Undercutting ain't easy
Bear in mind: posting an auction that has a deposit is a commitment. If it returns unsold, you lose a bit of money. If enough auctions come back, you can conceivably lose a lot of money. Be aware of the deposit costs for your items. It's based
on the vendor price and auction length. If you're competing with people in a market where each item posted is a risk of several gold, you'll have to be much more careful about the amount you list at the same time. If, however, you're working on something like enchanting mats or scrolls that have no deposit (or glyphs that have virtually no deposit), it costs virtually nothing for people to cancel all their auctions and relist everything below your price.
How about a price fixing cartel?
You may think that the simplest and most profitable answer is to come to a gentleman's agreement about how to undercut one another. Price fixing
requires people to make sacrifices of personal profits to further the group's profits, and get a thinner slice of a thicker pie.Unfortunately
, an individual will do much better when they break these rules. You see, the most profitable course of action when approached by a group of players trying to fix prices is to:
- go along with it and agree to play by their rules
- follow the rules on the characters they know about
- create an alt with which to completely ignore said rules, stealing the largest slice of a larger pie
- replying to their indignant tells and letters with chuck norris jokes
Long story short, in a situation where you can't legally enforce promises and anonymity is a short run into town away, you can't collude against the natural balance of supply and demand.
Another common misconception is that people will buy the things they need, no matter how high the price is. There is no such thing as inelastic demand. As prices go down, the number of items bought always goes up. This is true for every type of market out there, and figuring out whether selling more items at a lower cost is more profit than selling less items at a higher cost is an important part of knowing your business.
The universal answer to undercutters
If you're being undercut and you don't want to undercut back, don't waste time politely asking your competition to stop undercutting by so much, buy them out! The reality is that many people do have a bad understanding of supply and demand, and will undercut no matter what. If you know for a fact that the demand for your goods outstrips the supply, instead of canceling and relisting your goods or waiting for the competition's auctions to be bought, buy them yourself and relist them. Make sure to send them a thank you note. Sometimes that will get them so riled up that they post a whole bunch of stock under your cost, saving you the trouble of crafting them yourself.
(Image courtesy of szlea on Flickr
Being an auctioneer is like being able to print money. Or gold, as it were. Wait, that doesn't make sense... you can print on gold, but you can't print gold. That would be closer to transmutation? I can transmute titanium, but that's only worth it if the price of saronite is low enough to justify the time spent making it. I need some sort of analogy here. Whatever, I'll figure it out later. Making gold? Every week, Gold Capped will teach you the tricks of the trade. From setting up your auction addons and user interface, to cross faction arbitrage, to learning how to use your tradeskills.