For those of you who tune into Hearthcast each week, you’ll know my son has recently started playing WoW. While I have the opportunity to go hand him some gold, I have not done so yet (Although Freckleface might have…). Instead, I decided to teach him a little about the Auction House.
Understanding the Auction House in 10 Easy Steps
1. Most people don’t know what they’re doing – and it effects value in a bad way.
A vast majority of people think that the only way to sell things is to be the cheapest on the AH. While this may hold some truth, what usually ends up happening is people undercut others by too much, and the value of an item spirals out of control. Additionally, a person may wish to drive the price of something up and ends up getting hung out to dry because a person came in behind them and undercut them by way too much.
2. Some people don’t know what they’re doing – and it effects value in a positive way.
Often times, people will loot something, and just toss it up willy-nilly on the Auction House with no research. They think, “hey, if I can get 100 gold for this, I’m happy” – when in reality, that item may sell for five times that. Additionally, if a person price matches a common item, then over time, a group of two or more people could easily raise the price of that item.
3. Gold Farmers use the AH to move gold – look for way overpriced items, and avoid them.
You will see grey or green items that might usually sell for 5 gold or less moving for 10K gold or more. Usually this is because they’ve illegally bought gold, and are having it delivered via the Auction House. Tip: don’t try to list something yourself for that high amount. It seldom sells.
4. People use the AH to move items between characters and friends – look for way under priced items, and buy them.
People use the auction house as a transportation tool. When they do, they’ll put an item up on the Neutral Auction House for very cheap, in the hopes that nobody else will be around to snag it. What they don’t realize is the Neutral Auction House is accessible from different locations… learn them, and happy hunting!
5. Without addons, the AH is a very dangerous place to be – get at least Auctioneer
Addons make a world of difference on the Auction House. They can tell you what the value of an item is, any trends that might be going on, or even if you should buy something and make a profit off it selling it back to a vendor! Without that type of information, you’re at a severe loss.
6. People make mistakes all the time – scanning the AH with Auctioneer will reveal good deals you should buy.
I recently bought a 500 gold gem for 50 gold. Someone simply messed up their pricing. Their loss. My gain. However, without Auctioneer, I would never have seen it. Scan, and scan often.
7. Hardcore Raiders are more concerned with time than gold – items you purchase from a vendor will sell for a profit on the AH.
Water, food, any type of consumable. You can get them from vendors, and put them up on the AH. You’d be surprised what sells!
8. Hardcore Raiders typically use the Remote Auction House to prep for a raid later that night. That’s why #7 works.
People get ready for raids while they’re at work (or they blog, like Cold does). You can take advantage of this by putting Raid-Consumables on the AH. Health and Manna items tend to do very well.
9. Everyone suffers in an undercutting war. Stay out of it.
When a bunch of people who don’t know what they’re doing undercut each other for too much, the price of the item ends up bottoming out. Most people don’t know enough to scan the AH before they post to see what kind of competition they currently have. When you see too many of an item (15-20+), and each one is a gold or more less than the one above it, then don’t list yours. Keep it. Wait for the storm to pass. Alternatively, if the price on the lowest one is significantly lower that what your normal price is… buy it, and flip it. 
10. You won’t always sell what you list, but you can’t sell what you don’t list.
You gotta be in it to win it. You can make a bunch of gold on the AH, but you need to be able to stomach the losses from time to time. My rule of thumb is if it doesn’t sell in 3 listings, vendor it and move on.
Until next week,
Rewt
About Rewt
I have a question: Isn’t undercutting a purely subjective term?
I see the word being thrown around like it’s some definable term, when in fact it’s purely abstract and subjective. IMO there is no such thing as undercutting. All prices on the AH are arbitrary and based on supply, demand, costs, and profit margins. In other words the pirce of items ALWAYS fluctuate (a sort of “systemic undercutting” if you will). If you scanned the auction house everyday for 1 year, you’d come up with an average price for an item. For example, Lets say Netherweave Bags…avg price over 1 year is 12G per bag.
But what if that same scan data showed that the average price of the MATS for that item is 2 or even 3 times more than what they are going for now (e.g. the average price over 1 year for Netherweave cloth is 60s per, but your buying yours at 30s per).
Is it considered undercutting to price your bags at 9g? I think not.
Rather than worry about undercutting or being undercut, I focus on 2 things, my total cost and my acceptable profit margin. Thats how I price my items. I could care less about what other people are pricing thier items at because, in reality, I have NO WAY of knowing what thier costs were or are.
Npoleon, thanks for you comments… very good points.
Actually, in this case, Undercutting is a definable term. In Auctioneer, there is a check box setting for “Undercut Competitors”. People blindly check it to ensure they have the lowest price. This setting is further definable by the percentage amount you want to undercut by.
I would argue that the majority of people that post looted items do not take the total cost of the item into consideration – how long it took them to get it, repair costs, etc. They figure, “hey, I got this loot, and I want to make sure I sell it for some gold”.
The WoW Auctionhouse is a very speculative market.
I agree in spirit with Npolean. My goal on the AH is to sell my items at an acceptable margin. Once upon a time, I would tell folks entering a new market to only undercut by 1c. The problem with this approach is that it significantly favors the AH camper. I have a job and can’t spend every minute of every day making sure my stuff is 1c lower than everyone else, so my only recourse is to post my items which is still profitable for me, but not for my competitors. Yes, if everyone else agreed to stay out of my market, I could sell an item for more. Some would argue that this is the “true” value of an item. I say that the value is a function of supply and demand and if the supply is too large, then reducing the price to a point where my competitors can no longer compete but which is still profitable for me is the way to go. I may not get the most profit theoretically possible out of each and every item, but more of the profits are going into MY pockets and not my competitors if I aggressively undercut.
So I think NPolean’s point…. and I agree… is that what you call and undercut, especially what you call an egregious undercut, is in fact an effective profit maximization technique. My price is the price at which *I* can profitably sell an item. If that price is less then yours and you choose to call mine an undercut, then so be it. In fact, it is just the price at which I believe my profits are maximized. If that decreases what you perceive as the value of the good, if that “leaves money on the table”, then that is your opinion. I will never reduce my price below what I believe my maximum profit can be, but if raising my price results in me losing sales to you, then I am better off keeping my prices low enough to make it not worth your while to continue.
Let’s not forget the nature of this article was to introduce a 12 year old to the AH…
That being said…
There is absolutely nothing wrong with setting a price you’re comfortable with, and sticking with it. Not at all. The issue is when someone has an item, takes it to the AH, and simply undercuts existing auctions out there, and then other people do the same.
I’m not referring to the individual who comes in with a set price in mind, and even though they see items trading at a higher gold level, is happy with the what they’re going to get because they’re making an “informed decision”.
It’s the group of people who’s sole “technique” is to click the undercut button and post the auction. When you have a crowd of those people, it damages the market.
Out pricing your competition is a valid strategy, one which I’ve employed several times. The two points I was trying (and apparently failing) to make about undercutting is to not use undercutting as the only method of posting auctions, and not to get caught up in an undercut war when many people simply undercut the last guy…
@Leonal – Precisely correct!
@Rewt – YES.. I understand and agree 100%. So I guess the real message for your son is to 1) research your product; 2) set a your price, and 3) STICK TO IT regardless of what the market is doing.
I have to disagree with this to an extent. Lets say I post 10 Ebonsteel belt buckles for 300G and someone comes along and post 2 for 270G and I know roughly 10 sale per day on my server, then I know that I’ll make more gold by allowing said person to sale there 2 buckles and myself sale 8 than i would if I undercut them by even a copper. Even though the mat costs may be lower on my server and I’d be making a profit regardless I’d still mathematically have better odds of making a larger sum by simply allowing my competition some sales. True if they begin posting more and creating more competition, posting 10 a day for example, then I’d have to rethink my strategy and “undercutting” their price would then be viable. But being lowest simply to prevent your competition from making a sale doesn’t really make sense. That scenario isn’t even factoring in canceled auction costs or posting fees.
A comment on #10:
True if it’s a low priced item then vendoring and recouping your ah costs is valid, but that advice is too broad. I’d never vendor certain items just because they didn’t sale after 3 postings. So long as you stand to earn more than you invested in posting costs and AH cuts, then keep posting it till it sales. for instance, I wouldn’t vendor a Hurricane deck just because it didn’t sale after being listed 3 times. granted that is common sense, but common sense isn’t so common, and this guide is geared towards new players and younger players.
I will disagree with one item on your list. You dont need addons to know what you are doing. In my view you should never blindly list an item without knowing the market. What is listed on the ah isnt necessarily the market. What value is important is the value the item sells at. Auctioneer tells me what items have been posted at. it does not tell me what they sell for. It is a starting point but it can be distorted due to many factors.
If you want to make gold…watch your market for a week….see the ups and downs….see what happens morning vs night….heavy raid nights……weekeends etc…..Prices vary and auctioneer will not tell you anything but what the items are listed for. i dont mean to pick on auctioneer here but I am just illustrating that you need to understand the tool you are using. the same goes for any addon or resource ie Undermine Journal.
A simple example, the actual item doesnt really matter but is used based on my servers tendancies. Inferno Ink…..often posted on my server at 70-90gold each. My postings of Inferno Ink…..50gold each….Why sell at 50g when a program like auctioneer will tell me that the average is say 70g. You list at a price that gets rid of your stock in the most profitable manner possible. On my server…inferno ink rarely sells at more than 60g despite the numerous listings above this price. Higher volumes require lower prices if demand is not sufficent to purchase all that is listed.
Lesser celestial essence…..component of Greater celestial essence. I list lessers at 25-30gold each despite the fact that greaters sell for 50-60gold each. I dont care in this market if I am undercut as at some point in a 24 hour period…there will not be any posted and mine that are overpriced will sell.
Addons are a tool….the average price is not necessarily the price to use to sell the item at that time.
Good article. A nice follow up would be how to take advantage of your different scenarios in selling or buying scenarios.
@Brent
I’m confused. Are you saying not to use add-ons, or are you saying “understand the add-ons you use”?
i am saying you dont need to use addons to determine prices. If you use addons you really should understand what they are doing.