Competing with Crazy Alchemists

Alchemists are a crazy bunch. Never satisfied with how things are, they concoct, blend and transmute. The fumes get to them after a while, and in a drunken stupor they roll up to the Auction House and just dump their goods at whatever price they feel like. Some alchemists even pick their own herbs and have convinced themselves that their [Golden Lotus] are free. Some alchemists have taken to gardening, and are surprised they even get paid for their wares after having fun in the sun, messing about with the soil and communing with mother Pandaria.

What the $#@% is an Enterprise to do?

Thanks to The Undermine Journal, you can see just how crazy the alchemists on your server are. Looking at the graph above, you can see just how often the price of materials is above the sale price of [Flask of the Earth]. Of course, the cost basis for flasks is significantly reduced by elixir specialisation, but even so, what kind of margin is that? A abysmal margin. That's what.

Automate sales with TSM

Getting the basics out the way, use TSM to sell your stuff. My philosophy with most consumables, is to get started creating a working stockpile, setting my thresholds for a reasonable profit margin and then just refilling my stock as required. If alchemists are being crazy, my stuff doesn't sell, but I don't care. I wait for a spike in demand, or for alchemists to sober up, and take my sales in those windows of opportunity.

If I haven't had sales in a little bit, or I notice something happening with the materials prices, I investigate and take action as necessary. It might mean raising or lowering my threshold and fallback, resetting a market or altering my materials acquisition to keep up with demand.

Specialise!

Never make an alchemy product without the correct specialisation:

• Elixir Master - Elixirs and Flasks
• Potion Master - Potions (but not Elixirs (see above))
• Transmutation Master - Transmuting (e.g., Living Steel, Gems, Meta Gems)

One of the reasons the alchemy markets are so cut throat is because there is roughly a 20% gain in end product by using the correct specialisation. So I recommend having (at least) three alchemists so you can cover all of the markets. The only reason to have more than one Transmutation Master is because some transmutes (e.g., Living Steel) have a daily cooldown and the only way to increase your yield is to have more alchemists to create that product.

So far in Mists of Pandaria, I have created 7259 flasks, 1218 of which were additional procs (20.16%). There is just no way I would try and compete in the flask market without that advantage.

Don't take a loss

Don't be pressured into lowering your threshold below your cost price. That's not competing with crazy alchemists, that's just dropping your pants. Don't join them, beat them. Aside from the enormous downward pressure on the market because of competition, the alchemy markets fluctuate in price quite a bit. If you are patient your goods will sell, at a profit.

The exception of course is when something dramatic happens to the market. Earlier this expansion, Blizzard adjusted the drop chance for [Golden Lotus] and people started growing them on their farms. The price crashed from about 80g to under 30g before rising steadily back to around 40g. When you start snapping up "bargains" and the price continues to drop, you need to be aggressive posting your existing stock to clear it at a profit, before the price of the product crashes to follow the materials.

Cover all the Alchemy Markets

On my server, the flask market has been flat for a few weeks. However, the gem markets and potion markets are ripe for the picking.

Potions are consumed by raiders with reckless abandon. In a progression night, I'll go through a couple of stacks, and I'm also the type of player that will use 6 pots just for LFR. I highly recommend making potions in batches of at least 120 with a potion master (240 herbs fits nicely in a mail to your potion master). Unlike transmuting living steel, which is prone to estimation bias, large batches of potions will more likely yield a return of an additional 20% every batch which more is than an extra stack of pots. In the last 30 days, I've bought [Green Tea Leaf] at 1g75s, [Silkweed] at 1g70s and sold [Potion of the Jade Serpent] 10g88s. Cost of less than 3g and selling for more than 10g? Now that's what I call a margin.

In general I have been pretty lazy with prospecting and selling gems. Until however, I saw cut rare gems going for over 300g/ea on my auction house. What the what? That is highway robbery. As I mentioned before, with [Golden Lotus] sitting around 40g, anything over 100g is more than doubling your coin. As I usually do when I see low hanging fruit, I got to work harvesting, skimming from the bottom of the lotus prices and lopping off the top of the gem market. The lotus price also makes for some cheap meta gems, where you get to double dip as a transmutation master.

Let Crazy Alchemists do your work for you

If the market is relatively stable, factoring in specialisation, and there are alchemy products on the auction house under cost, buy them out. It takes more than three minutes to make a decent batch of potions. Sure, you can go make a coffee, alt-tab to a blog post (or actual work) or leave your computer entirely and go do something else during that time. However, it can take 20 seconds to buy a whole bunch of potions and re-list them at a more reasonable price. Here's some tips I prepared earlier for resetting markets.

On my server, the price of [Master Mana Potions] goes up and down like a fiddler's arm. It's possibly because Blingtron gives them out pretty freely, or because using three herbs to create two potions is hard to figure out without a spreadsheet. Who knows? On the weekends the price can dip as low as 1g, and I think they are worth 3g, plus a generous markup for my troubles, damn it! Also, just because their materials are cheaper, I don't see why healers should get away with imbalanced potions costs! I mean, they get away with only taking one freakin' potion per pull already! So, I buy them all up and bide my time until payday, just before a raid on Wednesday night.

Sell in larger stacks and quantities 

I used to sell potions in singles. Twelve whole potions each time I'd post on the AH. It wasn't until I started putting my sales data into a database I noticed that most of the time when someone buys a potion from me, they buy ALL the potions. Did they need more potions? They probably did, so I got to feeling bad about the crappy service I was providing my loyal customers. So I experimented with putting more up for sale at a time and monitoring my unsold auctions, with great success.

Now I sell my potions in stacks of 10. I can put up a lot more potions and spend less time retrieving unsold potions from the mailbox. Similarly for flasks, I sell in stacks of 3, since the average raid goes for 3 hours it makes sense that even the most cashflow challenged raiders won't be turned off by the total cost of the transaction.

Do keep in mind how much you are prepared to spend in deposit costs. Depending on when you are posting and how competitive your server economy is, there is little point in flooding your auction house with multiple stacks of flasks, only to sell a small percentage of them a large percentage of the time. Just bump up your quantities in moderation until you get a yield of sales you are comfortable with.

Resetting the Glyph Market: Does it work?

TL;DR Yes, yes it does.

I recently posted Twitchie's Guide to Resetting Markets and my case study was my reset of the [Living Steel Belt Buckle] market. It was easy to see the results quickly because the market has only one product, and it is an item any self respecting active player will purchase regularly (if you have time to level, you have time to buckle).

One of my readers warned about the dangers of resetting the glyph market, to which I replied:

Oh I do this with Glyphs all the time! Just like with the glyph market in general, there's a different set of expectations. For resetting belt buckles, I can see the results in a day. However, with glyphs it can take a lot longer.

The other major difference with glyphs is that the margins are a LOT higher. I will buy 20 glyphs hoping for the result that one sells at the reset price and I make a profit.

There are also some pitfalls with glyph resets, in that common leveling glyphs will constantly have their price driven into the ground, as people make 5 of them and dump them at any price. When a glyph is less than 5g though, there really isn't that much risk. TSM is great for solving this problem, since once you have a stockpile of 40+ , it's probably not worth trying to keep resetting that particular glyph in the future.

There are different challenges for resetting in different markets, so I might go through some of my data for other examples, particularly glyphs.

The major difference between the buckle example and glyphs is that there lots of different glyphs. When I post buckles, I expect to sell some buckles. However, when I post a glyph I only expect that it might sell 1 in 10 times I post it, maybe less. The point is though, when I post over 400 different glyphs, 40 of them might sell and that's a fantastic result. The demand for each glyph is a lot lower (everyone needs a belt buckle, but every non-Paladin won't buy any Paladin glyphs) so you want to get as much coverage of the market as you can.

Glyphs is posting, mailbox and inventory intensive, and that alone is enough to turn many people away from the market. I suspect that the other major reason people leave the glyph market (aside from rabid competition) is that they don't commit heavily enough to get a return on their initial investment. Glyphs seems to be an all or nothing market, and until you retrieve those solid blocks of sales in your mailbox it can't seem worth the time.

The same is true for resets. In order to feel like resetting glyphs is productive, you don't want to try it on one glyph and wait for the coin to start rolling in. Rather than cherry pick one piece of low hanging fruit, get out your hedge trimmer and just lop off the whole low end of the market. Add those glyphs to your inventory and keep going with your normal posting cycle. Give it some time before you come back to assess. Or don't. You can take my approach and just assume that it works really well... until today.

After posting the reply, I decided to have a quick look at how well my glyph resetting works for the last month or two. For quick numbers, my first port of call is always to TradeSkillMaster. So open up /tsm and head to the accounting module, and hopefully you'll get results like mine:

• Predator: Bingo! 3 glyphs bought for a less than 15g for a return of more than 500g. Right here, is what resetting markets are all about. Relieving impatient and frustrated people of their undervalued goods, and selling them all the way back up at your fall back
• Pillar of Frost: 17 glyphs bought, only 2 sold. I mentioned that the glyph business is inventory intensive right? If you have the stomach for it, you can delete as many of the excess glyphs as you like and you've still made a tidy profit. What is most important isn't the number of glyphs you buy, as the total cost of the reset (in this case over 60g) and the likely return on investment. If you're worried about the inventory issue, or the time it will take to recoup your investment, the glyph market in general is probably not for you.
• Shred: 10 glyphs bought for 59g31s, one glyph sold for 59g25s. While you can think about this as a cheap way to gain 9 glyphs you can resell later, it isn't a great result. The data here is at least a months worth, and I spent time buying glyphs, storing and posting glyphs to make no gold? Bah! So keep in mind that every glyph you reset won't be a winner. Same goes for consecration, but it's a little different because the one Paladin that paid over 50g for a glyph instead of 2g makes it worth it.

The other important note is that there will be glyphs that I attempted to reset, where I didn't see any sales, which won't be on that list. What matters is that overall the process of resetting the glyph market is profitable for you and worth your time, rather than taking each glyph as a victory or failure.

What glyph resetting does for me is it allows me to be a stabilising force in the glyph market. It helps to make sure that glyphs are not too cheap, not to expensive, but just right. You're welcome, Goldilocks.

Twitchie's Guide to Resetting Markets

Have you ever been frustrated that the profit margins in your favourite market are razor thin? Have you ever thought, "My goods are worth more than that!"? Well, with a little capital and some moxie, you can have an impact on the prices on your auction house. Read on for some tips on finding the markets ripe for resetting and ways to reduce your risk.

The graph above is a reset I performed in the [Living Steel Belt Buckle] market just a couple of days ago. Thanks to The Undermine Journal, it is easy to analyse the impact the reset has had over the following days.

WHAT TO LOOK FOR BEFORE PERFORMING A RESET

Volume. In order to reset a market, you need to buy up all the undervalued goods. In order to reduce the capital you invest in the reset, you want to look for a market whose volume has bottomed out. To perform my reset, I only had to buy a little over a stack of buckles. There is a correlation between price and volume that indicates a market is ready for a reset. As the price is driven down, many competitors will leave a once lucrative market for greener pastures, lowering the volume available to consumers. If you are comfortable spending a little extra, the best case is when people liquidate their stock as they leave, giving you an opportunity to expand your own stock in the process.

Price. There are a few factors to consider when deciding a market is undervalued. In the graph above you can see an olive line that represents the materials price, which indicates that the price of belt buckles is just insanely close to the cost of [Living Steel]. As a blacksmith, I want a profit margin over and above the added value of smelting ore, transmuting bars and using my daily alchemy cooldowns. So, I double check the living steel market, which has been pretty consistent. I'm ready to declare belt buckles are undervalued.

Market factors. Belt buckles are an essential (yeah, I said it) enhancement for every player in end game content. Forget you know the word optional for a second. If you have time to level, you have time to buckle! So there's always going to be demand for these items, reasonable competition and some volume. Resetting lower volume markets (e.g., craftable epics) have other considerations. Take anything with [Blood Spirit]s in them for example. The price of spirits have fluctuated wildly since the start of the expansion. Firstly, because they are a depreciating asset (they start scarce, but as time goes on more content is cleared, more are produced and demand goes down as more and more characters no longer require them for gear). Secondly, sadly, because of duping which has a chaotic effect the markets it touches. So the two keywords here are depreciating and unpredictable. For other lower volume markets (e.g., BoEs, pets, mounts) the value of items are a lot more subjective, so experience with the market is key before attempting a reset.

Risk. Once a market is understood, and ripe for resetting, take another moment to understand the risk you are taking on before performing a reset. I like to consider the worst case scenario and work backwards from there. The hypothetical worst case is that you buy up a bunch of stock, and the items you bought were hotfixed overnight into vendor trash. You just just lost your entire capital investment. Scary, huh? So in my example, I spent over 7k on buckles. For me, where 7k is less than the average increase in my liquid gold per day, it is very low risk. Working up from that, consider how you would feel if the market crashed (e.g., if Blizzard changed the availability of [Golden Lotus] while you were resetting flasks) and what you would be prepared to do to liquidate your stock. Also consider how quickly you expect to get your investment back, particularly with high value, low volume markets. Depending the demand on your server, it can take days, weeks or months to offload goods, that are depreciating every moment they sit in your bags.

WHAT TO EXPECT AFTER A RESET

Expect a correction. It is naive to expect the market won't respond to a reset. The goal is to get a return on your investment before the price settles back down.

Don't be greedy. I'm all for pricing a product at 'whatever the market will bear'. However, when resetting a market, resetting it too high will just invite exponentially more competition looking to get in on the action. I know, do as I say, not as I do. I was a little greedy with my reset, and you can see the almost immediate correction from 580g to 470g. I also didn't sell a single buckle for over 470g in the reset.

Ride the price all the way down. A successful reset will see you make a return on your investment before the price falls down to pre-reset level. If you're lucky, the market will stabilise at a higher price, but you shouldn't count on it. Be aggressive and make sure you get the sales you want as quickly as possible. The beauty of resetting a market you are active in is that you have your original stock, plus the cheap stock from your competitors, so you can make sure to have plenty of volume for peak demand times (e.g., raid nights).

Record your result! In my example, I sold my stack of competitors buckles from 450g down to 420g before I started in on my own stock at 40g higher than pre-reset prices. A good result will give you the confidence to use this approach in all your markets. More importantly, a bad result is an opportunity to try and figure out why your assessment of undervalued was wrong. When I say record your success, I mean have the actual figures available! I highly recommend TSM accounting, which records both purchases and sales for easy reconciliation. When a fellow gold maker starts talking in with vague hyperbole and insipid estimation my eyes glaze over and I reach for the [Binary Brew]. I beg of you, a little gnome can only drink so much.

What markets do you actively reset? Be sure to comment with your victories and horrific failures in the comments!

Auction House Deposit Fees

I sent in mail to Faid, and my questions were discussed on the ClockworkRiot LiteCast - Ep 005. In using her responses, I have heavily paraphrased her answers to be more like 'what I heared' and less like 'what she said' so make sure you head over to ClockworkRiot and check it out for yourself.

Here is the questions I posed.

Hi Faid, I hate AH fees. One of the reasons I love the glyph market is that aside from time posting and collecting from the mailbox, there is no negative consequences for NOT selling a glyph. I love high priced markets, like the epic gem market. The profit per sale is so high for me that the AH fee of posting an epic gem seems trivial. However, in the non-ruby cut rare gem market, AH fees drive me crazy. For anywhere between a 15g and 65g sale, an AH fee of 2g25s can really put a dent in the profit margin for each sale if you need to relist multiple times. I know the capital I’ve outlaid for these ‘byproducts’ has already returned a profit, and I’m not going to try and sell them through trade to avoid the AH fee. Could you talk about your approach to AH fees and minimising your losses? Did you get into the non-ruby cut rare gem market, and was the AH fee something you considered?
    Thanks, Twitchie (the Gnome Warlock)

Faid made some excellent points, and I'll address them below.


#1 Deposit fees are doing exactly what they are supposed to do.

Faid is absolutely right. Deposit fees are designed as a deterrent to posting auctions at a higher price than is reasonable. If you post too high, your auction may expire purely because your goods are just not worth that much in the market. Bam, deposit gone. If you post too high, you encourage competitors to undercut you reducing the chance of a sale because you need enough demand to plow through your competitors auctions and then buy yours.

So the take home message here is to post for less, to encourage purchasers and discourage competitors. The issue with the rare gem market of course (which Faid also talked about) is that they are a biproduct of a profitable market, the shuffle for inferno rubies and other more profitable biproducts. The rare gems are left over after you've shuffled your way to the bank. In some cases competitors will post for just over the deposit fee, and that market can safely be considered, 'dead to me'.

#2 If you want to avoid auction fees, sell it in trade you sissy!

Asking Faid's advice with the "I don't want to sell in trade" caveat is kinda like going to a nutritionist about weight loss saying, "I just want to eat bacon and cake all day long".

Selling in trade has a couple of advantages. Firstly, our goal is satisfied... no deposit fee. Bam. Secondly, you don't have to precut your gems. This amounts to a fairly large saving of bag and mailbox space. It also helps that my major AH slave is my DK who is also my jewelcrafter.

So after going so far as to put my objections to selling in trade in my initial question, Faid prompted me to think a little more about it. I can probably develop a subtle and professional trade bark that I use once at the start of my posting session, advertising cuts of rare gems and a set price for the different colours. If I have some takers, I make some sales, and if I don't it only adds a split second to my auctioning process.

#3 Post during peak demand for the specific market

Faid had some great suggestions about posting at times that people require gems in their play cycles. After Tol Barad for PvP cuts, or at suitable times during the raiding week. The idea here is get an idea of the demand cycle for your market, which is something I hadn't thought to much about in relation to gems. Like most people, my posting fits around my real life schedule, but for specific markets there's no harm in not posting when the demand is low to avoid as many unsold auctions as possible.

I think most entrepreneurs are used to thinking about the supply cycle for buying materials. For example, I'm straight to the auction house on Thursday mornings to pick up all the [Essence of Destruction] from the Wednesday night farm bosses. If you are unhappy with the number of cancelled auctions from a specific market, have a think about the demand cycle as well.
  
#4 Get out when it's just not worth it

Not all markets are created equal, and no one has enough time, energy or perhaps even the compulsive tendancies to rule every market all the time. If after analysing your pricing, your posting and perhaps dabbling in trade sales you are still not enjoying a market... GET OUT!

I haven't shuffled for quite a while, since I have plenty of rare gems, I'm gemming epic gems anyway and there's just other markets and interests in WoW that I perfer to spend my time on. However, rather than just continuously bounce these rare (and uncommon for that matter) gems from mailbox to mailbox, I thought I'd reach out for a kick in the pants from a fellow gold blogger for a different perspective and think about moving some stock.

Thanks Faid, for taking the time to address the question on your LiteCast, and if you're interested enough in gold making in WoW to be reading this post... I highly recommend checking out ClockworkRiot.