Tuesday, May 26, 2009

Undercutting

People keep spamming my e-mail with "how to deal with undercutters". They keep spamming offtopic comments to every of my posts with the very same question.

I wrote several times about this, but with no effect. The reason is that people seems to be extremely reluctant to accept the obvious: the AH is not Naxx25 where everyone has a shot. Some of you will lose at the AH. So there is no IWIN answer I can give.

There are two pricing strategies in WoW. In real life there is more, usually (ab)using informational asymmetry, like the endless list of discounts at an air ticket. But in WoW everyone see every auctions with a single click so there is limited space for "tricks".

The first pricing stategy is the market middle price. Assuming that you scanned the AH often, the addon knows the median price. People sell there for a reason. You list your items, ignore undercutters hoping that they will sell and then yours too. If you are lucky they do. What can double-cross you:
  • The auctioneer does not know the price because overall deflation. The last week price is higher than today's price
  • The auctioneer is right about the weekly medium price, but the price is fluctuating during the days. For example the raiding consumables sell high around Wednesday and low on the weekends. Good luck selling any flasks on the weekends for the weekly medium price. You have to adjust manually. Even national holidays of bigger population countries can change the price.
  • The auctioneer is right about the monthly medium price, but ignorant about a new patch that turns things upside down. You must have a speculation plan for such events in your market.
  • Someone is flooding the market. He can be a dumb kid who farms day and night for a stupid mount, a professional farmer or some officer cleaning the guildbank. You won't sell anything these days.
  • A professional farmer plays "undercutting-bot". He lists only a few items, but always undercutting you 5c. If you undercut him, he cancels his auction and undercuts you. If his item sell, he lists another. You cannot do anything about it unless you want to sit by your computer all day watching the AH.
The other strategy is undercutting the market price. No, I'm not talking about 5c undercuts. I talk about at least 5% cuts. By doing so, you surely sell before the "price-holders" do. If you are unlucky, they can sell too and you lost 5% income. If you are lucky, you sold your item while they got auction expired (so would you if you had chosen the holder strategy). Practically one thing can double-cross you: someone undercuts you again. You can hope that his items sell and then yours too. If the market price estimation was correct, it will happen. If the medium price is well above the "real" price, even with your undercutting you can be above it, therefore being undercut by others and sell nothing.

By undercutting 5% you force all other undercutters to follow you. Unless your auctions are all bought up and the medium-priced too, you just decreased the medium price. This is why holders hate undercutters. They not only get auction expired but also have to decrease their prices on the next day.


I'm a heavy undercutter. I undercut by 40% on the glyph market. I can produce glyphs for 3G. So if I sell any higher, I get income. So I configured auctioneer to undercut even if it's 40% below the market price and do by at least 50s. I significantly deflated the glyph prices on my server, despite I'm there for two weeks. During this my income increases, as I gain larger and larger portion of the glyph market. On my old server I had 40-50% of the glyphs listed. Here I'm somewhere around 20%. This is about to change. As I push the prices down, more and more small-scale players will leave the glyphs. They want big sales, they won't research the AH for selling 5 glyphs/week, and maybe ignorant about the fact that selling a glyph for 7G meant 4G net profit with 10sec work. That's still 1400G/hour!

Sooner or later I'll have quasi-monopoly on the glyph market. I've configured auctioneer to match price with lowest auction if it's above the price. So if the medium price is 10G, the lowest auction is 13G, I'll list for 12.5. So as a competitor leaves, my prices automatically increases. When a new one comes, automatically decreases. As far as I'm above 3G, I'm fine.

The problem comes when you made an item for a cost and undercutting would mean selling below this cost. Well, too bad, you made a loss. However if you hold the item, you can make even more loss as you have 0 income and deposit cost. Do it only if you are damn sure that the prices will elevate or stay there for a longer period of time.

BTW if you are damn sure about that, why don't you buy the undercutter's item and relist it on the market price?


I list 8 glyphs, so I can see if one glyph sell in huge quantity or only 1 by 1 every week, but it's just for statistics. I undercut even if I'm 100% sure that my auctions would sell for 10% higher. Why? Because I'm only sure that they sell today. But if I let the competition bold, tomorrow they won't sell.

31 comments:

William said...

"A professional farmer plays "undercutting-bot". He lists only a few items, but always undercutting you 5c. If you undercut him, he cancels his auction and undercuts you. If his item sell, he lists another. You cannot do anything about it unless you want to sit by your computer all day watching the AH."

Sigh... there's at least 2 of these people in the glyph market on my server, and 1 in the enchanting vellum market as well.

Anonymous said...

Come to my server Thrall US and see if you can do this. Myself and a couple of others have all the glyphs and we will gladly play your game to see who comes out on top.

Taco

Anonymous said...

It was very nice to see this post, and I'm a little annoyed at myself for not finding the previous comments you've made on the subject.

I'd liken this sort of undercutting action to people sitting at a small campfire. Holding you hands away, close to you, lets you sit on your comfortable seat, and the warmth of the fire feels good.

But there's only so much area around the fire. If someone crowds you out by sitting closer, he gets more heat and you get colder. So you move in front of him. It gets hotter still, all these people moving forward, until there's just a few people holding their hands practically in the fire. You're counting on other people giving up and trying to find another fire to warm themselves from, instead of getting burned. What will be left, the equilibrium, is just enough space for the smartest and most aggressive people to claim their space at the campside fire.

Of course, the fire could go out. It could burn more coldly. So to can the market change and fluctuate, "burn" people who aren't prepared and lack forethought.

Anyway, enough rambling from me. Good post.

Anonymous said...

I can't find the other posts as well. Perhaps a search option could be a great adding :).

Anyway great blog, and great explanation of the undercutting system you're using. As new in the business all your blog is a real help!

pallynoob said...

Hi Gevlon,

I see you are a genius with Auctioneer. With your description I now see that there are more setting options, than I have understood so far.

Your setting:

Use Market Price:
If competition: undercut up to 40%
Otherwise use market price.

So far I have not managed to understand the settings that can be made in auctioneer to make exact these settings. (At least I have an idea now to what I have to look for)

How do you handle the following scenario?
All Auctions are by far overpriced: Do you still sell for market price?

My by far biggest problem:
The returning not sold glyphs. Usually I have 300 Glyphs running. And most of them return unsold due to heavy undercuts. Now I have to pick them up from the mailbox. I am running an addon called Mailget (not that sure about the name). But the limit is that the mailbox only includes 50 items. After I picked all up (still take a couple of seconds) I have to wait for the next 50 to even pop up, before I can pick them up.
Can this procedure be enhanced?


My last question for today: A full AH scan, how long does it take for you? I am running a 2K connection and 400 AH pages take me around 15minutes. Is it the same for you?

Thanks a lot.

Okrane S. said...

Even tho its not my main source of gold, I too am in the glyph business, even tho recently started on a level 65 alt. I post around 100 different types of glyphs each day.

My biggest problem is, as I am at work all day long, I usually list them for 24 hours, undercutting everyone similarly to what u are describing (-50%Market +100%Market and always by 1c).

My main issue with this is there are at least 2 other pro competitors which use the same methods, only that as those guys dont have work and are around for much longer, they are listing at 12 hours and they reposition themselves in the evening and in the morning.

Thus, I make nearly no cash from this thing (usually 200g per day).
Any advice? Should I quit or hang in there and invest more into books of glyphs and research.

Anonymous said...

Have been in the Glyph business for a while but been unable to replicate these kind of settings to ensure that bulk posted auctions always result in undercutting. sometimes they are, sometimes they're not. So believe it or not still posting 1 by 1 to ensure 1% undercut.

Do I need to do a full scan prior to each bulk posting?

Could you give exact details of what settings you've changed to get this result?

Same, issue with mailget, still have to wait for the mailbox to fill up. I have two bank alts to deal with all my glyphs, at present I collect what lot of 50 items, then log onto the other alt, collect, then back again.

Sparks said...

I'm curious about how much funds you're willing to put into defensive buying and reselling. A characteristic of some of my server's markets is we have a fair amount of flooders. At what point do you personally say it's not worth the time or money to fight over a given market? I ask as I'm curious what might be a good percentage of my warchest to devote to that. I do it a bit now, but some of my markets stay flooded well beyond the time it takes to put the goods back into the market.

Niax said...

Hi Gevlon,

I have been following your blog for a while now. And I am really curious about how often you scan, and how to find new markets. I am far from an Auctioneer expert I guess, and only just started in AH trading.

I don't have a lot of gold yet, so I am wondering (and I think a lot of people with me) how to start out, if you dont have a lot of gold (Less then 5K).

Niax

PMC said...

A professional farmer plays "undercutting-bot". Any idea how people do this or how to handle them?

On my server we got one of those and that guy is online for 15h a day during weekends and during that time it is impossible to sell anything. He just list one glyph at a time, if one is sold, he creates a new one and repost. If you undercut him, he cancel his glyph and repost really quickly (takes a couple of minutes).

Okrane S. said...

Just /pity him. If the guy spends 15 hours doing just that, let the guy win... at least it's the only sense of victory he'll ever have in his pathetic lifetime.

Archangel said...

I don’t spend 15h a day, but I do sacrifice some days just to play the AH. That’s because, on a high population server, with more then a few smart and intelligent businessmen, it’s the only way I can raise the money I want.
I recently entered the gem market. Buying saronite ore, prospect, cut gems and sell for profit (green gems makes rings and necklaces for disenchanting). I work all day and only log into game around 9 pm. Here's my competition (omnipresent figures in the blue gem cuts business, playing high volumes day by day): when I log on, player A and B have their gems already listed on the AH. At about the same time I log, I always see in Exodar, competitor C, already posting his/her gems. Then, no other big trader appears, until 11:30pm -12:00am or so, when competitor D shows up and starts listing as well. Player A and B must be posting during the night or early in the morning, cause I can’t remember seeing them “in person” or online. Following the above, I do all my business, after competitor C has listed the items already. Between 9 pm and 11:00 pm there is some sort of ballet of undercutting, starring myself, the occasional fotm jewelcrafters and some other “not to be neglected” competitors (It’s peak time, heh). The only thing I can do, to be able to sell as much as I want, is to log about half an hour or so to my bank alt, cancel the items that were undercut and post them again. I’m doing this 4-5 times the whole evening. Sometimes, during these sessions of logging the bank alt, I spot sale spikes. Either a large amount of gems was recently sold or they are selling while I check things out. Moments like these, I choose to stick around a bit longer and often manage to sell more, by immediately replacing the gems that just sold. I always only list two (yes 2) of each gem and I undercut by 1c. This is what I do to sell my gems (I only do this with gems) and how I deal with heavy undercutting. The 9:00pm – 12:00/01:00am is the only time window I play and I need to get the best out of it.

Okrane S. said...

@Archangel

you, my friend, are starting to do what the traders in investment banks are doing: stick around the screen all day long, watching prices go up and down and reacting accordingly.

a tad absurd if you ask me...

Yaggle said...

Bonus points for good use of "quasi" in a sentence.

Anonymous said...

@Archangel the problem with doing this with gems is they don't stack in your bags, so, the process requires much more back and forth. Also, the deposit costs are higher. I stopped selling most gems when the market crashed. Just not worth selling a cut emerald for 10G with a 2/5G deposit cost. I'd rather sell the raw gems.

@Gelvon, how many hours a day do you spend doing this?

Noak said...

@Archangel-

I actually sell gems as well. What is your income on average and what gems sell the best for you? (On my server, Solid Sky Sapphire sells best by far).

I find that a good way to make competition go away is by messaging them (mailing them if they are offline) and just buy gems directly from them for reduced price. This way, as I have no competition, I am free to raise the prices of gems without fear of getting undercut.

Anonymous said...

The glyph market (and enchants as well) suffer from lack of a meaningful AH deposit on the item. It costs less than 1s to list a glyph. It is prime for the canceling-relisting-undercutting cycle. On my server at least, it is definitely not a list and forget market.

Anonymous said...

One thing I often do is list things at their market value when prices are really low this makes the market not shift the prices to the low end and encourages people to buy the bargains fast leaving me a chance to sell at market value

thoumyvision said...

For those of you asking about scanning the AH: you should know that there is a fast scan button in Auctioneer which scans in about 3 minutes. It's the blue ">>" button at the top next to the yellow ">" button. Be warned, however, that if your connection is worse than about 400ms it will disconnect you and will not complete.

Archangel said...

@Okrane: I need to clarify this: it’s the only way I can actually sell gems. But I’m open for suggestions. I know Gevlon’s method and I’ve tried it on the gem cuts market from my server. For three weeks. It doesn’t work. I intentionally lost on this market at the beginning, letting the gems there, just to learn its habit and “players”. I know it sounds tedious what I do but try to analyze a bit: I do whatever I do in game, then on a break (bio, drink, waiting for something, whatever) I log my gems alt. Full of frostweave bags, nothing but cut gems in it. Cancel the items that were undercut and relist. It takes me no more then 3 minutes. By canceling/relisting, I lose 67 silver and 50 copper per gem (12h posting). Having 2 gems per type, I end up with a total of 30-40 gems listed on AH.

@Anonymous: if a type of gem does not sell (including emeralds for 10g) for let’s say a week, I stop crafting / listing for a while. My emeralds sell just fine for 7-8g, and I never include them in my cost/profit math in the first place. As for raw gems, I happily buy them, cut them and sell if the difference between them is at least 5g.

@Noak: First I put for sale 2 types of every blue gem I know. Regardless of their price and stats. Watched it for few weeks and thus I saw which sell best and how the price moves. I don’t want to get rid of the competition. I just want to be able to sell my own gems too.

Chip said...

I like this a lot. Personal experience question for you. Do you relist your entries as soon as you see you've been undercut?

I originally started my Inscriptionist to support my Enchanter. That's when my friend showed me your site and I started having some good ideas about it. The inscriptionist was somewhere in the low 300's but I pounded out 430 after spend 400 or so gold. Now she's making pretty good money on her own. I've been able to make about 1.5k over the holiday weekend between the two of them.

Thanks for taking the time to list all this information. I was along the same track but didn't really think of everything that you've included here. Thanks again.

Chip said...

@Archangel: If the competition is so stiff why not chance to a percentage of cost sale. Figure out the value per gem of what you are creating then instead of playing the undercut game slice it down to making your profit with 10% above cost or more. This could scare the other party off if they don't make the profit they were in it for. As Gev said, be in it for the long run. If you take a hit in profit now but SECURE the market, then future profits will make up for the lean times you are currently in.

periodic said...

I have a few people who are also in the glyph business with me and we all sort of live in the same ecosystem. There is one that is willing to post glyphs for abut 4G. I set myself a limit of about 5G as the minimum for a purchase.

I configured auctioneer to do up to 50% undercutting. I post glyphs at market price with undercut. I know I'm making a profit on any glyph I post with a market value of at least 10G and it helps me stay on top of the huge fluctuations in the market.

When I make glyphs, I don't make glyphs for which the market price is under 10G, so I know I'm always making a profit on what sells. If I'm getting severely undercut it simply won't sell under auctioneer starts to lower its market estimate. And if it gets below 10G I'll just stop making it.

I don't know if I sell as much as some others, but I bring in at least 2k every set of 48h auctions.

It's also just so much easier to batch post 600 auctions instead of manually going through and checking the competition.

MyName said...

What you need to understand is that the undercutters are people too. They aren't going to be content with mindlessly making a handful of gold (even if it's from alot of people). While they've got "bread and butter" goods that they're going to sell dirt cheap, they've also got "cake" somewhere that they aren't going to sell as cheaply.

As far as the gem market goes, I make money off of Scarlet Rubies and Monarch Topaz. Everything else is just there to cover the cost of buying saronite (if that even). That's why the undercutting "bots" are posting them so cheaply: they just want to get rid of them. They aren't going to be nearly as aggressive about the money making gems.

On my server at least, you will nearly always make more money selling a cut version of a gem you prospected, but you need to find the 3-4 cuts that people actually buy (vivid forest emerald, for example) and only make those. If you're always getting undercut, then just sell the uncut and don't worry about it.

With regards to undercutting "bots" on the glyph market. The only way to beat them is to pick the glyphs with some demand (and an inflated profit) and post on them. Even if they put up 5-10 of every type at a low value, they won't be going for 5g each, especially if they're one of the new glyph patterns that people want (like Glyph of Living Bomb).

Another way to beat them is to find a niche market that they aren't in yet. For example by selling vellums for old world enchants (like Crusader/Fiery/Icy), old world/outland mining or goods, farm the pattern for Rituals of the New Moon (which most people ignore even though I've sold it for 2-4x the cost), etc. The market is too big for any one person to control even if they can get a handle on a single segment (in this case, cheap gems/glyphs for everyone). You just need to find a niche.

The bottom line is that if you're spending 15 hours trying to undercut these people, then you're working unprofitably and you need to find a different market, even if it's milling inks or making Darkmoon Cards with only a few of the expensive glyphs. Just be ready to reenter the market if the prices for some of the glyphs go back up.

Archangel said...

@Chip: the gem market is not the only one I'm in. You can't always find saronite ore at the right price (AH or regular suppliers). The largest batch available I could ever bought was 87 stacks. On average you get the same amount of blue gems. ~ 87 gems sell in 2 days at market price, if I stick to my method (minus emeralds, they sell slower, but I don't count them in my math anyway). On sale spikes you can literally finish your raw gems in like 30min, trying to keep up with sales. So I see no reason to play the cost+10%. They will sell for sure as you say, faster and possibly driving away some competition. But gems seem to be in high demand right now, and they sell for whatever the price. It would be unwise not to profit from this. Then again, if they sell faster, my stock will dry up and I'll just watch the competition selling at market price, until the next wave of cheap saronite kicks in.

Chip said...

@Arch: Heh, Gems are your market so I'll bow to your experience. I am just telling you how I've gotten past some of the bickering with undercuts. It enabled me to put up more auctions faster instead of having wars I was making money and the only interaction I had was to buy more mats for my next item. Just a thought, but as I said Gems aren't my territory, yet.

Anonymous said...

Even though it is illegal in real life, a number of crafters on my server have entered into a price fixing arrangement (where we agreed on a set price and the number of items one can list at a time). We usually kill people like Gevlon, as between us we have the market covered 24/7 and he has no chance to undercut us. That is unless he likes to re-list 8 of every glyph every couple of minutes.

Anonymous said...

To the above poster,

What do you do when someone outside your group undercuts you? Do you all adjust your "fixed" price and match him? undercut him back? or buy up whatever he posted and relist at your fixed price?

In the first case, the undercutter effectively becomes part of your cartel. In the second case, it would just be a matter of who tires of the re-undercutting first. In the last, the undercutter would have a heyday as Gevlon has shown time and time again with people trying to maintain a price floor.

Just curious what is going on in your server. Mine has two people that do the cancel-repost-undercut frequently on every glyph over 10 gold.

-Aanar

MyName said...

You can't maintain a cartel on a commodity that is both cheap and easy to make (like glyphs). That'd be like trying to corner the market on oxygen or something. Moreover, while the undercutter is reposting 8-10 glyphs (or whatever) you all have to repost that many or more to move your price below him.

Eventually the price moves down to cost, or below, and the person with the lowest overhead, the deepest pockets or the most patience wins.

The smartest thing to do in that situation is to stop price fixing and wait for the price of the glyphs to go up to a profitable level. At least if you're a single player.

Waljin said...

Regarding crafted items, a noteworthy side effect of undercutting in those markets is that you also keep your competitors from recapitalizing and therefore recrafting.

Sure in markets with low production costs like the glyph business this might not be much of an issue but with higher priced items it certainly is.

Even if you make a lower profit on certain sales, the free captial allows you to react better to the needs of the market and take on opportunities that may come up than any of the other sellers can, since they are still sitting on their piece to sell.

Beside that the one who made the sale can simply recraft the item (or maybe craft even a second one due to the profit just made) and relist it on the AH again, making it even harder for the competition to sell their stuff.

Anonymous said...

About the glyph business:

After reading this blog I picked inscription and herbalist on my 80 just test it out. I got all the addons he suggested and I scanned the AH for 1 week to get an OK data.

In that week I took herbalim and inscription to 450 by just using the herbs I gather since I didnt have any money on this character (200g).

I did exactly was he said he was doing, check the prices of each glyph in the tradeskill addon, if it was above 10g I will check to see if my other toon (bank) will have less than 5. If that was the case I will make enough to keep 5 at all time on my alt.

Mail all the glyphs to the alt, and post all the glyphs (3 of each kind) for 24 hours.

AH settings:

Undercutting: -40% (like he said)
if above market: +10%
Time: 24 hours per auction
stack: 1
amount posted: 3 only)
batch posting checked
match price checked

BEFORE you post your glyph just search the glyph tab in the AH and click next page until you see all the pages for glyphs. This will refresh the information on all your glyphs so you can have the most accurate info before posting.

Alt + Ctrl + Shit click on bash posting and go away.

I come back to the AH again hours later, maybe 10 hours later and re-scan the AH and I do bash posting again (without looking or caring if anything have sold or not) and walk away again. This takes about 2 min to do, 1min 58sec for AH scan, 2 sec for hitting the bash button. Next day (24 hours after your first post) repeat the whole process.

Every time I made over 300g I would buy a book of glyph. In 6 days I had all the books learned. Now I just buy tons of ink of the sea and keep the business moving. Posting 500 glyphs and making 1K gold a day. Spending 30 min doing all this a day. So it's about 2K gold and hour ratio.

And I dont collect herbs anymore since my business is now running. I did it at the begging because I didn't have any gold and to get the ball rolling faster. All this was done AFTER 3.1

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