Dealing with Undercutters

If you have ever tried to sell anything on AH, you have seen them.  They list their goods just a few silver below you or list the buyout a little bit below yours to come up first on the list.  So, how do you deal with them?  A lot of people talked about it and I’d like to explain how I deal with them.  First of all, I split them into three categories:

1. Passers-by: these are people who don’t usually post on AH, but happened to have the goods (for example from leveling a character or from leveling a profession).  Most often they only have a few items to list.
2. Farmers: These are people who spend hours and hours farming and usually have very large quantities of goods.  You can easily recognize them because they use level 1 characters and their English is hard to understand. 
3. Fellow traders: These are people like you.  They buy and sell to pocket the profits.

Let’s look at how to deal with each of these groups.

Passers-by

This group is the simplest one to deal with.  They only have a few items and they want to sell them.  They have no idea how much the items cost and have no patience to wait for the sale – they want their gold right now.  They check the AH, find the lowest price on their items and undercut that price.  It doesn’t matter if the prices are at the all-time high or at the all-time low, because they don’t know anything about the market.  The best way to deal with them is to either buy their goods (if they are cheap) or ignore them – since they only have a few, it doesn’t matter.  If you can talk to them, see if they will unlist the items and sell them to you for 80% of what they are asking.

Farmers

These guys have A LOT of items to sell.  Sometimes they have more than the market can absorb.  Not only that, but they will get more tomorrow.  They aren’t interested in buying, they only sell.  Their only goal is to sell all they have before they get the next batch a day later.  What they tend to do is to

1. Advertise in /trade selling at about 80% of current AH prices
2. What they can’t sell this way, they list on AH for 12hrs undercutting everyone
3. They frequently log back to check and if needed relist their items

If you have a new farmer entering one of your markets, be prepared for a drop in prices.  There are two things I do about these guys:

1. Try to talk to them and buy all they have.  You have to be careful here.  First, make sure you buy ALL they have.  Otherwise they will still undercut you with what they have left.  If you can’t buy it all, don’t buy at all.  Second, since they have very large quantities, you might not be able to sell everything.  So make sure to set the price that leaves you plenty of room for profits.  I usually make an offer at around 60% of market value.  They won’t sell it to you right away, but be firm and most likely they’ll give up.  Remember, they want their gold now and they don’t want to risk getting another batch while the original one hasn’t been sold yet.
2. If you can’t buy their goods and they start undercutting you, you have two choices.  You can either leave the market or you can fight them.  Fighting can take time and you might lose some gold in the process, but it can drive farmers out.  To fight them, you need to undercut them as well.  However, do it smart.  If they list 20 items, undercut them with 2 or 3.  As they sell, put up another 2-3.  If they ignore you, you’ll sell your stuff and they won’t sell any.  If they decide to relist, undercut them again.  What happens is that both of you lose AH deposits, but you lose on 2-3 items while they lose on 20.    Keep repeating this and they will start looking for other markets or will be more willing to negotiate with you.

Fellow Traders

These are people like you.  They have the same goals.  They want to keep prices high and they hate undercutters.  Two choices here again. 

1. Peace.  The strategy here is to work with them.  Talk to them and set up agreements to match each other’s prices.  On my server, I have agreements with various traders in several markets and it’s been working really well.
2. War.  This could be either your decision or theirs.  Be very aggressive and try to drive them out of the market.  Add them to your friends list and check AH as soon as they go offline.  Undercut them and use short listings.  Check AH as frequently as you can.  The goal here is to not let them buy at low prices (be there first) and prevent their existing items from selling.  If you can achieve these goals, they will eventually leave.  If not, you’ll have to leave. 

Hope this was helpful.  If you have other strategies, feel free to share :)

Risk and Reward

If you are using Auctioneer, it tells you how many times a given item was seen on AH.  This gives you a good indication of how common the item is.  Today I’m going to talk about reselling uncommon items – rare pets, epic gear, rare patterns, etc.  If you’ve read my post on Getting Started With Auction House Trading, you’ll remember about using profit goals to determine the price you are willing to pay for items.  The same rule applies when dealing with uncommon items, but there is a catch.  When you buy/sell common items that have high traffic, you are virtually guaranteed to sell what you’ve bought.  You might take a small loss if you made a mistake, but it won’t be drastic.  When buying uncommon items which have low traffic, you face two potential problems.  First, you don’t know how long it’ll take you to resell them.  This means your money will be tied up and won’t be earning you anything for some time.  Second, you might never sell it.  Hopefully, this isn’t the case since you should’ve done your research before buying the items, but it can happen.  In order to compensate for these two potential problems, you have to demand a higher return on your investment.  For very low traffic items, you need to set your purchase price to get you at least 50-80% profits.  The more unsure you are about when/if you are going to resell the item, the higher the return that you should demand. 

Getting Started With Auction House Trading

This blog entry is for those of you who want to start making wow gold but aren’t sure where to start.  There are a number of posts from various people that tell you how to make hundreds or even thousands of gold each day using one of the more popular professions.  The problem is, not everyone has those professions and leveling one will cost you several thousand gold coins.  On top of that, you can’t use them if you are just starting and your character is still leveling.  So here’s your catch 22 – in order to use their advise you need the gold, which is what you lack in the first place.  I have no problems making 1-3k gold each day without using any professions by following a few simple steps that are described below.  Most of them are common sense, but you’ll be surprised how many people miss some of them.

• Determine how much gold you can use to start with.  Don’t use all you have since you might need it for other purposes.  For example, if you raid, you will need gold for repairs.  If you are still leveling, you might need gold to learn new skills.  Make sure you have enough and use the rest to start your business.
• Decide what is the minimum profit margin you are willing to take.  A profit margin is determined by how much you sell something versus how much you paid for it:

Profit Margin = (Sale Price – AH Commissions – Un-refunded Listing Fees – Cost)/Cost

I use 15%-20% as my target, but you can pick a different number that makes you feel comfortable.  Just don’t expect it to be much higher than 50% all the time.  Occasionally, you’ll make crazy profits (buy for 1g and sell for 100g), but this is very very rare.  For the rest of the post, I’ll assume that you want to go with 20% margin.

• Now that you have your starting capital and know what profits you want to get, you need to find your first purchase.  When you make your first purchases, you want to go for something that sells a lot.  Good examples are herbs used for making flasks and elixirs, ore used for prospecting, cloth used for popular items and so on.  Your goal here is to buy something that is going to be easy to sell.  You don’t want to invest all you have and get stuck with it because there are no buyers for a few weeks.  How to spot these items if you don’t know what they are?  There are usually a lot of them up for sale by a large number of different sellers. 
• The next step is to determine the price which will let you sell everything with at least 20% markup (replace 20% with whatever margin you picked earlier).  If you are smart (and I know you are), you might ask how do you know  what this price is?  This is the most difficult part about playing the AH game.  You need to KNOW THE MARKET YOU WANT TO PLAY IN.  In other words, you need to know the average prices on the goods you buy.  You need to know how high they get and how low they get.  Without this knowledge you are more likely to lose gold than to make it.  So, how do you gain this knowledge?  You need to watch the markets.  You can use addons such as Auctioneer or you can do it manually – it is up to you.  But you have to do it.  It takes time.  You might want to wait a few days before making your first investment.  Don’t buy the first thing you see on the AH because it is the cheapest - unless you are sure it is a good deal.  So let’s use an example here.  Suppose you’ve been watching the prices on Frost Lotus and it usually sells around 30g each.  The prices can go as high up as 50 and as low as 18.  Let’s pick your target price at 29g for resale.  and let’s say that you will have to list it twice before someone buys it.  Now we do a little bit of math to determine how much you want to pay for it:

        Buy Price = (Sale Price – AH commissions – Un-refunded AH listing fees)/(1+margin)

If we use 20% margin and the lotus prices I described above, we’ll get:

        Buy Price = (29g – 1.45g - 0.6g)/(1+0.2) = 22.45g

This is the price at which you can buy Frost Lotus if you want to get 20% profits.

• Now you have your initial gold, you know what to buy and you know how much to pay for it.  Here’s another very important part.  Unless you are willing to take lower profits or try to sell it for a higher price, don’t buy anything that costs more than the price you determined in the previous step (22.45g in my example).  Remember, you want to make gold, not to buy stuff. 
• Once you buy and sell your first item(s), reinvest the profits into the next one.

 

That’s about it.  In a nutshell, this is all you need to get started.  Hope you found it useful.