Wednesday, February 16, 2011

Art of Haggle: Haggler

Last time we talked about getting haggled. Now let's look at doing some haggling.

Fundamentally, haggling is a tug-of-war battle between two people with imperfect information. As the seller, you do not know how much the buyer is willing to pay - as the buyer, you do not know how low the seller is willing to go. Even if the buyer/seller tells you exactly how much they are willing to accept, there is no real way for you to know if they are telling the truth or whether it is merely a gambit on their part. In fact, it's entirely possible that the buyer/seller does not even know the truth of their own statement.

Within World of Warcraft however, there is one piece of information you do know when it comes to people selling items through Trade Chat: they are desperate.



"But... Azuriel! I/my friend/some dude sells things over Trade all the time and isn't desperate at all!"
"You/your friend/that guy is merely a good haggler and/or enjoys it."

Think about the market for your item, say, a Volcano deck. Who would buy it? You might have raiders, you might have PvPers, you might have alts with sugar-daddy mains, you might have just some random guy just hitting the level cap. Your market would include people specifically looking for that deck, and it could also potentially include people who were not specifically looking for the deck, but just happened to stumble upon it and thought it would be good for them. Depending on the price you ask for the deck, you might also create demand for it from goblins willing to assume the risk of flipping it.

Who is excluded from your market? People whom have been priced out of the demand curve of your deck. You also exclude people who never knew you were selling the deck to begin with.

All of the above assumes you listed the card in the AH. Why? Because by selling it solely in Trade chat, you exclude another group of potential buyers: everyone not currently in Trade chat. Think about that. You could have raiders and PvPers fawning over your item and willing to pay through the teeth... but they are currently in a raid/Arena, and not around to even know you are selling. Or, hell, they could merely be out doing dailies or questing on an alt. Or AFK.

So your entire market is solely the people currently in Trade chat. No reasonable person would pay more for an item from Trade that he/she could buy from the AH for less. In fact, everyone instinctively accepts that AH prices have a "premium" built-in for the convenience of being able to buy at one's leisure, which means they instinctively know the opposite to be true, e.g. things are cheaper in Trade chat. Any seller that consciously chooses to handcuff themselves by selling in Trade, almost by definition, is either desperate or willing to limit their profits to push product now rather than later. I would call the latter "desperation" anyway.

I typed all the conceptual framework above as a preface to this otherwise simplistic suggestion: low-ball the hell out of them. Keep it in the realm of possibility, but low-ball it.

Let me give you a literally true example that occurred just two days after my Volcano hagglee experience, and is the height of irony. For one thing, I was on my Inscription toon reposting unsold Darkmoon decks when, lo and behold, someone came on Trade wanting to sell a Volcano deck for 16,000g. I whispered them with an offer for 12,000g. Why 12k? What I wanted to do was provide a tantalizing floor at which someone might end up going "screw it" and selling it at. If I had made a truly absurd offer like 8000g or less, they would dismiss it out of hand as a troll, just like anyone in Trade chat offering 1g for it. Personally, 12k is pretty ridiculous by itself for a Darkmoon deck worth 16,000g in Inferno Inks, but if someone wants to pay the reverse-premium of a guaranteed sale right now, let'em.

I did not actually get a response right away from the seller. I saw him barking it up a few more times, and I whispered "I'm still willing to buy at 12,000g." He came back with a "Well, 12k is kind of low. I'm splitting it with another guy." Remember when I said I was a big softie? Yeah, well, it comes and goes. There is no way for me to know whether he is serious or just cynically playing the heart-strings, so my default bargaining state of not believing anything they say kicked in. "I'll buy at 12,000g if you end up changing your mind." This is my signature haggling move, the Artful Disengage, in which I indicate "this is my deal, take it or leave it" without actually achieving that aggressive posture. Sure enough, the guy went back to Trade with "WTS Volcano deck, have 12k offer. If you want it, offer has to be 13k." Interesting gambit on this guy's part and it almost inclined me to offer 13k just to seal the deal.

Remember from last time when I mentioned that my internal bargaining position would be weaker if I was selling something I could not actually use/have a use for? It also works in reverse: I already had an unsold Volcano deck, so it was not as though I was emotionally invested in this transaction outside of the gold-making possibilities. I use the Artful Disengage no matter my level of personal involvement, but this time I actually meant the "take it or leave it." After another 5-10 minutes of waiting, the seller took it. I met him outside the Dwarven District AH, traded the 12,000g, and then I immediately walked 15 yards to the auctioneer and listed the deck for 21,000g, the same price as my other Volcano deck.

After logging on the next day, I discovered someone had bought one of the decks for 21,000g. That is a profit margin of over 8,000g. You can be damn sure that the buyer was NOT someone in Trade chat the night before.

  • When you see someone selling on Trade, try to establish a floor for them. The "floor" in this case is a bid high enough to make them think twice about *not* selling it to anyone, while low enough for you to have room to maneuver should they drive a harder bargain. If you read my Hagglee post, you should now see why I had you establish a floor for yourself, lest someone else try to do it for you.

  • If you find yourself bad at haggling, you will ironically be more successful the less important the transaction actually is to you.

  • Usually goes without saying, but being aware of the market price for the item in question is important, especially when the seller is giving away no information (other than their inherent desperation), such as when they just say "WTS X, pst" or "make an offer." The seller is secretly hoping that you, the buyer, will make an offer higher than their expectations. If the seller wants 50g for the item, they hope you offer 60g and think you are getting a bargain.
That about sums it all up for haggling. I could possibly squeeze in another entry focusing on the Volcano deck, considering how much mileage I have gotten out of it already. I jest, I jest. The trinket just so happens to be a fairly interesting case-study given the profit potential of all the steps leading up to making it, and the (reproducible) profit from the discrete object itself. Not everyone deals with Darkmoon cards though, so I will try to find more generalized examples next time.

10 comments:

  1. Reaction one --- this is a well written blog.

    Reaction two --- this needs to go on my google reader

    Reaction three --- cool, hey we play on the same server

    Reaction four --- crap, a thoughtful AH player on my server

    Reaction five --- Who are the toons in front of this player

    Keep 'em coming!

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  2. Great post! I like the Artful Disengage. The softer points and min-maxing of being a good goblin are very interesting to think about.

    I've added your blog to my blog roll. Hope we can share some traffic.

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  3. Both great articles. You've landed on my RSS reader... keep up the good stuff!

    I'd just like to point out that advertising in /trade doesn't necessarily mean any inherent desperation. I often advertise in trade to generate awareness, to suggestive sell, and to avoid AH fees on big ticket items. Selling a Vial of the Sands for 42k in trade is more profitable than selling it for 44k in the AH. And, given market fluctuations, it's not hard to sell for the same or a higher price in trade than on the AH. Of course, I'll admit that if he's not desparate, you haven't really lost anything by haggling with the assumption that he is (unless you're easily swindled). I understand your point however, that if you can detect that a seller is desperate, then you have some leverage, and you should try to take advantage of that!

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  4. Great post!

    Lowballing with an offer that can't simply be laughed off is a great move. If you can take it or leave it, make sure any negotiation puts you in a position to profit if it happens. Why take on unnecessary risk? Another thing you can do is throw in something else to sweeten the deal (most players can use cut gems, and if they were multi-toon/profession goblins they probably wouldn't be in trade chat selling in the first place).

    One additional tactic I have used: using your scenario, offer to buy the item COD for 12,000g - heck, make it 11,500g - if they can't find a buyer and mail it to you..."tonight."

    It's a terrific win-win offer. It's considerate, giving them time to find another, better deal (they may or may not. Either way, you lose nothing and stand a decent chance of getting a very nice deal - and you don't have to wait around for it.

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  5. @Stede: Added.

    @Michael: Fair point on the super-high profile items like Vial. I don't have anything against advertising on Trade or even selling per se, especially if you can play within the borders of the 5% AH cut. I just see people all the time getting seduced by the prospect of instant sales when their buyers were more than likely willing to pay the AH premium.

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  6. WoW, It is obvious the amount of time you put into this post. Great post!

    I use the trade Chat like Michael stated before placing my items in ah to attempt to save myself from AH fees. But usually I end up getting impatient and undercutting competitiors prices dramatically until all of my items are sold. I make gold as a result, but If I just played the AH right, I could of had a lot more gold.

    Thanks for the post.

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  7. I had the exact same situation the other night. It was advertised in trade in i offered 12 k ,and he said kk,i bought it and reposted it on the ah for 21k,and the other morning some dude posts his deck for 15k under 2 decks selling for 21k/on of those mine/. So the question is. Should i sell cheap or wait for bigger chance to flip?

    Ty a lot

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  8. @Nikopol

    It always sucks when someone puts you in a position to make tough choices like that. As you probably have contemplated, a 14999g or 14500g or 14000g sale is still a 2000g return on your original investment, and is something that is probably something that would go nearly instantly on the AH. On the other hand, in our heart of hearts, we know that the Volcano deck is worth more than that - I would place its (arbitrary) true value somewhere in the 18k-19k range. Obviously though, no one is going to buy it for 18k, 19k, 21k or for more than 15k while that 15k deck is on the AH.

    If you are asking me what *I* would do, I would continue listing it for ~21k and only worry about whoever is undercutting you at the 21k mark. It will keep coming back into your mailbox until the market buys the 15k deck of course, but my own personal time horizon is pretty long - in other words, having 12,000g tied up into a deck isn't a big deal for me, especially considering in a nightmare scenario I have toons that could actually use the trinket.

    If you were anticipating a slam-dunk and otherwise want to invest elsewhere, go ahead and cash in your chips by undercutting the 15k guy. I'm personally willing to ride the market out for a chance at making an extra +5,000g a few weeks from now. Plus, hell, it is not as though you won't be able to sell the deck for ~14k a few weeks from now, e.g. it's not going to depreciate that quickly.

    Good luck.

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  9. Tyvm for the answer. After a while i came to the same conclusion. The other decks that were going for 21 are also selling for 15k now so im just gonna wait until they are all gone,or sell it when the next darkmoon faire hits.

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  10. Thanks, Azuriel! I have another tactic I typically use in price negotiations. When I get whispered a price I really like, I wait about half a minute to respond. I let em cook. I want them to get the idea that I'm thinking about it because if I seem to eager, they might try to jump the price up on me.

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