On my recent post about Manipulating Auction House Prices, Alcattle wrote a comment about selling at a loss. I was going to respond in the comments, but I started thinking about it and found enough material for a full post. For reference, Alcattle's comment was:
"My pet peeve is people who sell stuff at a loss. I know they get them for free, but if they look at the cost to replace the mats... I won't sell at a loss unless it is something I will not replace/relist."
Why People Sell at a Loss
- Push others out of the market. One of the primary reasons that someone might consider selling at a loss is to push competition out of the market. Let's say I can sell at a loss for 2 weeks, losing 5,000g in the process. But it also eliminates most of my competition. Once they're all gone, I raise prices and bring in 10,000 more gold than I would have with the larger pool of competitors. Essentially, I just spent 5k (the loss) to bring in 10k more than I would have made normally.
- They are ignorant of true costs. Some people are just ignorant. They don't understand things like opportunity cost, so they sell finished products for less than they could get by selling the materials raw. Or they don't value their time, and so sell below market because 10g/item is still profitable when materials are "free" for them.
- They aren't selling for a loss at all. I work under the assumption that my biggest competitors are able to get materials for cheaper than I do on a consistent basis. When I see them selling cheaper than me, I assume they aren't losing money, but rather have a lower production cost than me. Maybe they log in more frequently and can purchase cheaper supplies. Or maybe they have a farmer selling them raw materials directly and bypassing the Auction House all together.
- They're getting out of the market. Certain items just aren't profitable to make because they are used in leveling professions. Certain glyphs and enchants are notoriously cheap sellers because people make them to level their profession, then just dump them for cheap on the Auction House to get some of their money back. Other people are fed up with a market and just want to dump their stock and get out quickly.
- Some people just like to be obnoxious. They like to annoy others and consider it fun to mess with the economy or their competition.
- Buy them up and re-sell later. If you do your research, and have a little bit of patience, you can make gold by taking advantage of people selling items for a loss or less than the market will sustain. I rarely craft Inferno Rubies these days. Instead, I purchase any cut rubies from the Auction House behold a certain threshold. They sit in my bags and get posted when the price rises later in the week. My stock fluctuates between 5-6 Brilliant Infernos and 20-25 on most weeks. If I buy the rubies at 125g and sell them for 150, I'm making 25g/Inferno for little to no work. The key is understanding when prices will rise and fall. Heavy raid nights (especially post-raid for gems), patch days or after nerfs to content make great times to sell the cheap stock you've been purchasing from your competition.
- Get cheaper materials. Maybe you need to log in more frequently to get the best deals. Set up mobile alerts at The Undermine Journal or use the mobile auction house app from Blizzard. Start advertising in trade chat and build a relationship with the farmers on your server. Get people to send you supplies regularly and bypass the Auction House. Your competition is probably doing it, so why aren't you?
- Jump ship. If you don't have the time or resources to wage a war with a loss-seller, you might need to step out of the market for a period of time. Look for opportunities to get back in when their guard is down. If you don't have the stomach to outlast or outspend the loss-sellers, don't waste your precious resources trying.
I consider myself a somewhat casual auctioneer. I can be found via Twitter @Aleithia3. I also like getting email at Aleithia AT jasonthedce DOT com. Send me your questions and I'll try to write about them on the site.
