The AH/JC Experiment – Casting The Net

I have been at the JC experiment now for about 2 months.  About the same time I swapped over to JC, at least two of my guildies did as well, and one that was already a JC had decided to start playing the market as well.  So, I knew I was going to have intense competition, not only from guildmates, but from those that were already established in the market.

Currently, I make about 2K per day on the AH in the weekend, and 5-750g per day on the weekdays (with some exceptions).  My next closest competitor in my guild, makes about half that, and he works a bit harder.  He asked me how I do it, so this post is partially explaining that.

Edit to include:  I know that it is possible to make WAY more than what I am making, but, as you will see below, JC really does not scale as well when you start to move more and more product.

Selling Options

Ok, let’s think critically for a moment.  How do you make money?  You have to produce a product (or service) that another person wants, then sell it.  But more than that, you have to sell it for more than the cost of producing it, or you will have a net loss.   Some people think this is a no brainer, but honestly, you would be surprised at the amount of people who make that fundamental mistake.

The first part is (relatively) easy.  You have Jewelcrafting.  This is a no-brain money maker.  Just about everything can be crafted for a profit, even if it is just 1 copper.  The tricky part is to fill the second part – you have to sell it.  What are your options to sell?

You can become a “mobile” JC – and especially with the recent epic flood, many have went this route to not have a high overhead.  The will travel to you for a 25g fee, and cut any gems you want.  This is a low profit way to do business.  You are constrained in many ways – travel time (unless you are a mage), not to mention, you can only cut gems when you are online, rather than AHing them, and selling while you are offline.

You can sell cut gems at a discount off of AH in trade.  This is a perfectly viable way of doing business, but again you are constrained by online vs offline time, as well as travel time.  However, if you give good deals on gem cuts (10-20% off of AH) you will likely move a large amount of product.  You wont make as much profit, and thus, you would have to make up for that loss in volume – which you would be hard pressed to do.

Finally, you can AH your product.  This is the choice that most people run with, and it is the logical choice – you can see and track trends, sell while you are offline, and do not have to travel.

However, even in the AH game, it can be ruthless.  In the glyph market, it is not uncommon for sellers to stand by the AH for a couple of hours constantly crafting and undercutting the competition.  This, however, is usually not present in the JC Market.  Why?  AH posting costs of course.  Pasting a glyph is about 35s and posting a gem is 1g35s.  Generally, you have your key players posting their batch of gems for the day, and they leave it at that, and you have a few small players that come in and undercut them with 1 or two gems.

Market Limits

The term “Market” means, very generally, “those who are out to buy something.”  Any consumer is considered to be in the market.  However, it is used most often in the more specific context: “Those who are out to buy something you offer.”  Bear with me a moment, because I want to use both contexts.

I’m sure that everyone is aware of Supply and Demand.  A dimple S&D curve would look something like this for any specific market:

svdOf course, each individual market would have a different shape to it, but the overall concept is the same – when supply is low, demand is very high, and when supply is very high, demand is very low.  This curve works on a macro-economic scale (big), but not in a micro-economic (small) scale. But there is one critical point that is often overlooked – what I like to call “Market Need.”  Some people dismiss this as just demand, but it is quite different in my mind.

Case in point – gems.  Some gem cuts are very undesireable, and only used in very specific, obscure compositions.  In this case, the market would only need one gem per week.  So what is the market demand?  The market demand is almost non-existent.  If you post a gem at a very competitive price, and the one person who needs it happens to spot it, they may swoop it up.  But, at standard pricing, you will probably be posting that one gem for several days before actually selling it – assuming that no one is going to undercut you.  The demand curve is going to be a flat like, no matter the supply.

Now on the case of a Bold Scarlet Ruby (or the epic equivalent), the market demand is going to be much, much higher.  Many spec’s can use that gem, and it fills an essential need.  The market need is going to be somewhere around 20-30 gems/day, with demand being a proper curve.

What I am trying to get at here, is you really need to know your market (as a whole), AND the market (for that one gem).  The person that pays attention and fills the market NEED (the gems that are actually going to be purchased that day), is going to make the most money.  And no one person is going to fill that bill.  Need changes on a daily basis – some days the market might purchase 40 gems, others 0, no matter the supply that is on the AH.

Filling the NEED

So, we have established the “need” of the market, how do we fill it?

One way is to just post gems at a slight undercut of those that are already in the market.  Lets say you post 3 bold scarlet rubies.  What are your risks here?  The risk here is that you loose your post cost.  That is 4g (ish).  Not much, in the grand scheme of things, but what happens if you do this across 8 or 10 different cuts, and you only sell one of each gem?  That is 24g down the drain – the revenue from a typical orange gem.  I have seen people make this mistake on an even larger scale – 5-6 gems posted across 8-10 cuts.  When you do this, you risk becoming, what I call, the “Market Anchor.”  This post is a bit long for that explanation, so I will come back to that in the next JC post.

The way that I fill the market need is to “diversify” and time my posts appropriately.  Timing is everything when posting (again, for another post).  I also have about 20-25 different cuts that I post in.  It does take a ton of work to keep up with them all, but I make up for it in turning the profit.  I only post 1 or two gems in each cut.  Why?

When I post, I post at a 5% undercut – thats about a 2% greater undercut than most of my competition – I try to move myself away from the main pack of posters.  It usually doesn’t take more than 2 or so hours for most of my gems (about 80%) to sell off.  In my bags, I keep several uncut gems with me, so I can cut on the fly whatever sells, and post again.  The advantage is that by the time I come around to post again, there may be more people entering the market.  I get to reset my undercut practically every time I post.

Don’t get me wrong, I don’t stand around the AH all day.  I go do my dailies (gosh, I really need to farm up Sons of Hodir once and for all), raid, etc.  But every time I am in town, I cut and post a handful of gems.  Instead of only getting 1 or 2 of that daily market “need,” I am getting maybe 3 or four, and my posting costs are as low as they can be – 95% of all gems I post sell before expiring.

This is how I pushed at least 2 key players out of several highly profitable cuts – if I am there filling 25% of the market “need”, then they are not filling that.  I like to call this my “sniping” method.  They have not only the cost of the lost AH deposit, but also the cost of not selling the gem.  Their money is locked up in a gem that they have to spend *more* money to try and recoup the revenue.

So that’s it.  Try to diversify as much as possible, and make sure to only post one or two gems at a time.  You limit your chances of loosing that AH deposit, and you don’t have your money locked up in a gem that isn’t selling.  In a more advanced technique than this, you can use this to your advantage – but just starting out, we want the gold flowing, so we can stay in business.

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Comments
4 Responses to “The AH/JC Experiment – Casting The Net”
  1. Tutunkommon says:

    I would question the use of a 5% undercut. My experience both buying and selling is that if you are 1c cheaper, you will get the sale. I always ran 1& undercut, and did quite well in the alchemy market, as well as the enchanting mats market.

    Do you post 12 hour auctions then, rather than 24 or 48? I never braved up to going 12, but I did get to a point where several items could go on 24. That is another aspect of the market to know: What sells fast enough to pinch the coppers on posting cost, and which ones sell in ‘bursts’, where several stacks get put on 48 hour auctions, and will generally sell 3-4 stacks to the same buyer at once.

    Cool article. Never tried the JC thing, but I know that there are ‘Phat Lewtz’ in it if done right!

  2. kyrilean says:

    JC has always concerned me. I’ve dabbled a little, but the posting costs vs. getting undercut haven’t always made the market appealing. So I’ve never found that right niche that works. I would definitely look forward to any additional posts regarding JCing.

    @Tutunkommon – I generally undercut by 1c as well, but the problem with minimal undercuts is that it invites undercutting. With gems the cost to cancel and repost are high when compared to some other items like glyphs and enchant mats.

    What I’m saying is if I post a gem at 99g 99s 99c to undercut someone, how long do you think it’ll take for the next guy to undercut me? And what are my chances of selling it in that short period of time?

    Larger undercuts discourage undercutting. People evaluate whether they want to undercut or if they should wait for that item to sell so they can sell higher.

  3. Firespirit says:

    @Tut and Ky:

    Ky is correct, it does discourage posters from undercutting. I know it does me. There is someone on Muradin that keeps trying to crash the Runed and Bright scarlet ruby market. They post 20 of em (no idea where they are getting that many rubies) at 35g or so, when they normally are between 60-70g a piece. It certainly drives people out of the market, like me, who have other, more profitable cuts. The question is, why undercut so much? I think he is trying to take a Greedy Goblinish approach to gaining market share, that is, crash the market so it is mildy profitable for him, but unprofitable for everyone else. All I can say is that I have no idea, unless he is farming his own ore, where he is making a profit at. Raw rubies even go for 55g or so. And the amount of ore to get a stack of rubies that size? It would be about 1500g of ore if he bought it. He is crafting at a loss, no doubt about that.

    But, there is another, more simple reason that I undercut for 5% as well. That is the default UI from blizz. Believe it or not, not everyone uses auctioneer. And since blizz dosent like to sort by relative price, I need to undercut just enough so that people recognize the price break, and not just glance over it – lets face it a 2g50s undercut gets noticed more than a 30c undercut on a gem that is going for 68g.

  4. Yarsh says:

    I started posting some gems using 12hr recently for one reason if it has not sold in that time I found that i have been undercut and it would not have sold not anyways if i used the 24Hr or 48hr then i have to cancel the auction and repost. The depost for 12hr is less then 24hr and 48hr.

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