Greedy Goblin

Friday, April 16, 2010

Trivial competition

Update: I'm back, playing and processing comments.

What is the biggest competitor of Coca-Cola?

This question is often asked by the teacher of the first or second economics class. The ignorant students instantly answer "Pepsi Cola". However the correct answer is "water from the tap". They all on the same market: drinking something non-alcoholic against being thirsty.

Since the average WoW player usually has less economic knowledge than a first semester economics student, this error is widespread among AH sellers.

"Who is your biggest competitor on the glyph/gem/belt buckle/whatever market?" No, not the guy who camps the AH and undercuts you by a copper. No, not the other one who undercuts you by 10% every 48 hours. Your biggest competitor is the buyer's guildmate who crafts for free. And here "free" does not mean "I farmed for free", it means that the buyer does not have to pay anything, not even time to transform his materials to products. The "freindly helpfull" guildmate waits for him, leveled his profession and now crafts for free.

The only inconvenience the buyer have to accept for this trade is that the guildmate is not always online. The M&S usually want things now, and can't wait. But if you give him a good reason, like 100G difference between material and crafted prices, he'll wait. Strike that, if the materials are farmable (mostly are), he will calculate between crafted price and zero, as the materials are obviously free, since "i can farm them lol".

Since WoW have long broken the tradition of rare drop recipes, you can't offer anything that the guildmate cannot, besides immediacy. If he presses the buyout button, he get the item instantly. It is a huge thing for an M&S. But not everyone are M&S and not every M&S have thousands of gold. Actually by definition the M&S has little gold, as does impulse buys, have no stable income and farms when broken.

So despite all speculations, no items have inelastic demand curve. Just because you are the only AH-seller for 100G profit, you won't sell to every potential buyer. Sometimes the few sells you make give you enough gold. Sometimes not. It's your choice. However never think that you beat the competition because you listed below the guys in the AH. There is always an unseen, trivial competitor!


Anonymous said...

Overall I agree with your post. However, I also believe that most of the people who craft for free and try to get friends to craft for free have little idea of the cost of their product (in mats) so even if you offer something for only a 10G markup it doesn't mean you will get all the people who's friends craft for free.

People just need to be intelligent about their pricing strategy. IE, sell high and recognize you won't have quite the volume or sell low and try to sell enough extra units to offset the decrease in sales prices. Also, recognize the different people have different opinions on what the optimal pricing strategy is and that's where moving prices and competition is going to come from.

Anonymous said...

That's why we love agi 15/25 and crusader!
The recipes are not available to every enchanter with the immediate payment of X shards, mats are "hard" to find cause few ppl farm them anymore(old content), so M&S rarely find "helpful gmates" making them, so instead they are buying the scrolls for the "elusive" price of 120-180g, depending the market's current state of prices.

In some cases M&S find my 140g +15agi "cheap" cause the elemental air goes for 25g median price!Little the know the elemental airs they're seeing are mine also and overpriced in purpose.

In the other hand, sapphire spellthreads seems to have huge profit(60-110g profit in my realm) but they are not getting sold(in quantities i mean) just because most players get them crafted by a friend.
The perfect example of a non-worth market due to the huge "trivial" competition.
Except that time i pushed it down to 110-120g a piece and the "curve of demand",which you had so many times told about, was proved so f*cking right.

Anonymous said...

Do they still use the water question in class? I can't recall the last time I saw someone drinking tap water And CocaCola and Pepsi already had large water businesses before Coke spent $4billion on Glaceau I think it was. Certainly there is a lot more advertising for bottled water than tap water.

TheGrumpyElf said...

When I sell I noticed that the buyout is the key to selling, for me at least. Most people want what they want and they want it now. Not in 18 hours if they win the auction. So if someone is selling something for 18 gold with no buy out and you list for 19 gold buy out, heck even as much as 25 gold buy out, it will sell almost instantly while the other guys item will go unsold.

When buying on the market it is the same discipline that is needed in reverse. Someone is selling stacks of any cloth for 2 gold starting and no buy out and stacks are 20 gold buy out. I bid on all the 2 gold stacks and hope I win, if I am around and outbid I will go back and bid again. Usually, unless you get someone else camping them to buy them you will end up paying half of what you can turn around and sell them for.

Echo said...

I've got a rule.

If you're paying me then I'm in dalaran immediately doing your craft. If you're a guildie and you want it done free send me the mats or come find me and I'll do them when I'm ready to.

I paid the Primordial Saronites (For LW patterns) mainly for the guild. Had I sold them all at the time I'd have made 12k+ gold due to the price at the time. My current trade price for an icc item craft is 100g and i tend to get a lot of return customers, some of whom also come to me for drums. It still takes me 120 sales to recoup my investment. I'd say I've done maybe 5-7 a week since ICC came out. Had I been more "on it" then I could have exploited the market first week and spammed trade with advertising.

One of my guild mates is at gold cap through crafting. Pretty much he got every JC recipe in the game when it was released and has maintained his position as the "guy who can cut anything" and as such a minor server celebrity.