Tuesday, March 22, 2011

The Markets

We have a gigantic catalog of items in WoW.
You can expect a lot of them to find their way on the AH.
However, how do you make any sense of all these items, the prices they are listed at, and the fact that the prices go up and down all the time ?
How can you jump in these waters without drowning ?

It's all part of market basics.
There's demand and there's offer.
There's someone trying to make a profit.
There's someone trying to get a bargain.

The interesting thing about the Auction House in WoW is that it is a copy of the real-life stock markets without the complications and external elements that can totally transform the entirety of all markets unexpectedly. (No wonder WoW Economics is being taught in a few universities!)
The only element of surprise can be found in people's behaviors when they buy or sell.
What I mean to say with this is that some behaviors are to be expected by buyers and sellers alike, and one has to take both into account in order to make the most profit.
All this knowledge makes you smarter at playing the Auction House, further reducing risk.

Now, the notion of risk is a key point in a marketplace.
It's how much you will put on the line in order to make a percentage of profit.
It's also how much you are willing to lose before you actually turn up a profit.

Defining this will determine what kind of market you want to work into.
Let's separate risk into 3 types: Low, Medium and High risk.

Low Risk: Selling items that players are sure to need. However, chances are that you will have a lot of competition and will make a tiny but steady profit out of the sells. Will commonly deal with white and green items, tradeskill items and achievement-related items.

Medium Risk: Selling items that specific types of players are sure to need. Competition will be sparse, but will cover more ranges of items. You can make a tidy profit but you will have to repost a portion of your expired auctions. Will commonly deal with green and blue items, tradeskill, craftables and leveling items.

High Risk: Selling items that require a large sum of money from buyers. Competition may be close to none, profits will be great, but patience is required: may take weeks, even months before the items are sold. Will commonly deal with blue and purple items, mounts, high-end gear and very desirable items that are rare to find.

(This is a very gross generalization, of course. There are many different shades of risk when you get into specific markets or specific items. I'm just outlining the basic principles/common conceptions here.)

Different levels of risk for different types of markets.
A beginner auctioneer might want to start with low risk markets to test the waters and get more knowledge about the economy/ecosystem of the server, and eventually branch out to the other markets and higher levels of risk.
Again, this depends on your level of involvement in the AH game.
The best gold-makers out there will tell you that one of the keys to success is to diversify and have your hands dipped in all levels of risk.

The point of this post is to start to make the distinction that even though the Auction House is an always-evolving organism, you can distinguish parts of how it works and start to pinpoint your areas of interest.
You can flesh out some certainties in the AH game, that there is a broad spectrum of risk associated to items, going from the almost perfect certainty of a sell, to the unknowable darkness of the promise of gold to come.

And as a result of this, you will either encounter other gold-makers that are working on those markets or you will be able to discover markets that have been left wide open for you to take.

Next time, I'll go into more detail with niche markets.

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