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Gold Capped: Competition in tailoring

Every week, WoW Insider brings you Gold Capped, in which Basil "Euripides" Berntsen aims to show you how to make money on the auction house. Email Basil with your questions, comments, or hate mail! This week's community post is the most recent recording of the weekly JMTC's meeting. I was invited to attend this one and answer a couple of questions.

I got an email from Aralo on Altar of Storms recently that I wanted to share.
I know cloth is not what a person would call a high profit market. It's cut more often then gems, skinned more than leather, melted down more than ore, and well you know where all these puns go. In Wrath on my sever, I was able to (haphazardly at least) able to maintain a steady hold on the more demanded markets. In Cataclysm, though, I'm struggling to stay afloat. Embersilk is particularly rough.

I bring this up because never have I seen you really talk cloth that was not a cooldown. Do you have any ideas on how to stay afloat on threads or maybe some add-ons other than auctioneer to help build and maintain my market?
Admittedly, part of the reason I want to share this is all the awesome puns. Secondly, I do have a few answers. I'll be writing up a proper tailoring guide next, I promise, but in the meantime, I want to talk about that "steady hold" on the market.

Who controls this market?

I get accused of "running" a market on a fairly regular basis. My response is always the same: Nobody can control a market -- they can only participate in it. Long-term, serious control of a market is not really profitable, except in a few outlier situations I've never experienced (like an infinitesimally small market).

If you ask people what they mean by "controlling the market," they'll say that the monopolist undercuts immediately day and night and that the mats are always more expensive than the finished goods will support. I'm not saying that controlling a market isn't possible but that it's not profitable. You can do an unprofitable activity as long as you have the bankroll to support it. If the effect you're going for isn't personal profit, then by all means, control away.

Assuming you want to profit in the market, though, take the word "control" out of your vocabulary. Your goal is to make profitable sales, and that's the end. This means buying raw materials, crafting goods, and listing them on the AH. There are all kinds of fun AH PvP tactics involved in these steps, but none of them amount to control. Here are the techniques that are unprofitable:
  • Camping I've always said that camping the AH and frequently relisting your goods is a waste of time. The extra revenue it brings compared with a "set it and forget it" strategy isn't worth it in just about any market. If only it could be this clear-cut for buying ...
  • Setting materials price This is the big one that everyone thinks is the best strategy until they lose a shirt or two trying it out. You will most certainly have an effect on the price of your materials on the AH, but don't delude yourself into thinking that you can use this effect to lock competitors out. It's unavoidable that all the products you buy will increase prices, but remember that this hurts you as much (or more) as it hurts your competitors. Also, as you buy more and more of your base material, more and more will be listed. If the only way you can protect your margins or revenue is to keep buying the higher volume of stock at a higher price, you're going to build up unsold goods too fast and be stuck with a glut of unsold inventory.
The most profitable way to manage your materials purchasing is usually to reduce the impact your buying has. Drain the AH only when there's a good price, and set your finished goods high enough that you have only enough sales volume to use mats bought at a "good" price. The further down the path of volume you go, the thinner your margins will be. The only way to get a cheaper price when you buy more is if you to go around the AH for this and buy direct from producers, however since cloth is really annoying to farm, your only option is to check the AH as frequently as possible.

So what can I do?

Just because you can't profitably control a market doesn't mean you have to craft, list, and log off. You can often get decent return on time invested by engaging in some AH PvP. This is a competition, and there's no reason to show restraint to your opponent on the AH, any more than there is in an arena match.
  • Profit from auto-undercutters. If your competition or your suppliers use an addon to list their goods or can be counted on to always undercut the cheapest auction instead of the largest batch of auctions, you can profit quite nicely by baiting the AH. Put a small quantity of auctions for, for example, cloth, at well under the cheapest price on the AH (but still believably high) and wait for someone to undercut it. The worst-case scenario is that a competitor will buy it, but it's just one cloth.
  • Play for keeps. If you can convince a competitor to act in your interest without anything more than an in-game mail, they're playing to lose. My personal favorite is agreeing with a competitor to price-fix, then using an anonymous alt to undercut once they feel secure that they'll get half of the business. If they get aggressive and buy out my undercutter, I list as much as I can on him.
  • Use competitors to manage stock. if you find yourself with too many mats or finished goods, list small quantities on the AH at a price with almost no margin at all. Then spam trade about it when your competitor can see it. More often than not, they'll buy you out. At this point, you can safely mass-list your entire inventory and log out, and by the time you log back in, you'll probably have an inbox full of your competitor's money. It's not as good as high-profit business, but considering that most liquidation situations are triggered by a massive drop in mats prices, you are making someone else take the loss of heavy stocking when priced drop.
Aside from PvP tactics, you can out-strategize your competition. This is where I make my money. As soon as someone starts wasting money to cost me money, I beat them to the next market. Being agile and taking the long view are the most important skills I've learned. Until I am competing with someone who can literally corner every single market simultaneously, there will be room for me to make my money. The game is not currently designed to support that kind of competitor without breaking the ToS, and those guys can be dealt with with a ticket or 10.

Addons

Aralo also wanted advice on addons. Auctioneer is dead to me, as I never looked back after switching to Auctionator and TradeSkillMaster. Your competition uses it to reduce the time spent grinding, and if you're stuck on an obsolete tool, you're handicapping yourself.

Maximize your profits with more advice from Gold Capped as well as the author's Call to Auction podcast. Do you have questions about selling, reselling and building your financial empire on the auction house? Basil is taking your questions at basil@wowinsider.com.

Filed under: Economy, Gold Capped

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