot of inks. If your field affect high-end raiding, know what are the high-end guilds doing.

I don't say to let a huge luck pass by if it's not on your field. But unless it's a blockbuster (some idiot is selling Armor Plated Combat Shotgun for 80G), don't go into someone else's field. He is more prepared, he will win. If you have such a lucky pull, don't get too greedy. If you bought the gun for 80G, don't start selling it for 1280, if you see another selling for 1300 by a competitor. He will undercut you soon and you will be relisting the damn thing for weeks paying 5G a day to the AH. Sell it for 999. He will buy it and resell for 1300. You get your 919G profit overnight.

So know your field, scan your field for items often, have stock of items of your field and sell them for good profit. That's the goblin way!

10 comments:

Chris said...

Gevlon, great blog!

Question for you: I have 4 lvl80s, so I have 8 professions covered. They are:
Pally - Miner, Herber
Mage - Tailor (shadow), Alchemist
Hunter - JC, Enchanter
DKnight - BS, Inscription

Am I stretching myself too thin? Meaning, could I possibly know all the markets well enough to make a profit everywhere? My biggest money-maker by far was buying greens and DEing them 1-2 months after WOTLK. I made an absolute killing when 20xInfinite Dust was 120g, and Greater Cosmics were 30g each.

Right now most of my money is tied up in gems - I have between 60 - 80 of each blue quality gem ready to be cut in the weeks following the patch.

I've tried your bag business with a little success, but there's too much competition. Netherweave bags hover around 6g, and there's not enough cheap cloth to go around.

I recently leveled inscription, so I'm about to dive into that market. Do you still just check all the glyphs that are selling for more than 10g and list 5-10 of those?

Anonymous said...

I'll answer some of your questions, Chris. But Gevlon may answer as well... we'll see.

First, I have three 80s with 6 of your 8 professions (I don't have a tailor or BS, but I have guildies who cover my needs there). I do have a lvl 70 tailor who can make bags, however.

I don't feel you're spread too thinly. Contrary to Gevlon's post, I deal in a large number of markets: inscription, tailoring, BS, herbs, gems, enchanting mats/scrolls, pets, ores, etc. Although I never try and deal with every item in each of these professions: just the ones that have a good profit margin and move quickly on my server.

Example: my miner spends a couple of hours getting saronite/titanium plus gems and eternals. He sends the ore to my JC who prospects it, cutting the blues for resale and sending the greens and eternals to my alchemist. My alchemist then makes a bunch of raw metas, proc'ing 17% extras since he's transmute spec. He sends these back to the JC who cuts the metas into the most popular cuts (there are 4) who then sends to my bank mule.

This is often called "vertical production" because you are producing items from farming to finished product, mass producing, and never tipping anyone.

I don't think it's important to restrict yourself to one niche; just make sure you don't start playing in markets that you don't understand well, unless you're prepared to lose some money along the way. As Gevlon said, most people will be playing one or two niches with high volume, so if you try and play in their backyard with just one or two items, you'll probably lose.

Regarding inscription: I too just leveled a scribe. Here's the deal: there will be a few scribes already at 450 on your server. They leveled pre-wrath, did their daily research, and they have all 83 discoverable majors, as well as the minors.

You just leveled it, and you won't have most of the discoverable majors. So you'll be competing during patch week with the other scribes who either just leveled or who were too lazy/cheap to spend their research cooldown. You'll produce the trainable glyphs only, and that market will be crowded (or not, depending on your server).

So what should you do? Well, here's what I plan to do: produce only the glyphs that I have that are considered "useful" for each spec. Some will dual-spec PvE/PvE, some will spec PvE/PvP. You have to know what you're doing for every spec, and that takes some research.

Also, minors should be profitable since a lot of people will forget they need new (or duplicate) minors on their 2nd glyph tab for their 2nd spec. Know which minors are used.

I've found Inscription to be overwhelming, and I've put about 20 hours into studying it and getting organized and stocked up. That's a lot of effort for a profession that may severely diminish 2 weeks from now. But at least I don't have to grind Hodir on one toon.

Anonymous said...

Hi!

I just mention this because you mentioned on an earlier post that people don't notice the repeated posts.

So: REPEAT!

Although, I see the reference to Dos Santos' Famous Hunting Rifle has been updated.

So, a bit disappointed today to not get my daily Goblin dose. Feeling the need to boost someone for free... Must fight it... Argh...

outdps said...

No matter how many links in the production chain you control, the demand for your raw product is fairly stable. Trying to diversify with vertical integration will only lower the demand for your product.

For example: if you produce enchanting mats, and decide that the market price is too low for you to undercut much more, using your mats to craft scrolls and frostweave bags is at best a temporary solution. Every finished product you sell is that much less demand for the raw enchanting mats you're trying to sell. You will have a different set of competitors and maybe clients, some of whom might be a little slower to react to your presence, but in the long run, you'll get the same market price and volume as if you didn't integrate the next link in the production chain.

Vertical integration might be effective in lowering margins for some smaller players who are further down the chain than you, but this is not money that you get- it's just money you cost them by lowering margins on whatever vertically diversified product you're using to vent inventory.

Notmyrealname said...

Good post, and interesting food for thought although I think it best to have something to fall back on outside of your core market should margins dry up due to competition or drastic supply and demand changes. Know at least one market well, but know enough about another to be dangerous there should you need to quickly change.

@Gevlon, The lack of competition on your server is depressing. Better competitors would give you more to write about. Consider finding a more competitive environment if you start to run out of ideas.

@ "should i continue to undercut them even tho it affects my profits?"

If undercutting at a lower profit margin is the most profitable thing available to you, then do it. Know what your costs are and cut to a level that continues to make an acceptable profit if you're trying to push someone out of a market. Assuming there's only demand for one sale of the item, yours will sell and theirs will be returned. You make a profit and they incur cost from the listing fee.

Know going in that someone entrenched in a market may have established relationships that allow them lower costs than those available to the general public. If this is the case, they will be able to undercut your lowest acceptable price while staying profitable. Its a lot easier for someone established to push a newcomer out of a market this way than it is for a newcomer to push out someone entrenched.

Chris said...

I probably should have clarified what I was using the other professions for.

As I said, the Hunter Enchanter was my best money maker for a while - it was free, easy money. I did some gem prospecting/cutting for a little bit, but only when Saronite was at low prices (usually on the weekends). Now just does the JC daily, and looks for cheap greens on the AH, holding onto the mats for the patch.

I rarely - if ever - farm anymore on the pally. Now he just makes Titansteel every day and does the cooking daily.

The tailor tried the bag market (as I mentioned) but recently nothing else was worth making. Now I solely make my 2x Ebonweave every 4 days, and I'm holding onto them until after the patch. Flasks are now poop, and I might be switching to transmute spec (as was mentioned above).

I leveled BS just to make belt buckles and the Legplates of Conquest / Vendor trick. Damn blizzard and their hotfix, but I managed to make about 2k after recouping my leveling BS costs before it got nerfed.

So, I'm not so much "vertical" as I'm just trying to take advantage of the "free" aspects of the profession (extra cloth, dailies, etc).

But I agree that it really doesn't allow me to focus on 1 market, and doesn't probably help my bottom line much, when looking at a time/cost ratio.

Archangel said...

@Chris: for BS try to craft and sell the Savage Saronite pvp items. Only those that require fire, water and air eternals. The ones requiring earth and shadow eternals are often used for leveling. As for buckles, I can't sell them anymore, 'cause my competitors decided that 3-5g margin is ok for them and they settled there. There's more value per Saronite Bar in crafting the Savage set rather than the buckles.

Ngita said...

Chris probably not, But I am similar and invariably it comes down to what can I make between all my alts that costs the least for the most mats de'ed.

But working in the markets you know is very good advice. Just dont be too cautious, I didnt move into the epic belt making market for 6 months because they were such big ticket items, but in the last 6 months of TBC I pulled 30k from that market and could have doubled that if I started earlier.prout

Peter said...

Goblin, nice post, and one that also holds true to real life. The market is littered with the carcasses of failed businesses that were excellent in one field, say selling building materials, only to fail completely when expanding into a unknown field, say real estate.

I make my gold selling materials, particularly metals, and I learnt what mats were needed in bulk by leveling blacksmithing and engineering.

Anonymous said...

For example: if you produce enchanting mats, and decide that the market price is too low for you to undercut much more, using your mats to craft scrolls and frostweave bags is at best a temporary solution. Every finished product you sell is that much less demand for the raw enchanting mats you're trying to sell. You will have a different set of competitors and maybe clients, some of whom might be a little slower to react to your presence, but in the long run, you'll get the same market price and volume as if you didn't integrate the next link in the production chain.
I buy 50 stacks of NW cloth for 4g/stack and I craft 50 bags; 24 hrs later I've sold them for 10g ea. I perhaps could have sold the cloth for 5g/stack faster, but I prefer the bigger profit at the slower rate.

Do you think this is somehow bad?

Vertical integration might be effective in lowering margins for some smaller players who are further down the chain than you, but this is not money that you get- it's just money you cost them by lowering margins on whatever vertically diversified product you're using to vent inventory.
I tried in earnest to attempt to understand this, but failed even after a few attempts. Can you explain?