I received this email, my response is below it:
"Hi Markco, hanks for your blog. I've been following it for a few months now and managed to cross the 50k gold threshold for the first time this week ;)
I have a question for you regarding bidding wars. One of the tips I picked up from JM2C was making netherweave bags. The profit margin on these was pretty good. Mats on my server usually come to around 5.5G per bag and on a good day they were selling for 13G. There were already a few people selling large numbers of bags on the AH, so, not wanting to be seen as a threat, I would only post 3 or 4 bags at a time. This way, I figured, my bags would definitely sell and some of the competitions probably would too. I would do this three or four times a day (don't have time to be on all day long) and was turning a pretty nice profit.
Yesterday, however, disaster struck - a price war erupted between the major manufacturers. Each of the three main players started undercutting each other. And not just with three or four bags, but dozens at a time. This has meant that each time one guy got undercut he had no choice but to further undercut because with 30 to 40 bags on the AH cheaper than his there was no way they would sell out in 48 hours. Today bags are on the AH for 7G a piece - next to no profit for anyone. I'm not posting any new bags right now.
Any advice on how to deal with this situation? I guess I could try buying out the cheap bags until the price was back up to 13G, then resell them. But thats a significant investment and the (dumb) competition could just start another price war. Any ideas you have would be welcome.
Regards,
Whiteleaf"
Great question Whiteleaf and there are a few ways to go about beating your competition when they do this. First off, never assume that someone is not making money or that everyone has the same minimum profit range. It could be that the person posting has a farmer selling them items cheaper than you can get them.
Here's what I would do because it is unlikely that anyone farms the cloth for netherweave bags anymore (botters wouldn't anway):
Realise that this is just two or more people attempting to control the market. Buy out the bags below minimum profit and wait till after the weekend to sell your bags again. Continue doing what you're doing with a few here or there to allow for competetition and avoid price wars. Your competetition right now is too dumb to think like you did, so until they give up you will just have to wait it out and be patient.
Hope that helps!
Markco
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18 comments: on "How to Deal With Undercutters - Netherweave Bags"
jimmyolsenblues said... November 12, 2009 at 9:40 AM
It is actually common that some of your best stuff is eventually going to be undercut. That is why you have to have a lot things going on at once.
My main character is mine and skin...always good cash there.
My 2nd character is alchemy and jewel crafting...both are being a grind and hard to level at the moment.
My brand new death knight is a herbalist...
I switch around between characters and hit the auction house with a lot of different punches some hit some don't.
Always travel to other areas for limited recipes and always max out your fishing and cooking...great cash there...
And as a last result..do as many daily quests as possible while the ah gets rid of oversupply of undercutters..
Good luck
Rusty said... November 12, 2009 at 10:09 AM
One of my strategies in that market atmosphere is to buy up all of the Netherweave Cloth that is below my minimum bag price.
I accomplish two things by doing this.
First, I deny my competitors the cheaper mats.
Second, I move the price for Netherweave Cloth upward. As the price for the cloth rises, the bag price will rise with it.
Anonymous said... November 12, 2009 at 10:56 AM
I use to make gold with the 100+hp twink enchant, the mats are 2 X Small Brilliant Shard and the price per shard is about 1-2g/each on my server, still I manage to sell the enchant for ~70g, and I sell several each week. By simply buying out all of the shards, so I deny all my competition.
I totally agree with Daxenos that buying out all the netherweave cloth would be the greatest strategy, if the mats are gone the competition will be gone soon too
Good luck
Markco said... November 12, 2009 at 11:31 AM
Loving the comments, nice :)
The Gnome of Zurich said... November 12, 2009 at 12:04 PM
the key thing to realize is that the demand for netherweave bags is strong, so if mats dry up or a price warrior bows out, either prices will go up fast, or bags will sell out or almost sell out and you can reset the price yourself at low risk (buying up 30+ bags to reset the price is risky, buying up 5 is much less so.
The deposit to profit ratio on bags is fairly high so price wars are very unforgiving, I don't recommend getting into them.
If the price is still profitable for you, post a few bags, but it's not worth listing 10+ bags at lower margins IMO, unless there is a good chance most of them will sell, or the price is very high so that even one or two sales will cover your deposit costs and give you a big upside opportunity.
It's very easy to get bored with the netherweave market with it taking 15 seconds to make a bag, supplies sometimes being scarce and expensive (which you can help by buying up any cheap cloth that shows up), and deposit hits when you list 20 bags and don't sell but a few for slim margins are very depressing. So I wouldn't expect price wars to last long if it ever goes below 2-3g per bag profit.
This market is not like glyphs where you can make decent money on 1-2g profit for a long time even selling only 1/4 of your glphys. Every bag you don't sell costs you 15/30/60s. That means with 48 hr listings, selling 1/4 of your bags is only break-even when individual profit is 2.40g. This is not the glyph market where selling 250 glyphs out of 1000 for an average 2g profit (i.e. a horrible market in the middle of a wide and strong price war) still makes you 500g profit and costs you only a few gold in unsold deposits.
Let the idiots have price wars on high deposit items. Save your ammo for cheap/free to list items.
Just wait them out.
Anonymous said... November 12, 2009 at 12:36 PM
I agree with the wait it out theory. As long as you are making some profit, either join them at the lower a few bags a time or wait for the dust to settle. . Im a bit jealous of your 13g price- netherweave on a good day runs 4-5g on my server and 7-8g a bag is the normal price. Its not my main income, but they are pretty painles to make, and profit is profit.
Periluna
TRaZ said... November 12, 2009 at 2:29 PM
Same thing happened on my server. The cost of the bags got down to about 6.5g. I quit posting and started buying up all the netherweave cloth at 5g and under.
Now, a couple weeks later, either the two involved in the price war have run out of stock, or they have given up. Either way, I reset the price back to 10.5g and I'm back in business.
The key (as mentioned before) is to diversify and be patient. While my I wasn't moving bags, I was moving in other markets. Now the bags are moving again and I'm sitting on about 40 or so stacks of netherweave bolts with no fear of not being able to move them.
Course, I keep an eye on patch notes in case anything changes with the mats for fw bags.
Anonymous said... November 12, 2009 at 2:40 PM
All solid advice... ride the storm.
Bags are 8g on one of my servers and 10g on another, so...
Unknown said... November 12, 2009 at 4:26 PM
I'm also buying out the stock of mats under 6G, and adjusting the number of bags posted based on competition.
Just recently set my search in auctioneer to the 6G threshold and am ruthlessly buying it out to keep the mats price too high to justify too much undercut.
The effect right now is that the bag price has begun fluctuating wildly. Over the weekend, it was up to 13.5G each, but last night it dropped to around 8G each.
On the low swings, I only post 4 at a time, so that I'm not hit too hard if some bags don't sell. On the high swing, I post about 12 at a time.
Zeran said... November 12, 2009 at 7:11 PM
My advice depends on your evaluation of your competition. If you think they're being really dumb and undercutting blindly in their price war, than post 1-2 bags below theirs to cause their prices to fall below profitable (I.e. cheaper than you can buy the mats) then while keeping the price on cloth high, buy the bags. (This way their stupid war becomes your ammo)
However, this is likely to be a big investment and somewhat risky, the safest answer is keep your other markets going and /point /laugh at the fools killing themselves to make less g/he than doing dailies.
Saiyuri said... November 12, 2009 at 9:15 PM
I must admit i have tons of stacks of bolts of netherweave and have been for months buying out all cloth <6g per stack (bags sell for 12 - 20g on my server regulary)
Have had a full bank tab at times or (like at the moment) get down to my last few stacks and sales are still going strong with 2-3x my investment back while my copetition cant get cloth off ah to craft more
Zach said... November 12, 2009 at 11:38 PM
I definitely agree with the poster who suggested buying all the netherweave under a certain price, this will help with undercutting like this...
also - when you see them posted below the good price -buy them out as markco suggested - eventually these 2 things will even each other out - sure the other guys will sell some bags - but the bulk of them will end up with you - both in bags and raw mats... then you can repost for your price when they run out...
if they don't seem to be running out - you may just have to sit on the bags/mats for a bit -but it will eventually even out - also - when you are buying raw mats - don't make them all into bags - when you buy all the netherweave under a certain price -the price on it will naturally rise, so you can also post some netherweave back to the AH for a small profit per stack (sometimes a nice profit per stack)
also - if they are just blindly undercutting whenever they are undercut... undercut them with 1 item (works really well in gem market due to HIGH posting costs) they will sometimes undercut you farther... and you will be able to buy those out for bigger margin...
Just some ideas
Kevan Smith said... November 13, 2009 at 3:24 AM
All wrong ....
Here's what to do:
Set a MAXIMUM price you will buy netherweave. Make it low; mine is 4 gold a stack. NEVER buy netherweave above that price.
Let the bidding wars drive the price down. It's just a market lull, and it WILL go back up.
In the meantime, you can keep crafting and posting. You might make a little bit less per bag, but you will still be profiting. More importantly, you will not be feeding your competitors gold by buying their goods. After all, they will just buy the mats you need with that gold.
chaoskas said... November 13, 2009 at 5:14 AM
I keep posting my bags for an insane 14g bid, 17g BO price. They keep selling although there are a lot of bags sitting around 9g when I post them.
i don't know but I make more money when I stick to my price as when I try to undercut on my own. Maybe because a single sold bag is worth all the deposit costs.
Anonymous said... November 13, 2009 at 8:35 AM
Just adapt to the market conditions. On my sever the prices per stack were 10 gold, but i could sell the bags for 20 gold each. I tried the tactic of buying the supply out but eventually the supply really broke free and that was not an option any more. Now the prices are around 9 gold per bag. So i just buy the cloth below 4 gold and still make a nice profit. In the mean while i hope for the supply to dry up and get back to the 20g per bag ;)
whiteleaf said... November 13, 2009 at 10:20 AM
Update on what actually happened: I followed Markco's advice and bought out 29 bags at just under 8G each. It took till Tuesday for the market to run out of stock at which point I sold a few bags at 14g, then the rest at 10 or 11 when the market stabilised again :) Its the weekend again now and guess what - the weekend price warriors are back, undercutting each other by as little as 1s ><. A good chance I can get some more bargains then :) I like the idea of buying out the mats too so I'll look into doing that. Thanks for all the tips guys.
Dahab said... January 2, 2011 at 4:22 PM
I am currently in the same situation - I just got into the bag market and been consequently buying up all bags and cloth under my minimum price. I reset the price to 20g-25g per bag. If someone undercuts me for a few silver, I post five bags a bit below their price, but never under 20g. This weekend however someone has been posting 80-150 bags at a time for 10-14g. Why people do this is something I don't understand, since the bags sold very well for 20g. I am currently buying them all out, as well as buying out all the cheap cloth and hoping that they will leave on Monday and I will be able to sell my inventory. I am running out of space to store all the stuff though. :D
It really baffles me that people refuse to profit for the sake of undercutting.
Nigel said... January 3, 2011 at 7:35 AM
I've been in it for a bit (the market of netherweave bags). I follow the strategy of 19.50/19 posting about 20-30 bags every 48 hours. Although a few do come back for relisting, they all sell during the week. I have also been buying out any and all cloth at 8g and lower (profit is there so why not?). The result was that cloth hit 20g and up per stack so the bag market has been affected. Every now and then I'll see someone post a bunch of cloth at 3-4g per stack (yum is what I say). I do the buyout at about 3-4am server (I am locally 3 hours ahead so it's 7-8am for me :)). At any rate, I did see another dealer and whispered him about setting a price of 25. He agreed and then we saw another dealer come in and post for 10g, about 30 bags. I sent that man a note and asked about getting together to set the market but he respectfully declined (but did offer the suggestion that I buy his bags and relist since they do take a while to create... I did not do this.). Oh well, the price I sell is 19.5 and they all sell. As others have said, if there are 100 or so in a price war, wait till the weekend is over; the weekdays sell just as well.
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