Logic of Undercutting?

[kuu]

Re: Logic of Undercutting?

First Rule of business...well 2nd rule, or maybe even third they're all important.

Always move inventory as much as possible.

Besides generally good business sense, FFxi culture also promotes this.

1: HELM/skilling up/HQing -> Moon phases, days, "big hauls", weekends, primetimes, etc

Both buyers and sellers.

Buy when there's large stock more and less when there is low stock.

Skill up Crafters make in bulk, and need to clean inv. Would take a lost so to move to the next level.

HQ crafters take a lost in NQ and make up for it in HQ, To do that, you go by moon phaseses and elemental days. Elemental staves are a fine example of this. All NQ are taken at a lost these days on AH, which there is great profit on HQ. You got to undercut in those situations.

HELM/Farming samething. Inv space is limited, and you gotta move your products. The more in stock, the more you try to undercut to be first to sell.

Even worse, you lose gil if it doesn't sell(after 5 days stuck up in the AH already a big inv lost). Which is harsh on cheap items which you'll have lost 1 for ever 3 that doesn't sell.

[Jei]

Re: Logic of Undercutting?

silk thread sells to NPC at like 100 gil each. you have to be stupid enough to be banned by [GM] Dave to want to NPC them.

[Chulo]

Re: Logic of Undercutting?

Some items sell in streaks, no sales for a few days then the AH sells out. For that type of item you want to be the low price so you get some cash and free up the slot. Silk threads are not like that (they sell every day) but the undercutters may not realize.

I learned early to look for situations like this and bid low. If I can pick up items for less than half price I'll send them to a mule to sell later. Stackables I'll accumulate and sell as a stack. People are usually only lazy like this for cheap items so it is a good way for new players to make some gil.

Some items, however, consistently fluctuate in value quite a bit, e.g. Yag necklaces in Windy, flints in Bastok. These items are excellent for buying low and reselling high because there will always be a demand e.g. for Norg fame.

My point is that if you see undercutting like this, buy them out (start bidding at 1 gil) and relist at the going rate. You solve the problem and make some gil.

[Standablaze]

Re: Logic of Undercutting?

Prism Powders are starting to be undercut on my server now, which has become my main source of income.

Its very very annoying. 30k last night, now its 25k and going down. I'll be losing about 30k profit total, not very nice.

[Raydeus]

Re: Logic of Undercutting?

I sometimes undercut on stuff I can mass produce (although there aren't many items I can do that with) when someone tries to jack the prices up.

The same way people complain about undercutters is the same way I complain about people that tries to sell an item for 2 or 3 times it's regular value.

[Draco Dagon]

Re: Logic of Undercutting?

I can understand the logic behind undercutting in certain situations. What's really been bothering me is that so few have the patience and restraint to try and raise prices back up (and I do emphasize back up) given the right circumstances.

I make a lot of my cooking an item that's often used for skill ups. Typically, there's 10 to 20 stacks of the item up for sale, and the price stays steady. Unfortunately, when some power crafts on that item, there will often be 30+ stacks of it. Consequently, the price gets undercut from, say, 15k a stack to 10k a stack.

But then, once the supply starts running low, and there's less than 10 stacks up for sale, it's nigh unto impossible to try and get the market price back up to what it was before. Recently, there were as few as 4 stacks up for sale, and I couldn't get the price to go up by even 1k a stack at that point.

Patience? For two months now, I've been waiting for Beehive Chips to return to 30k/stack and since December for Silk Thread to be at 100k/stack (otherwise, Silk Thread is crap for me to farm) again. Now, Silk Thread is becoming 40k/stack and Beehive Chips have just entered a new low at 15k/stack (making it useless to farm). Talk to me about patience some other time. (Now, don't get me wrong. It's not so much the prices themselves, but nowhere am I seeing any USEFUL undercuts, on like say-the multimillion items {ie. Scorpy Harness, Woodsman rings, etc.} to make it worthwhile.)

silk thread sells to NPC at like 100 gil each. you have to be stupid enough to be banned by [GM] Dave to want to NPC them.

Well, if you don't give a damn about how much you make off a particular item-then you do NOT give a damn, no ifs or buts about it.

[Omniblast]

Re: Logic of Undercutting?

It's not called undercutting it's called Turnover rate.

from Wikipedia

...turnover in a financial context refers to the rate at which a provider of goods cycles through its average inventory. The number of times within its business cycle that a company completely exhausts (and replenishes) its inventory is called its turnover. Auditors will frequenlty use a company's turnover ratio (turnover = cost of goods sold/average inventory level) to compare it to other companies in its industry.

A higher turnover rate indicates a higher Return on Investment or Rate of Return. ROI > 0 = profit; ROI < 0 = loss

Is there a economist in the house? I remember reading a college thesis and article on the economics of a virtual economy, and I don't remember where I read it at. Does anyone have a link?

It's a fascinating read... but then again I stare at books that read like stereo installation instructions or VCR programming for the old folks.

EDIT: Also, the cost of the goods sold is equal to however much the person feels that they should get for it. You value your silk threads more than the other person. Their "time" value of things is worth less than your "time" value of things.

Note: The Auction house does not perform exactly like a real auction house. The "Reserve" price that is set by the auctioneer is theoretically the price in which he feels or warrants their time value of gil. Thusly "undercutting" occurs. In a real auction house, you bid upwards vs. other people who want the same goods or auction items.

[Taruun]

Re: Logic of Undercutting?

I've recently started cooking on my mithra, and I have her sell OJ at 150g, which is 50g less than the AH sells it for. Had about 10 juices on her and left her on AFK last night, and when I got up to check on her, she only had 1 juice left. But at that price, I barely make a few gil profit. Also gave her meatballs to sell at 1000g, but they hadn't been touched.

[Raydeus]

Re: Logic of Undercutting?

I've recently started cooking on my mithra, and I have her sell OJ at 150g, which is 50g less than the AH sells it for. Had about 10 juices on her and left her on AFK last night, and when I got up to check on her, she only had 1 juice left. But at that price, I barely make a few gil profit. Also gave her meatballs to sell at 1000g, but they hadn't been touched.

Did you put in your search comment that you were selling those items? Most of the times I've bought stuff from bazaar it was because I saw the item I wanted in a sea comment.



Edit> Checking Bazaar after bazaar isn't my idea of "shopping"

[mikesjustice]

Re: Logic of Undercutting?

Quite the predicament we find ourselves in isn't it?

The mentality that we must undercut to move product has produced crafting scenerios where we must HQ in order to break even. Scenerio's where our large tier 11 and 31 craftables like HQ staves, SH, and Haubs, etc, are slowly becoming unprofitable to make, even in their HQ version. Specific items of interest being Triumph earrings, Hauberk +1, just to name a few, do not produce a profit. Hauberks +1 on Odin specifically sell for an overall 1 million gil loss, to cover the HQ averages.

With more and more crafters joining the crafting ranks, and more and more players accumulating these end game HQ's, coupled with SE's introduction to very attractive RA/EX pieces, it's an undesirable position to be in for a crafter.

Granted consumble markets might fare just fine, as supply is always in demand and literally this demand will never fade.

Why do people undercut?

- Low demand from (crafter) made items. Crafter wants to unload and move on.
- No vested intersted in the piece any longer. (non-crafter) unloads and moves on.
- Wants gil asap (everyone)
- Sometimes the seller has relisted multiple times and just want the item gone no matter what, eliminating the frustration factor.
- RMT currency in circulation. Depending on what's happening with RMT determines whether we see an inflation, deflation, or stable cycle. Currently we see a deflation cycle and people are pinching, jumping over one another to bail and salvage w/e gil they can during sell off. We see these undercuts because their's less affordable gil for gilbuyers to purchase. Truth hurts.

Why does this hurt us? Well low demand is common sense, but no vested interest in the piece is what kills a craft, along with a must have gil now attitude. The public generally does not know what's involved to create the piece, but they see a selling history that continues in a negative spiral, likely due to massive stock, people just bailing for no reason, w/e. They don't care it costs 2 million more to make than what it sells for, they will post it and undercut to make sure they get their gil out before it sinks. Others notice this trend and repeat the pattern, squeezing the crafters even further.

To further taint the pool, we have newbie crafters with dreams of HQing or making that first haubergeon, to purchase that damascus ingot for 5 million, only to end up selling their finished product for 4.5 million. Ignorant to the fact that on average they just lost about 800-900k for that NQ, and that over time, an HQ would only bring him back on par.

Unfortunate as it is, there is truth in the saying "You had to get in early to make great gil". Not that anyone can't make good gil in todays markets, it's just become compounded in efforts to produce that same gil. Many people are going back to the basics, making the cheaper items to fund their ventures.

And again unfortunately, not many people either understand or care about the concept of cause and effect.

[Sabaron]

Re: Logic of Undercutting?

Undercutting results in good sales. For instance, Malboro Vines on my server occasionally go for 5,000gil each. However, I never buy them for more than 3,000 each, and then only when necessary. If people are selling them consistently at 1,000-2,000 each, I won't touch the 3,000gil ones. This increases my profit margins considerably. In fact, I do it with everything. Most synthesized products sell for far more money that it costs me to make them, therefore, I don't buy them unless someone is severely undercutting the market. The only way you'll sell me Animal Glue, Venom Potions, Bronze Ingots, Silver Beastcoins, etc, is if I can make money off of them. Otherwise, I'll just make my own. This is similar for farmed products; if Malboro Vines are too expensive, I'll just make something else and you can find your expensive vines back in your inventory. My general rule is that a farmed item (if it is the only one in the synthesis) may not consume more than 33% of the retail price of the synthesized item. If it exceeds 33%, I won't buy it. Mistletoe, for instance, sells for 100,000gil per stack of 12; I never buy it at 100,000gil. I buy individual sprigs at 1000-5000gil each over a period of about 2 weeks in order to make a stack and turn them into Remedies. 100,000gil is the selling price of a stack of remedies, and a stack of Mistletoe makes two stacks of remedies at NQ, so that's 50% of the retail price.

Too high? Don't buy.

This also serves to keep inflation relatively stable. If you just let people keep bumping up the price, you'll eventually have to increase yours and that changes the economy--everything becomes more expensive and pretty soon you're just making exactly what you were before, you just have more coins to represent the same amount of wealth.

[Omniblast]

Re: Logic of Undercutting?

Well, cause and effect aside, it brings everything back to basic and simple economy.

Supply vs. demand.

When the value of a good drops below the normal set price there is a influx of supply. The demand for the good is relatively low.

When the value of a good goes above the normal set price there is a short supply. The demand for the good is relatively high.

But what is the normal price? The normal price is whatever the consumer wants to pay for that good. As such it is what they see fit.

Then we see another such comparison of...

Time vs. Money (gil)

Would it be worth my time to kill crawlers for silk threads or purchase them at the auction house for 1k each? Is going out, smacking a crawler worth a chance to get 1k? Drops are not guaranteed, however the auction house has been selling silk threads for 1k each. How do I balance this economic scale?

Someone can say that they make 500k an hour, I can say that I make 400k an hour, while you are making 0k an hour by selling my goods at a lower price than yours. Then someone else can claim that they make 300k an hour by selling it lower than mines. Theoretically I would make 0k at that point.

There was a point that Jei was buying darksteel ores for 35k, suddenly he bought copper ores for 35k. At that point, his value of time was more important than his value of money (gil). He valued his time of reading online web journals or forums vs. the gil he spent buying darksteel ores.

Sorry Jei for using you as an example

[PTT]

Re: Logic of Undercutting?

When you have about 2000 gil left to your name, and an inventory full of items to sell , you're hurting for gil.

Having the AH sell a steady stream of items under you, even when your price is under the AH going rate, is infuriating. Having the items returned to you when your inventory is full is maddening.

I'm hurting for gil. I need it to sell NOW.

I'm willing then, to take a chance on profit just to get it out of my way, so I can buy the consumables I need to be effective.

[Taruun]

Re: Logic of Undercutting?

Did you put in your search comment that you were selling those items? Most of the times I've bought stuff from bazaar it was because I saw the item I wanted in a sea comment.



Edit> Checking Bazaar after bazaar isn't my idea of "shopping"

Actually yes I did, put in the sea comment I was selling OJ and Meatballs = <fish> <bait>. Although I think its more my location than the sea comment getting my OJ to sell.

[greydaze]

Re: Logic of Undercutting?

one reason for undercut, is the product priced for lowest, ive heard, is sold first.
example

bee spatha:

bee spatha1 - 2k
bee spatha 2 - 1.9k

#2 would sell first

thats what ive heard and noticed in my ah when i sell ore for different prices

maybe its not true, if not, then.. idk why people undercut

This is how it works:

If someone bids 1.9, #2 sells first. If someone bids 2k, however, #1 sells first.