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 :)