Samstag, 12. März 2011

Entering new markets - How to make the call

Long time, no post. I've been fairly busy at work over the last week, because the deadlines of some major projects came faster than I could expect. I am also arranging a long distance relocation at the moment, so that ate a lot of time as well. The remaining few minutes of free time I spent with re-stocking and re-listing with my auctioneers and cranking out the occasional dozen tradeskill points.

As I am currently attending a conference in Asia, I'll have the time to write a few pieces this week. The downside is, this and the following posts will have to be released after my return home, since Blogspot is blocked by the local ISPs (wanna take a guess where I am?). Enough chit-chat, let's get to business.

In my last entry, I talked about exploring new markets. The topic of the March issue of JMTC's blogging carnival was diversify or specialize and provided a lot of very interesting insight from all experience levels with regards to goldmaking. The general consensus seemed to be, "FOTM (flavor of the month) markets can make you a lot of money, but it's the investment in multiple markets that'll keep your gold growing consistently, no matter what". Consequently, every AH player should enter new markets regularly.

A lot of times, this will be made easier by other players from the goldmaking community, who document their favorite or successful tactics. The Obsidium shuffle, the Mysterious Fortune Card lottery or the new 4.0.6 meta and enchanting recipes are well-known examples for this. But even the most well documented market strategy should be researched a little before being employed on my own server. At least I should check TUJ or my Auctioneer history to see if the prices on my or the original author's server aren't way off.

But what if the blog post suggesting a certain idea I want to try out is a few weeks or months old? What if it's from the last expansion? What if I have a trading idea of my own and can't find any evidence of it having been tried before? I'll have to do some research. Or what a lot of the elder bloggers refer to as "doing my homework". But what facts need to be checked, what questions to be answered to be able to make the call whether or not you want to invest into a market? Because I keep pondering these exact questions over and over recently, I'll try to assemble a little checklist of questions.

1.) What's necessary?
Know what I'm getting yourself into. Which preparations have to be done beforehand and what actions have to be performed on a regular basis? "Doing the Obsidium shuffle" sounds a lot easier than getting Jewelcrafting, Enchanting and Alchemy up to Cataclysm levels as a prerequisite and then spend at least half an hour daily prospecting, crafting (cut gems, make jewelery, do transmutes), mailing and listing it on the AH.

2.) What's the profit margin?
Is there money to be made with this? Buying uncommon ores (e.g. Silver, Gold) and melting them into bars may make you money on some servers and lose you gold on others. If I assemble a DMF trinket for 10,000g, how much will I be able to sell it for? If I buy Netherweave and craft cloth gear to disenchant, will the Arcane Dust earn me money?

3.) Who am I selling to?
Selling Flasks, raiders will probably make up 95% of my customers. Classic Dusts (Strange, Soul, Vision etc.) will mostly be bought by other people leveling Enchanting. Hybrid glyphs (e.g. Paladin, Druid) will have a higher demand than "pure" class glyphs, because they are more prone to switch their main talent trees and there are generally more of them, since they are more popular. Do I want to sell to the one guy crazy enough to pay 200,000g for a Crimson Deathcharger or the thousands needing Enchants on a daily basis?

4.) What about the competition?
The best strategies and ideas can go bust pretty quick, if one ore more other players are already doing it. Do I want to be in the Glyph or Gem market on a server where half a dozen guys are fighting over each of those markets? Can I co-exist with the other guy selling metal rods to leveling Enchanters without one of us starting a price war? And how high is the probability of someone noticing that this market can be exploited or tanked?

5.) Can I afford to do it?
This question actually divides into two aspects. The obvious one is the amount of liquid gold itself. Would I have been able to flip ores, bars, cloth and leather up to Cataclysm level when I had less than 1,000g? Probably not. I was pretty sure, 300 Inscription and Enchanting would be steady money makers, but before I had sold a few dozen stacks of low-level ores and herbs, there was just no way I could have afforded the initial leveling costs.
The second aspect is often neglected by myself and, from what I could gather at the Consortium and JMTC forums, a lot of other less experienced goldmakers. It's time. Or, how the elder goblins call it, opportunity cost. If I only have one or two crafts and strategies, which are making me gold, this is a small issue. But doing a 100 stack Obsidium shuffle takes the better part of an hour and re-stocking and re-listing 400 glyphs, gems and enchantment scrolls with the common 80 slot inventory does as well (although APM/TSM helps big time with the latter). If a strategy is earning me less gold per hour than I would earn doing daily quests (at max level) or spending the same time farming ore and herbs in Elwynn Forest, is it really worth my time? But it doesn't stop there. How much attention will this strategy take? If I would need to check up on my cut rare gems regularly during the day to be able to sell some of them, isn't that the wrong market for someone with a day job? And how much of my 1-4 hours daily do I want to spend on goldmaking instead of leveling my toons, running heroics or otherwise advancing them?

I think by going through these questions when evaluating a new strategy, I'll gain a pretty good understanding of the respective risks and rewards involved. In addition, they should also prove valuable when re-evaluating my already employed strategies, in case one of the factors has changed, both in a positive or negative way.

Note: I intentionally left out a question regarding risk, because each of those five questions provokes a certain risk evaluation already
"What's necessary?" makes me consider how probable it is, that my supply won't run dry or that Blizzard will mess it up in a patch (e.g. Disenchanting Alchemy trinkets).
"What's the profit margin?" should cause me to consider how volatile a market is or if sudden or gradual changes are to be expected (content patches, gear progress etc.).
"Who am I selling to?" requires me to find out if, how many and when people are willing to pay the prices I am intending to charge.
"What about the competition?" questions not only the situation in the foreseeable future. I need to at least be able to make an educated guess about people entering and leaving that market until I make back my initial investment.
"Can I affort to do it?" as the last question is a sanity check for me as both the executing and investing entity. Only because I have 10,000g doesn't mean it's a good idea to invest 8,000g into single level 85 DMF cards to collect and sell an assembled deck or trinket.

What do you think?


  1. I think you raise some very good questions there :) Many newer goblins either follow blog advice or go with their 'gut' feeling. I know I do both quite regularly. Perhaps I should slow down long enough to ask myself these questions or am I already making these decisions but on a subconscious level?

  2. I really appreciate you thorough and well thought out post. I appreciate bloggers who look like put real time into their posts.

    I also like how you break own the considerations we should think about before jumping in.

    "Look before you leap." and "Measure twice. Cut once." both cone to mind.

    That being said we an o all our "homework" but that is no substitute for getting into the market and getting our hands dirty. Some lessons can onlmy be learned from actually doing.

    Cheers again and keep the high-quality posts coming. -flux

  3. Please excuse my broken typing. My iPad doesn't always behave. :)