Managing Inventory as Cataclysm Winds Down

Posted by Aleithia at 8:00 AM

How do you calculate the cost of an item? Without getting into opportunity costs, let's assume all raw materials have a cost associated with them, even the self-farmed items. We'll use Dragonscale Leg Armor as an example as it only has two components: 1 Pristine Hide and 20 Blackened Dragonscales.

Figuring out the cost is easy enough for the Dragonscales: look up the data on the Auction House, your favorite pricing addon (ie, Trade Skill Master, Auctioneer or Auctionator) or at an independent auction site (The Undermine Journal, AH Spy). All will return different prices most likely, but you'll be able to get a good sense of what it's worth.

Pristine Hides are a bit trickier, because they can be purchased at three different levels:

• Buying 50 Savage Leather, converting them into 10 Heavy Savage Leather and trading for a Pristine Hide from the leatherworking supply vendors.
• Buying 10 Heavy Savage Leather and trading it in.
• Buying 1 from the Auction House.

So you calculate a cost for that Pristine Hide, add it to the Dragonscales and you've got the cost of one Dragonscale Leg Armor. Except it's a little more complicated than that. Here's why: raw goods aren't always worth what you paid for them, but rather what it would take to replace them.

Prior to patch 4.3, I purchased large amounts of Savage Leather to turn into leg enchants for sale after the patch. My average price was around 3.75 gold/leather, or 187.5 gold/Pristine Hide. The Blackened Dragonscale cost me around 14 gold each, or 280g/stack. Add in the cost of the hide, and I was able to make the armors for 467.5g each. Post-patch, they were selling for roughly 800g on average after the initial surge in pricing, for a profit of 333.5g. Not too shabby.

The problem is that replacing them costs much more now. Savage Leather is sitting around 6g on average (300/hide) and Blackened Dragonscale is actually down a bit at 13.75g or 275/stack. The cost of producing them now is 575g and the average sale price has dropped to around 700g. That's a profit of ~125g—Still nice, but not as good.

Of course, right now there's not a real problem because I'm still making a profit on the leg armors. But what if prices for finished goods have dropped below the cost of your materials? This is a very real possibility the longer 4.3 lasts before Mists of Pandaria comes out. Raid Finder has been great for business, but soon the large uptick in business will fade and prices will begin to dip lower and lower. So what to do?

Well, I've not been as aggressively restocking my large supply materials (Leather, Ores, Herbs) as aggressively, instead waiting for prices to drop and my inventory to dwindle. Some items will continue to hold value into MoP, but many won't. Rather than gamble on a large overstock of something, I'd rather use up my inventory and then restock as needed.

I'm also only restocking my limited supply items (enchanting mats) in small batches to better control my costs. The last thing I want to do is purchase 500 Maelstrom Crystals at 200g each, only to see them drop back down to 150 or 125 as more gear from raids and 5-mans starts getting sharded again.

The Cataclysm is far from over. Best case scenario, MoP arrives in May or June. More likely it's August or as late as December. But with the launch of Star Wars: The Old Republic, declining subscriber numbers and Dragon Soul fatigue soon to set in, it's time to start thinking about ending in a good position to start the next big surge with the release of Mists of Pandaria.