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Thursday, July 12, 2012

Why Buy Low, Sell Normal Is A Joke


Buy Low, Sell Normal

Buy Low, Sell Normal
vs
Buy Low, Sell High

Everyone has heard the common economics standard of Buy Low, Sell High.  However, there are some auctioneers in WoW and Diablo 3 that will tell you that the time tested fundamental economic principle of Buying Lowing & Selling High is a farce that doesn't work.  Well, it's been the standard of basic profiteering for centuries.  So I'm calling bullshit on your Buy Low, Sell Normal mantra, when you claim it is better than Buy Low, Sell High.

All basic money making can be simplified to Buy For X, and Sell For More Than X.  That sale will turn you a profit.  All you need to do is sell the item for more than you paid for it.  That's what Buy Low, Sell High means.  Selling for higher than the lower price you bought it for, regardless of the market price for that item. 

So What Is Buy Low, Sell Normal?

Buy Low, Sell Normal is supposed to be "the best way to operate as an auctioneer" as the followers of this belief tell you to "Sell at normal value, no higher than what the item usually goes for."  These Buy Low, Sell Normal types, think you will make more profits by selling more items at a lower cost.  The basic backbone of any discussion about this comparison references that is how Walmart operates, by Buying Low & Selling Normal.

Sure, Walmart has lots of sales and cheap prices too, but as gold and money makers in Diablo 3 and World of Warcraft, we aren't Walmart.  We don't have a huge staff working under us.  We are just 1 person trying to turn a profit on an in-game auction house.  Walmart makes their money by coming into and forcing out all of the smaller companies that can't compete with their prices.  Some of their items they actually sell below their cost, so others have no chance to compete.  This serves to limit their competition and force others out of the market, but how profitable of a strategy is selling at a loss or for minimal profits in an online virtual environment?

So you bought or crafted an item at a low price, how much do you want to sell it for?

Well, I am a member of Generation X and I tend to go by the typical Gen-X mantra of "Getting the most money, for the least amount of work."  See that's the problem with the Buy Low, Sell Normal philosophy.  By selling at minimal profits, you may get more sales, but are those minimal profits worth your time and effort?  I'd rather sell less items for more profit per item, which results in less time recrafting, recollecting, and reposting.

Sell Normal Or Sell High In The Glyph Market?

The WoW Glyph Market has a polarizing effect on most of the sellers within that market.  Either they are willing to dance or they aren't.  But because of the foolish teachings of some bloggers who've preach about Buying Low and Selling Normal, the Glyph market can be an absolute nightmare for some sellers as we've been discussing on some episodes of The Eviscerated Gaming Podcast.

A good example is between the 2 main strategies of Glyph sellers.
  • Option 1 - Craft & Sell as many Glyphs as possible (market blanketing), all for a bare minimum profit, to keep competition away.  Often using heavy undercutting (another foolish strategy in my opinion) and walling of low priced items in hopes of driving out competition.  This is often referred to as the Walmart Glyph Model. - Sell Normal

  • Option 2 - Craft & Sell only Glyphs when they reach a nice threshold worth your time and effort.  Nev of Auction House Addict was the first to discuss this philosophy on the PW:Gold Podcast.  Don't even bother with a glyph unless it is selling for 100 gold or more.  - Sell High

With Nev's Glyph Strategy, you still make plenty of gold and have far much less work to do to restock and relist.  And you are free of the headache of massive dog fight wars of undercutting, glyph walling, and other time inefficient strategies.  Often times, you will still makes sales because not everyone has all glyph recipes and there are times when all of the low priced ones will be gone.  If I can sell glyphs for 250 gold, why the hell would I waste time fighting to sell them for 12 gold each to make a few gold per sale? 

Why Buy Low, Sell Normal?

So why would someone even want to create a Buy Low, Sell Normal idea?  It was a blogger who coined the notion and even refers to it as his "catch phrase".  The entire notion is based on foolish logic and trying to disprove a time weathered basic principal of economic theory.  The whole Buy Low, Sell Normal idea was nothing more than an online marketing ploy created by an internet salesmen trying to stir up his own "catch phrase" to discuss and quote on various blogs and podcasts all to drive traffic to his sites.  Then people want to hear how Buy Low, Sell Normal is so much better than Buy Low, Sell High and they head to his sites, where he tries to sell them his latest Secret Gold Guides.  In all reality Buy Low, Sell Normal is nothing more than a hype generating gimmick of an internet con-man.  It's nothing more than a tagline and sales gimmick.

So be smart and get the most from each and every sale.  Why leave money on the table?

I think @dollada06 said it best on twitter:
"Buy Low / Sell Normal is an idiotic ideology which basically says sell your items before they yield maximum profits."

Read more about how Buy Low, Sell Normal is a bad idea in Diablo 3 at:

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13 comments:

  1. sell high (aka as price gouging) is for campers, sell normal is for those of us who don't camp and would rather sell 100 day for 10-20% profit than 1 a month for 100% profit.

    That's all there is to it.

    ReplyDelete
    Replies
    1. No, that's not all there is to it. I don't camp, I only queue glyphs that show at least 100g profit, and I make a few thousand a day doing this. On a medium pop server with healthy competition.

      Delete
    2. I can't speak for everyone but 100 a day for 10-20% profit and 1 a month for 100% has never been the case. If you are selling 100 a day at "Buy low, sell normal" I could still expect to sell 85 reasonably and I would still come out ahead.

      Then don't ignore the fact that "Buy low, sell normal" is STILL "buy low, sell high" you are purchasing something at a low price and selling it when it rises. They, by any economic definition, is buy low, sell high.

      Delete
    3. 1 a month for 100% profit? You are doing it wrong bud. Camping isn't even a factor as it's even more dump of an idea than buy low, sell normal. If you have to camp to make gold, then find a better market.

      I'm over gold cap and have NEVER camped a market. It's a wasteful and poor strategy that just serves to increase undercutting and continually assists in driving the prices down.

      My goal is to keep prices high so I make more profit per transaction, thus resulting in less work required per gold piece earned.


      With Nev's tactic posting only glyphs over 100 gold, you make just as much if not more with a fraction of the effort. And you never even look at the compeition. You set up a fallback and a threshold. If the glyph's price is below your threshold they don't get posted.

      If I can typically sell glyphs for 150, 250, & 350 gold, then you guys that thinking walling and undercutting is smart can keep fighting over scraps, while we make just as much if not more, with a fraction of the work. That frees the saved time to be used in a more time efficient market or for actually playing the game!

      Delete
  2. I think what it all boils down to is how much time you are willing to invest in listing/cancelling items. You will definitely make the most gold per hour only aiming for the expensive glyphs.

    Investing additional time into posting the less profitable, but still profitable glyphs will make you more gold - but reduce your effective gold income per hour.

    Basically, there is a marginal return on investment for each additional hour spent selling items, as you lower your minimum required profit. The amount of time you have available to spend on the AH is a big factor in whether "sell high" or "sell normal" is the best strategy to use.

    ReplyDelete
  3. I agree with Cold in two respects.

    That glyphs (and other markets) shouldnt follow the low/normal strategy, and that a specific blogger who creates sensationalist approaches shouldnt be followed.

    However..

    Since Vanilla, I've been following the low/normal approach with flipping and it's worked better for me than any other method.

    The way I see it is if you are scooping up the items that are at ridiculous prices (approx 10%-30% of what they would go for normally) then listing them at just below their normal means you are catering for two markets; the buyer AND the reseller.

    The reason being is that whilst it's called 'flipping' you could also call it 'snowballing' as the immediate profit you get can then be reinvested into more items for sale (increase the chance of sale means faster profit, albeit smaller).

    This is only one market, one method, however. A different good means a different approach to selling.

    In the same way as people who only shuffle are limited in the way they can react to changes in the market, adopting only one pricing method limits a goblin in their ability to make money either quickly or over time.

    Cyril - Azuremyst EU (sorry about the anonymous)

    p.s. where's Wes, I miss the 3-way frisson of AHJ

    ReplyDelete
    Replies
    1. Well - Auction House Junkies is working on returning to producing shows, hopeing to record this weekend actually.

      Wes just got a new job and now has more time to write, etc. so he's gonna be relaunching content over at Capped By Cata soon also.

      Delete
  4. obviously you people have never had to deal with professional gold sellers botting the auction. If you had you wouldn't be talking this crap.

    ReplyDelete
    Replies
    1. Of course we all have, except instead of be foolish and try to compete with a bot, we are smart and go to another market worth our time and effort.

      Delete
    2. "I don't camp, I only queue glyphs that show at least 100g profit, and I make a few thousand a day doing this. On a medium pop server with healthy competition."

      That's peanuts compared to what both campers and bulk sellers posting at normal prices make in a day. On a medium pop server infested with bots.

      10k is a bad day, 100k means the competition fell asleep, 500k means a new content patch dropped.

      Delete
    3. 500k in 1 day in 1 market? Stop lying to cover your ass bro.

      Delete
  5. Selling for the best profit margin you can get is important. Though also is the number of times you can make that sale.

    For example, if you increase your sales by a multiple of 3 by halving your profit margins then you are still doing better (though, to your point, you may have had to put additional effort in to achieve this by cancelling and reposting etc).

    A buy low sell high strategy is one that maximises profit margins but perhaps to the detriment of sales volumes where as a strategy that buys low and sells normal (or even low) will reduce profit margins but increase sales volumes.

    indeed, in the same market you can employ both strategies - for example a scribe can focus on selling high the glyphs that only a few have on the server (so no aggressive under cutting here) and sell normal the other glyphs.

    But for sure, selling normal may not be the best idea if it is not accompanied by a more than offsetting rise in sales.

    but likewise, selling high may not the best strategy is the sales volumes fall too far.

    ReplyDelete

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