Making gold from the Auction House is all about managing risk.
The risk you take is that your auction will not sell, making you lose not only the deposit fee but also whatever time it took you to list it to begin with. Sometimes your goal is not necessarily to sell the item at all, or perhaps the profit margin is big enough by itself that infrequent sales is not much of a risk as long as one or two make it through. Your risk of a non-sale increases for each competitor in the market with an identical good, and increases further still when you get undercut.
When Not to Undercut
You do not actually have to always undercut the competition, or otherwise cancel your auctions and repost. In a demand-driven high-volume sales market it is entirely possible that buyers will chew through the lower-priced competition's wares and still be hungry for more. The risk you take by not undercutting is that there will not be enough sales within the listing period for your auctions to be on top (and then get sold) - you can also be burned if your competition lists additional auctions throughout the day. Of course, if your competition continues to list goods throughout the day, your undercutting is not going to help anyway.
An example of a demand-driven high-volume market: Mageweave Cloth. The people powerleveling their First Aid are going to need 4-6 stacks while the Tailors are going to need ~20 stacks. Considering that not everyone levels their First Aid as they level their character up, the demand pressure for Mageweave is always there at every level (e.g. a level 40 and a level 80 toon could both need it). While the same could be said of Wool Cloth or Runecloth, Mageweave is special insofar as it is much more difficult to farm as the dungeons in which it drops are out of the way for most max-level characters.
MFCs are also fairly high-volume although they are not entirely demand-driven as they are pushed.
When To Undercut, and How Much
There are generally two approaches to undercutting and using either depends on the circumstances and your expectations.
The first approach is the mechanical undercut. This is when you let addons like Auctionator just undercut the lowest-priced auction by X amount, usually a few silver. The benefit of mechanical undercutting is that it places your auctions at the front of the line while maximizing your potential profits for each sale. The downside? The competition you are undercutting can undercut you by canceling/relisting for the price of the deposit fee + the few silver. In essence, by undercutting by the minimum amount possible, you are taking the risk that you will snag some sales before your competition returns the favor.
The second approach is the savage undercut. You just put up some Bold Inferno Rubies on the AH for 250g because you happened to be the only seller at the moment, and here comes Noob B. Esq. with some of his own Bold cuts for 150g. Why a 100g undercut?! Does he not understand that he could list them for 249g and basically make an extra 99g? Hell, at that price I could buy them up myself and relist them for...
...hook, line, and sinker.
Fundamentally, the savage undercut model is used when you want to guarentee sales - the lower your price, the more of the demand triangle you get on those Supply/Demand charts, which increases the likelihood of a quick sale. The irony here is that if you undercut savagely enough, the buyers actually start to include your competition. If your competition wants to give you 150g for a chance at making 100g, I say let'em. In fact, I insist! Especially when I am getting the uncut gems at 80g or below.
Unless you are cashing in your chips and exiting a market, the key to savage undercutting is to understand your own profit margin independant of what else is going on in the AH. Would you be happy buying uncut gems for 80g and selling them for 150g? That is a 70g margin per gem. If you see someone selling them for 250g on the AH, that potential margin increases to 170g. The key word here is: potential. If you know the gem market and know the market price is 150g, then you also know the likelihood of getting those gems back in your mailbox minus the ~4g deposit if you start pushing 250g apiece with competition afoot is higher.
While the gem deposit fee is big enough to discourage casual cancelling/reposting, the same cannot be said of other goods, like Glyphs for example. If you show up at the AH with a handful of glyphs and start undercutting the 80g ones at 79.99g, the Glyph Barons lose around 3 silver by undercutting you (their time is irrelevant, since they are already committed to the abysmal time sink that is selling Glyphs). If you show up and start savagely undercutting their glyphs, say posting them at 50g, then... well, you will still probably get undercut. The point is that the Glyph Barons aren't losing 3 silver by undercutting you, they are losing 30g. Even if savagely undercutting results in no sale, what you lost was the deposit cost, while they lost nearly half of their margin. In the scheme of things, I'd call that a win.
Have I mentioned I hate the design of Glyphs top-to-bottom?
So What is the TL;DR?
The answer is going to cost you, conservatively, around 10,000g. A month. That is approximately how much you stand to lose by A) never undercutting, B) always undercutting by 1s, or C) always undercutting by 50g+.
If you missed your Ritalin dose for today though, here is the quick and dirty version. Don't undercut in fast-moving markets like Dust/Cloth OR when there are just 1-2 severally discounted auctions compared to the normal, more reasonable market price. Undercut by a minimal amount when it is unlikely your competition is going to bother canceling/relisting, either because they aren't hardcore auctioneers (e.g. normal players who just check their mailbox 48 hours later) or because the deposit fee makes a 1s undercut from you cost them 1g or more. Savagely undercut in slow-moving and/or high margin markets to guarentee sales.
Showing posts with label Foundation. Show all posts
Showing posts with label Foundation. Show all posts
Monday, January 24, 2011
Monday, January 17, 2011
The Snowball Effect
(This post is my submission for Cold's Gold Factory Blogging Carnival on February 11th.)
The hardest part of any endeavor is usually taking that first step. You may have it in your mind to do something - starting that research paper, beginning an exercise routine, jumping into the dating pool, deciding you want a piece of the AH game - but it is easy to become overwhelmed by all the options and variables available to you at the start. This is especially the case for beginning Auctioneers, as no matter what server or faction you play on, there are hundreds and hundreds of potential markets for you to dabble in and not enough time in the day to participate in all of them. No, seriously, you can't. So if you want to succeed as a fresh Auctioneer from rags to riches, I recommend using the Snowball Effect, in three stages.
Stage 1: Taking Stock, or I am an Unique Snowflake
Everyone has to start somewhere. So... where are you starting from? Take stock of how much gold you have right now, what characters you have on the server, what items may or may not be in your bank, and any professions you might have (at any level). Do you happen to have any addons installed to assist you? If not, go and download Auctionator right now, and perhaps Auditor if you enjoy tracking the progress of your bottom line. Successful use of addons, especially Auctionator, is what I consider one of the Foundations of gold-making, so if you remain leery of using these tools, just understand you are holding yourself back.
One thing to keep in mind concerning professions, and by extension other characters, is that having more available to you allows access to markets that would otherwise be shut. Can you be highly successful with zero professions and just a level 1 character? Yes, it is possible. Not ideal by any stretch of the imagination, of course, as anything a level 1 character could do, you could do faster on a level 85 (and presumably have fun things to spend that gold on). Point being, I always recommend leveling professions to max level if you have not already, even on alts (but especially if they are level 75+ alts as you can hit 525 on them, depending on the profession).
Stage 2: Seed Money, or Getting the Snowball Rolling
You have probably heard that it takes money to make money, which is true, but a bit misleading. The reality is that it doesn't take a whole lot of money to at least get more money than you had before. The goal with seed money is to provide a base of capital from which you can start making larger and larger investments. But where do you find the seeds? You find them like anyone finds seeds: by digging for them.
One way to dig for seed money is to actually get down and dirty by doing daily quests. Yes, a gold blogger actually recommending daily quests. Once the snowball starts rolling you won't need to do any daily quests for the gold itself, but if you are starting from nothing, daily quest rewards allow you to at least start expanding. The other benefit from doing these is that it gets you out in the world killing and looting things, some mobs of which drop items that you could sell: greens, cloth, food, or other materials. If you have not already, start getting into the habit of putting a price tag on all the things that grace your bags; an addon might do it automatically for you, but appraising the true market value of an item is 1 part skill, 1,000,000 parts prior experience.
The other source of seeds is low-hanging fruit. Heard about Enchanting Vellums? Ask a guard in any major city to direct you to the local Enchanting trainer, and the Enchanting Supplies vendor is probably nearby. Buy a few stacks for 10s or less apiece and then toss a stack or two of them (as singles) on the AH, letting Auctionator automatically undercut any that may be already on the AH. If there are none, count your blessings, and list them for 2g apiece. One sale at 2g pays for the entire stack, with any further sales bringing pure profit. You can usually do the same with practically anything from vendors, with limited supply recipes commanding hundreds of times more for the same sort of effort. There are a lot of guides out there to give you ideas about markets, and I talk about some of said markets in my other Foundation article, Finding the Margin.
Stage 3: Being the Avalanche, or All Your Gold Are Belong to Us
Part of the benefit of getting your seed money from low-hanging fruit, such as selling vendor recipes, is it gets you acclimated to making small investments that net large returns. Seed money in hand, you simply redefine what you consider a small investment. Spending 10s on Enchanting Vellums should almost be trivial to you by now... but what about spending 50g per stack of Obsidium Ore? As you should know from here and elsewhere, 50g is below the True Vendor Price of Obsidium if you have a Cata-level Jewelcrafter, so it should not even register as a risk. Should you be dropping 5,000g on a hundred stacks at a time? Maybe not at first, but as each investment you make in any particular market grants a return, your purchasing power increases and allows you to either take on more risk, or at least make more and more low-risk buys.
One of my alts is a max level Scribe who I basically abandoned at the end of Wrath because I no longer wanted to be a part of the Glyph racket. Cataclysm rolls around, and in doing my character audit, I note this toon has around 2000g in its bags. From this starting point, I went to the AH and noted that some farmer has sent Azshara's Veil and some other Cataclysm herbs down to 60g per stack. What did I do? I bought 30 stacks of herbs at 60g, leaving me with all those herbs and 200g. At a minimum, each stack of herbs would make four Blackfallow Ink, which sell practically instantly at 15g apiece. Of course, each milling attempt has a chance to give you Burning Embers, which then turn into Inferno Ink that go for 150g at the lowest possible end. In effect, I was taking on zero risk for a fairly good shot at 150g profit per stack, or 75g every two stacks. I do not actually advocate selling the Blackfallow Inks themselves, as there are ways to turn each ink into a different good that adds 20g to its value, as I documented in Low-Impact Inscription.
Once everything has been milled, crafted, and listed on the AH, I waited. Did everything sell? Irrelevant. Did you get discouraged when not all of your Enchanting Vellums sold? The only important thing here is that enough things sold that I got my 1800g investment back plus the unsold merchandise. As it happened, most everything sold so I got a lot more than 1800g back, and what did not sell immediately eventually moved after a few more days of listings and uncutting. Now instead of 2000g, my capital has grown to 5000g, which means I can either purchase 80 stacks of herbs next time instead of just 30, or I could jump into other markets... like buying Blackfallow Ink someone else listed for below the cost of Mysterious Fortune Cards and/or Inferno Ink, saving me the 17+ minutes of milling while fostering the next generation of goblins besides.
Epilogue: ???, or Profit
Where is that Scribe alt now?
The only thing that I have that a brand new auctioneer doesn't is the confidence that comes from experience. Hell, many of the gold blogs I read today did not even exist when I started playing, so in many ways goblins fresh off the boat will have an easier time getting started than I did. The key is to take stock of what you have to work with, start small by collecting seed money and becoming comfortable with the AH, and finally escalating your investments and otherwise being the avalanche. Whether you cash out and buy that Tundra Mammoth once you hit your goal, or reinvest the gold in your alts to get thumbs in more pies is a choice I leave up to you.
Good luck, and most importantly, have fun.
The hardest part of any endeavor is usually taking that first step. You may have it in your mind to do something - starting that research paper, beginning an exercise routine, jumping into the dating pool, deciding you want a piece of the AH game - but it is easy to become overwhelmed by all the options and variables available to you at the start. This is especially the case for beginning Auctioneers, as no matter what server or faction you play on, there are hundreds and hundreds of potential markets for you to dabble in and not enough time in the day to participate in all of them. No, seriously, you can't. So if you want to succeed as a fresh Auctioneer from rags to riches, I recommend using the Snowball Effect, in three stages.
Stage 1: Taking Stock, or I am an Unique Snowflake
Everyone has to start somewhere. So... where are you starting from? Take stock of how much gold you have right now, what characters you have on the server, what items may or may not be in your bank, and any professions you might have (at any level). Do you happen to have any addons installed to assist you? If not, go and download Auctionator right now, and perhaps Auditor if you enjoy tracking the progress of your bottom line. Successful use of addons, especially Auctionator, is what I consider one of the Foundations of gold-making, so if you remain leery of using these tools, just understand you are holding yourself back.
One thing to keep in mind concerning professions, and by extension other characters, is that having more available to you allows access to markets that would otherwise be shut. Can you be highly successful with zero professions and just a level 1 character? Yes, it is possible. Not ideal by any stretch of the imagination, of course, as anything a level 1 character could do, you could do faster on a level 85 (and presumably have fun things to spend that gold on). Point being, I always recommend leveling professions to max level if you have not already, even on alts (but especially if they are level 75+ alts as you can hit 525 on them, depending on the profession).
Stage 2: Seed Money, or Getting the Snowball Rolling
You have probably heard that it takes money to make money, which is true, but a bit misleading. The reality is that it doesn't take a whole lot of money to at least get more money than you had before. The goal with seed money is to provide a base of capital from which you can start making larger and larger investments. But where do you find the seeds? You find them like anyone finds seeds: by digging for them.
One way to dig for seed money is to actually get down and dirty by doing daily quests. Yes, a gold blogger actually recommending daily quests. Once the snowball starts rolling you won't need to do any daily quests for the gold itself, but if you are starting from nothing, daily quest rewards allow you to at least start expanding. The other benefit from doing these is that it gets you out in the world killing and looting things, some mobs of which drop items that you could sell: greens, cloth, food, or other materials. If you have not already, start getting into the habit of putting a price tag on all the things that grace your bags; an addon might do it automatically for you, but appraising the true market value of an item is 1 part skill, 1,000,000 parts prior experience.
The other source of seeds is low-hanging fruit. Heard about Enchanting Vellums? Ask a guard in any major city to direct you to the local Enchanting trainer, and the Enchanting Supplies vendor is probably nearby. Buy a few stacks for 10s or less apiece and then toss a stack or two of them (as singles) on the AH, letting Auctionator automatically undercut any that may be already on the AH. If there are none, count your blessings, and list them for 2g apiece. One sale at 2g pays for the entire stack, with any further sales bringing pure profit. You can usually do the same with practically anything from vendors, with limited supply recipes commanding hundreds of times more for the same sort of effort. There are a lot of guides out there to give you ideas about markets, and I talk about some of said markets in my other Foundation article, Finding the Margin.
Stage 3: Being the Avalanche, or All Your Gold Are Belong to Us
Part of the benefit of getting your seed money from low-hanging fruit, such as selling vendor recipes, is it gets you acclimated to making small investments that net large returns. Seed money in hand, you simply redefine what you consider a small investment. Spending 10s on Enchanting Vellums should almost be trivial to you by now... but what about spending 50g per stack of Obsidium Ore? As you should know from here and elsewhere, 50g is below the True Vendor Price of Obsidium if you have a Cata-level Jewelcrafter, so it should not even register as a risk. Should you be dropping 5,000g on a hundred stacks at a time? Maybe not at first, but as each investment you make in any particular market grants a return, your purchasing power increases and allows you to either take on more risk, or at least make more and more low-risk buys.
One of my alts is a max level Scribe who I basically abandoned at the end of Wrath because I no longer wanted to be a part of the Glyph racket. Cataclysm rolls around, and in doing my character audit, I note this toon has around 2000g in its bags. From this starting point, I went to the AH and noted that some farmer has sent Azshara's Veil and some other Cataclysm herbs down to 60g per stack. What did I do? I bought 30 stacks of herbs at 60g, leaving me with all those herbs and 200g. At a minimum, each stack of herbs would make four Blackfallow Ink, which sell practically instantly at 15g apiece. Of course, each milling attempt has a chance to give you Burning Embers, which then turn into Inferno Ink that go for 150g at the lowest possible end. In effect, I was taking on zero risk for a fairly good shot at 150g profit per stack, or 75g every two stacks. I do not actually advocate selling the Blackfallow Inks themselves, as there are ways to turn each ink into a different good that adds 20g to its value, as I documented in Low-Impact Inscription.
Once everything has been milled, crafted, and listed on the AH, I waited. Did everything sell? Irrelevant. Did you get discouraged when not all of your Enchanting Vellums sold? The only important thing here is that enough things sold that I got my 1800g investment back plus the unsold merchandise. As it happened, most everything sold so I got a lot more than 1800g back, and what did not sell immediately eventually moved after a few more days of listings and uncutting. Now instead of 2000g, my capital has grown to 5000g, which means I can either purchase 80 stacks of herbs next time instead of just 30, or I could jump into other markets... like buying Blackfallow Ink someone else listed for below the cost of Mysterious Fortune Cards and/or Inferno Ink, saving me the 17+ minutes of milling while fostering the next generation of goblins besides.
Epilogue: ???, or Profit
Where is that Scribe alt now?
The only thing that I have that a brand new auctioneer doesn't is the confidence that comes from experience. Hell, many of the gold blogs I read today did not even exist when I started playing, so in many ways goblins fresh off the boat will have an easier time getting started than I did. The key is to take stock of what you have to work with, start small by collecting seed money and becoming comfortable with the AH, and finally escalating your investments and otherwise being the avalanche. Whether you cash out and buy that Tundra Mammoth once you hit your goal, or reinvest the gold in your alts to get thumbs in more pies is a choice I leave up to you.
Good luck, and most importantly, have fun.
Thursday, December 23, 2010
There Are No Shortcuts... Except This One
Auctionator.
I have been a huge fan of the classic Auctioneer since I started playing the game back in the beginning stages of TBC, and it worked for me all the way until patch 4.0.1, Destroyer of Addons. With Auctioneer out of commission during that Black Tuesday, I decided to give Autionator a try. And I have never really looked back.
What is the difference? Auctionator is designed to be easy to use. Drag and drop your items into the box (or Alt-Left Click) and it will automatically undercut the lowest auction, with your competition listed to the right. If the lowest is too low, just click on what price you want to undercut. Hell, you can even buy other peoples' auctions or cancel your undercut ones from this same screen. Auctioneer is capable of auto-undercutting, but you actually have to hit Refresh to get the current prices, which doubles the clicks necessary to offload your loot.
The Buy tab is similarly elegant in its simplicity and power. Want to see the current prices of Amberjewel and what it can be cut into? Bam! If you have auctions up that are being undercut you will see a red X next to it, compared with a green check-mark to show you are still the classiest act in town. Your most recent searches are saved along the left-hand side, but you can make shopping lists if you want to be pro. One of my favorite uses for these shopping lists is using the "advanced" search function which looks like this:
This search string will bring up every scroll for that gear slot and clicking the price will re-sort them so the most expensive (and thus most profitable!) are at the top. You can do the same thing with Glyphs if you want to remind yourself how much you hate the Blizzard designers.
I am known to troll the AH for deals on occasion though, and unfortunately Auctinator does nothing to change the hideousness of the default AH screen. That is why I do recommend installing Auctioneer too so you can easily browse 50 items at a time and sort things by prices. As has been reported on some of the other blog sites though, the future of Auctioneer is currently unknown considering the sweeping behind-the-scenes code changes that make scanning the entire AH in a few minutes unreliable at best, impossible at worst. While I recommend using Aunctionator simply because it IS a good AH tool even compared to Aunctioneer, you may want to become familiar with it should Auctioneer suddenly find itself no longer working or being discontinued.
I have been a huge fan of the classic Auctioneer since I started playing the game back in the beginning stages of TBC, and it worked for me all the way until patch 4.0.1, Destroyer of Addons. With Auctioneer out of commission during that Black Tuesday, I decided to give Autionator a try. And I have never really looked back.
What is the difference? Auctionator is designed to be easy to use. Drag and drop your items into the box (or Alt-Left Click) and it will automatically undercut the lowest auction, with your competition listed to the right. If the lowest is too low, just click on what price you want to undercut. Hell, you can even buy other peoples' auctions or cancel your undercut ones from this same screen. Auctioneer is capable of auto-undercutting, but you actually have to hit Refresh to get the current prices, which doubles the clicks necessary to offload your loot.
The Buy tab is similarly elegant in its simplicity and power. Want to see the current prices of Amberjewel and what it can be cut into? Bam! If you have auctions up that are being undercut you will see a red X next to it, compared with a green check-mark to show you are still the classiest act in town. Your most recent searches are saved along the left-hand side, but you can make shopping lists if you want to be pro. One of my favorite uses for these shopping lists is using the "advanced" search function which looks like this:
This search string will bring up every scroll for that gear slot and clicking the price will re-sort them so the most expensive (and thus most profitable!) are at the top. You can do the same thing with Glyphs if you want to remind yourself how much you hate the Blizzard designers.
I am known to troll the AH for deals on occasion though, and unfortunately Auctinator does nothing to change the hideousness of the default AH screen. That is why I do recommend installing Auctioneer too so you can easily browse 50 items at a time and sort things by prices. As has been reported on some of the other blog sites though, the future of Auctioneer is currently unknown considering the sweeping behind-the-scenes code changes that make scanning the entire AH in a few minutes unreliable at best, impossible at worst. While I recommend using Aunctionator simply because it IS a good AH tool even compared to Aunctioneer, you may want to become familiar with it should Auctioneer suddenly find itself no longer working or being discontinued.
Tuesday, December 21, 2010
Finding the Margin
What is the minimum monetary reward you are willing to accept for one posted auction?
This is the single most important question you can answer for yourself on your journey of wealth creation, for it instructs you in a direction that will ultimately be more personally rewarding and you will be more likely to stick with it long enough to actualize that wealth.
My personal minimum is now 30g. That may not make sense to you, and it's not supposed to. That is my margin. You might not believe there is much difference between one auction with a 30g margin and five auctions with a 6g margin that you have automated, but there is a difference well beyond the actual time it takes to post said auctions: motivation, willingness, reward. If you are the type of person who is self-motivated to the point that every copper of profit feels like your birthday, and you can maintain that motivation over the long-term, more power to you; the entire world will be your market.
For the rest of us, we must choose.
This is the single most important question you can answer for yourself on your journey of wealth creation, for it instructs you in a direction that will ultimately be more personally rewarding and you will be more likely to stick with it long enough to actualize that wealth.
My personal minimum is now 30g. That may not make sense to you, and it's not supposed to. That is my margin. You might not believe there is much difference between one auction with a 30g margin and five auctions with a 6g margin that you have automated, but there is a difference well beyond the actual time it takes to post said auctions: motivation, willingness, reward. If you are the type of person who is self-motivated to the point that every copper of profit feels like your birthday, and you can maintain that motivation over the long-term, more power to you; the entire world will be your market.
For the rest of us, we must choose.
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