Goblin Mindset: Speed of sales matters more than price

It is infinitely better to sell a Geosynchronous World Spinner for 85 000 gold than have it sitting on the Auction House for 140 000 gold.

I’m going to make the argument for why people care way too much about the prices of their item, and too little about how fast it sells. This post is not any sort of specific technique, but in the line of what I call Goblin Mindset. How to think about gold-making to maximize your long term success as a gold maker. This post contains some contrarian viewpoints so be ready to potentially get your views challenged! For some earlier point in this vein check out my posts on finding your competitive advantage and why you should not believe the hype.

None of what I say here is some sort of universal truth. You will have to learn how to combine these ideas with the game to truly master this. That being said it is not a necessary part of gold making. You can easily get richer by me just by farming for more hours a week than I play, but that’s beside the point. We are here to make gold with minimal effort. Minimizing in game effort means understanding the market better than your competitors, and continuously seeking to improve your methods. That is what we are going to do today.

Liquid gold is more important than inventory value

At the end of the day, the TSM value of your items is meaningless. The only thing that matters is liquid gold. Your TSM inventory value is a pointer, but it is all paper profits. It is only Liquid gold that can buy tokens, gear on the AH, repairs etc. Tomorrow Blizzard could change the game in ways that would make your stock worthless. So all else being equal you should prefer to have as much of your value as possible in Liquid gold.

This is also a strong argument for diversifying your income across as many methods as possible. I have written posts for a ton of different professions and I strongly believe that using as many methods as possible is best.

There is of course a conflicting idea here. You should invest as much as possible of your gold into potentially profitable items that you can resell or craft, but you also care more about gold than inventory.  The way to reconcile this is to realize that as soon as you have bought or crafted an item you want to sell it for a profit as soon as possible. The most important metric is to sell it at a profit, the size of the profit is much less important than most people believe.

Lower prices lead to more sales

Now before going further you will have to accept the following statement that is pretty much a heresy in large parts of the gold making community:

Large undercuts are a good strategy!

The reason is simple. Lower prices mean that on average more people will be willing to buy. I have observed this personally on a number of occasions. Before Legion I dumped my stock of major glyphs that were being removed at rock bottom prices and they sold super fast. Lowering the price will increase the sales as more people will be able to fit the item into their personal economic situation. Obviously on some items this effect is so small that it should be disregarded and I’ll probably elaborate more on why I believe this some day. For now, just take it as gospel.

The effects of compounding

So we accept that liquid gold is preferable to value in items. And we accept that lower prices lead to more sales. From this point the idea that speed of sales matter more than profit is self-evident. You want to convert your items back into gold at a profit as fast as possible. This has two obvious advantages:

  1. You lock in your profit
  2. You have gold available to reinvest

The part that is not necessarily obvious is that these two advantages combined give a much stronger effect than they do individually. They will compound, and over time a compounding difference will be massive!

Showing the potential effects of compounding

I’m gonna take a hypothetical example to show the idea.

If we compare Vial of the Sands prices and sell rates on the biggest and smallest EU servers we find the following (by looking at the corresponding pages on Wowuction):

Outland:

  • Price: 75 520 gold
  • Sale rate: 5.6 per day

Medivh:

  • Price: 127 499 gold
  • Sale rate: 0.31 per day

I’m gonna assume the same crafting cost. This is of course incorrect as the smallest server will likely have a higher crafting cost. The incorrectness fo my assumption will however mean that I will overestimate the high price server so if anything the situation on the low profit margin server will in reality be even better by comparison. If we set the crafting cost to 60k.  The average profit per day for the servers will be:

  • Outland: (75 520-60 000)*5.6= 85 912 gold
  • Medivh: (127 499-60 000)*0.31 = 20 924.7 gold

We can also look at this for a set period of 3 days. We can get the average time between sales for the two realms: Medivh about 3 days, and for Outland about every 4-5 hours. If you could undercut to make sure you get every sale on the realm you will make 15 520 gold per 4-5 hours on Outland or 67 499 gold per 3 days on Medivh. Let’s see how 60 000 gold invested into one vial would look after 3 days.

Medivh: One sale of 127 499 = 67 499 profit. Profit margin = 112% over a 3 day period.

Outland: One sale every 5 hours. Rounds down to 14 sales. 15 520 gold profit per. Total profit over 3 days = 217 280. Profit margin = 360%

Keep in mind that this example is not “real”. It is a thought experiment meant to illustrate a point. I wholeheartedly believe the underlying logic however, and I regularily crash markets if I feel my items sell to slow. The main “errors” are that on Medivh the crafting cost will probably be higher as well as materials are harder to get and fewer people have the recipe. It does however amply illustrate the concept perfectly with a real example. This example does not even include compounding as it would be a bit too cumbersome to include. But if you assume that you can reinvest the profits in other markets while keeping enough to craft a new Vial the Outland example will very quickly completely outpace the Medivh one.

Some conclusions

This example is obviously extreme. It illustrates the obvious fact that continuously reinvesting into smaller profit margins that sell fast is better than selling fewer items at larger margins, asumming that your supply is not capped. Our mind is wired to care more about the big numbers. 10 sales of 1 000 gold feels like less than one sale of 10 000 gold. Even though it’s obviously the same amount of gold. Try to work against your biases. Actively work on selling your items fast. Reinvest into more stock and keep on crafting.

Obviously this only works if you make sure you sell at a profit. I personally love thin margin markets with large volume. They are a mass crafters dream and will allow you take advantage of large sample sizes to remove the RNG component of any shuffle.

Agree? Disagree? Let me know in the comments!

 

 

 

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