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Sunday, November 20, 2011

1c Undercuts - The Faid Stance

I'm not sure what's caused this to come up so often all of a sudden but I hear about 1c undercuts one way or another nearly every day for the past week or so. 

On the one hand I hear competitors yelling at me about  my 1c undercuts or guild members saying that 1c undercuts piss them off.  On the other I've got people complaining about how stupid it is for people to undercut by 10g+ and just cut everyone's profits down.

I don't pretend to know what's "right" in the realm of economic theory. I always just sort of assumed that this was a personal preference and everyone thinks that their way is right.  Well, let me tell you what my way is and why I think it's right.


The Supposed Case for >1c Undercuts
I've heard a few reasons for undercutting by more than 1c, or to put it another way, why undercutting by only 1c is not a smart decision.  Usually it's one of these beliefs:

● My item will sell faster if I undercut more because people will see that they're getting a better deal.
If there is an item that is usually 20,000g and I see it for 10,000g I have to admit I would be getting a deal and I may buy this item to flip it.  However, that is usually not the case.  Usually the 1c undercutting is happening in markets like gems or glyphs when the price tag is often under 100g.  When I look at discounts I look at them as a part of the entire cost of the item. Getting 10g knocked off a 20,000g item is a lot less of an appealing discount than getting 10g knocked off a 20g item, you see?

I will dare to say that most buyers are similar to me: We don't care if you're cheaper by 1g or 1c, if your item is at the top of my list (aka cheapest per unit) I'll buy yours.  Why? Because it's at the top.  Hell, with TSM_Shopping I don't even usually see a price comparison on many commodities, the items are just queued up by cheapest automatically.

● My item will sell faster if I undercut by a larger number.
Yes, I just rehashed the previous belief so I can discuss it from a different angle.  I want to discuss more from the speed angle here.  I am not a patient person.  Most people I know aren't particularly patient when it comes to buying things off the AH.

Understand that in WoW there really isn't a lot of window shopping and impulse buys, particularly for trade goods and consumables. Rarely are people going to stumble upon your great deal on flasks just on accident.  If people are looking at your item on the AH they probably went to the AH and typed in that item in particular.

I just powerleveled Jewlcrafting today.  There's this hellish area in JC when you need Large Opals, Azerothian Diamonds, and Blue Sapphires.  There were about 20 Large Opals on the AH, some were at 3g and the others were at 15g.  You know what? I bought all of them.  I didn't care that the 15g Opals were five times the rate of Mr. Undercut. I wanted opals so I bought opals.  Don't get me wrong, I love cheaper goods, but Mr. Undercut could have easily recieved 15g for his Opals as well had he not undercut so aggressively.

Remember that if your item is popping up in a search most people are specifically searching for that item. They already want it, you don't need to sell them on it by kicking sand in your competitor's face.

● Undercutting by 1c is a dick move.
This one's certainly opinion based so difficult to argue against.  To those who hold this belief I merely must ask you to look at it like this:  I can undercut you by 1c. You can then choose to undercut me by 1c. You've lost, at most, 2c of value off your original sale price and will still be selling it for Original Asking Price Minus 2c.  Or I can instead undercut you by 50g.  You can then undercut me if you want, and given your opinions on 1c undercut you'll probably undercut me by at least 1g.  So now you can, at most, sell your item for Original Asking Price Minus 51g just because you didn't like 1c undercuts. Who's the dick now?

The Upstanding Individual Who Fights 1c Undercuts
A phenomenon in all of this is the buyer who will buy a more expensive item if they see someone's been undercut by 1c.  For example, if you're selling a Glyph of Innervate for 50g and I post mine for 49.99.99 this "Upstanding Individual" will buy your glyph just because they don't like 1c undercuts. I know a few of these people.

But you know what?  For every one of these people I know I know about ten people who don't even look at the others on the AH, they buy the top if it's within their price range.  If you want to "fight the man and his 1c undercuts" by buying more expensive items that's fine; I'm sure the sellers appreciate it.  However, it's really no deterrent for you to brag about your moral highground and about how you prefer to pay more for the same product as other people are. The 1c Undercutters are still swimming in gold without needing yours. No skin off my back!


At  the end of the day there are multiple stances you can take on the issue. I don't particularly mind if someone takes one over the other. As you can see here I clearly am in support of 1c undercuts but I don't mind if my competition wants to rob themselves of potential profit. 


PS: I didn't want to devote a whole post to this since I felt like quickly my blog was becoming a blog about the blog itself, and not about gold-making. However, since I think some people may be interested in my reasoning, I did make up a page.  In case you didn't notice there are now ads on Nerf Faids. Here's why.  If you do run an ad blocking program I humbly request that you disable it for this website to help support me in blogging, but whatever you'd like to do is fine! 

22 comments:

  1. Duh. People who think you are a dumb/mean for undercutting by 1c are normally the people complaining about having like 300g. People are idiots, and don't understand economics. If this were not true, we couldn't make gold as easily.

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  2. Undercutting by 1c is purely a metagame move, an AH "exploit" as it were, which is why you see so many casual AHers complaining about it.

    In your counter-argument about 1c undercuts not being a dick move, you failed to address the fact that most of these people don't post their auctions more than once a session. If you undercut them by 50g, they can get that failed auction letter knowing that they were beaten "fairly" by someone who wasn't just putting their otherwise identical auctions at the top of an addon.

    The 1c nonsense is exactly why you don't see eBay auctions set up for $0.01 bids past certain thresholds, and why they have an auto-bidder up to a specified level besides.

    That being said, it's Blizzard fault for setting their AH this way without Buy/Sell orders, auto-bid/undercut and other rational economic measures. I don't begrudge anyone for their 1c undercuts as it is simply the necessary move if you have any desire to make a decent profit. It is a dick move, but it's Blizzard's dick, so to speak.

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  3. I don't see anything wrong with 1c undercuts. There are gas stations down the street from my house. one next to 711 is always 2cents cheaper than the one across the street from it. Isn't all that much different. I mean is there some magic number like 6 or 8c that is suddenly going to be better? I doubt it.

    For me it's easier if I'm posting items in bulk, like glyphs or gems to have my settings set to undercut by 1c (tho occasionally i change this to other random but tiny copper amounts)

    However, I do have some things I post manually, usually ah flips or things I don't sell frequently enough to bother setting up a category for. These items I tend to do deeper undercuts on, as I basically faceroll out a random number that is a desirable profit for me, regardless of how expensive someone else has it for out there.

    Sometimes I even strategically will do it as there are times when these items will sell faster simply because it shows on someones addon as a "good buy" because it is x amount cheaper than the next one.(some people often have unrealistic ideas of how much they can get for stuff though) I am totally ok with tripling my gold quickly but still leaving potential money on the table. Either way I find the people whom are undercut are likely to be unhappy regardless, it doesn't seem to make a huge difference if you undercut them by 1c or 1k. I always tell the ones who are mad at me for undercutting too much though, that if they think I left so much potential on the table they should buy my item and test their theory out.

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  4. Hi.
    You said, "I just powerleveled Jewlcrafting today. There's this hellish area in JC when you need Large Opals, Azerothian Diamonds, and Blue Sapphires."

    Does this mean that this is a choke point? Can I soak up all Large Opals, Azerothian Diamonds, and Blue Sapphires + Thorium Ore, to try to push up the price?

    Any experience with this?

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  5. Another problem with the people who think they're doing kharma a favor by buying the one that's 1c more expensive is the fact that, chances are, that guy's just gonna undercut by another copper in an hour. Regardless, you're paying the goblins. There is very little "mom & pop" when it comes to consumables.

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  6. @Fjelljeger:
    Yes, you could "technically" create a choke point here but its only the 230-300 skill points that are affected. You would also need to control the thorium ore and bars as well, since those skill points need thorium settings and those particular gems are prospected from thorium. GL with it.

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  7. @Fjelljeger:
    You could "technically" create a choke point there, but it only affects the 230-300 range. You would also need to control the thorium ore and bars since those require thorium settings in addition to those gems. Plus, prospecting thorium produces the required gems.

    GL with it, too much work for such a small margin of profit.

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  8. I'd much rather have the 1c undercutters, than the complete idiot undercutters who take 50% off the current price of an item, ending in them making a complete loss on crafting in the first place (Yes gem undercutters, I'm looking at those of you who take a 200g gem and drop it straight down to under 100g).

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  9. There is only one logical explanation. People are just mad they have to deal with competition. That's part of life, unfortunately. Whether it's a 1c or 100g undercut, competition is competition and unfortunately most folks on WoW have the social skills of a single celled organism. So instead of fighting back, they have to resort to name calling.

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  10. I do one silver undercuts, but only because that is what I have always done. One copper undercuts are part of the game. People cutting gems in half or more is retarded.

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  11. I agree with Jon. Calling people idiots because they make deep undercuts is a bit childish. You have two options the way I see it. Either undercut them so they don't make sales or buy their stock and re-post the items. Whining, I guess, could be a third option, but not very effective.

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  12. @cazmia

    100g isn't a "complete loss" on any gem.

    100g is about 30g profit on Inferno Rubies, 80-90g profit on Demonseye, Ember Topaz and 95g+ profit on the other 3 rare gems.

    I don't camp, I post my gems to sell not to be convenient for perpetual 1c undercutting campers to make huge profits. I'd rather sell 100 gems for 10g profit each than 1 every few days for 200g profit.

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  13. I did my own analysis of this problem a while ago. I know many people who fit in the "upstanding citizan" category. My solution is to undercut by some other menial amount, like 1s 12c, and with this, I satisfy all and profit.

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  14. I did my own analysis of this problem a while ago. I know many people who fit in the "upstanding citizan" category. My solution is to undercut by some other menial amount, like 1s 12c, and with this, I satisfy all and profit.

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  15. @MoxNix Maybe not, but when its these very same 100g undercutters who then also drive the price of the Bold, Brilliant and Delicate Inferno rubies down to 80g in that very same day, on my realm at least, they are making a good 10g loss (based on what it costs at the moment on my server to buy 3 carnelian and 3 heartblossom for 1 ruby transmute).

    Just a quick Q for all the goblins here, how do you deal with that one person who undercuts his own auctions when you match them on bid and buyout prices?

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  16. I have to admit 1c undercuts bother me. I am not sure why. I guess it falls under the "dick move" category for me. I usually under cut by 5-10 silver and never had complaints.

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  17. I do not understand these arguments for a 5-10s or other marginal amount undercuts. On a 50g+ item, how is a 5s-10s undercut any different than a 1c undercut? You're undercutting by a very small percentage of the item value (0.1%-0.2%) still.

    In my humble opinion, whatever arbitrary number you select for your undercut is irrelevant while the point for undercutting matters.

    If you are undercutting by a very marginal amount to be at the top of the list, then that is not distinguishable from someone who only undercuts by 1c. If on the other hand you undercut by a meaningful amount to signal that you can post the item for that amount and still turn a profit that's a different story.

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  18. The thing I find funny about the people saying they will buy the more expensive item rather than the 1c undercut item is that, at least on my realm, they would STILL be buying a 1c undercut in most markets. Honestly, is it any less of a dick move to undercut by 1s? 1g? You are still just trying to make your item the cheapest.

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  19. The reason people are bothered by 1c undercuts is simple: a 1c undercut shows that the seller wants to take full advantage of the buyer and is not ashamed to show it.

    Of course that is (or should be) true for every seller. The difference is in the image you give to potential buyers.

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  20. 1c undercuts are merely a way of making gold. I'm a goblin, I always undercut everything by 1c. I have well over 400 auctions up right now and every single one of them is undercutting someone by 1c.

    The way the AH "war" works, is that whoever is persistent enough to keep undercutting, sells most. The less you undercut by, the less the item's price drops.

    The alternative to 1c undercutting is the opposite of a bidding war. It would make people have to sell their items for as low as they could possibly go without losing gold. I prefer 1c undercuts.

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  21. personally i undercut glyphs by 50s. This is a hangover from the old days when setting a 1c undercut ran the risk of my glyph not being the lowest priced item by the time i got around to posting it. as is said in other comments, the key is being the cheapest product at the time when someone comes to the AH to buy it. and if you are 1c cheapest then you have got the best price you could have expected.

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  22. @kera and @dresk: I agree that when you really think about it, undercutting by 1s is the same as undercutting by 1c, but the appearance to someone briefly looking at the AH is that you aren't a dick.

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