Overflowing stupidity

[Wulfies]

You are missing the point of that example:

Tomb mats do sell a lot faster than crafted items.

In the example the mats total market value was 200k, the finished item undercut to 150k.

Regardless of if the 150k finished item sells faster than the other crafter's 250k item, the undercutter is still in effect losing 50k easy profit, by not just selling the mats.

The fact he farmed all the mats himself is irrelevant, while the 150k may be "pure profit", it's still a minimum 50k loss on the gil potential and a senseless move on his part.

Your key point here is "gil potential."

There there are 2 assumptions that you are using that I would like to refute. 1) There is no guarantee that your material will sell for 200k nor can you guarantee when the materials will sell, but I do know my 150k product will sell before your 200k materials will. 2) you are setting a valuation on the sum of your materials that may not be universally held. See my quote below:

I do not know what your goals are, but when I put crap stuff on the market, I want the product to move and collect my gil as quick as i can. To me, as a person who farms everything, my CoGS (Cost of Goods Sold) are next to nil except for the time it took me to farm the mats. As a merchant, my goal is to sell first and sell it fast. I want to move more product and if i can do that cheaper than you and still make more profit than you, i can and I will. This is a basic business model.

My theory is based on quick inventory turnover. This is my business model and works well for me (this may not be something you like but no one is forcing you to use this method.)

There is an old adage: "A bird in hand is worth 2 in the bush." I will take my gil-in-hand over the potential more profits for me.

Zigkid3 succinctly states my point.

in some cases its better to sell for less if it increases your inventory turnover rate.
Say someone can gain a net profit of 20k at price point A, or or gain a net profit of 30k at price point B. Price point B is higher which will result in getting 10K more out of the sale but it'll sell less often.
Say after 24 hours, at price A you were able to gain 20k for each sale and sold 5, so 100k total. In the same amount of time of 24 hours if you sold at price B and gained 30k each you may only sell 3 and gain a total of 90k.
So in 24 hours, it was better to sell at a lower price and gain less profit per item, but you sold a lot more in the same time frame.

Also, the fact that he/she farms all the mats has everything to do with this. By farming the mats, you are reducing your CoGS thus increasing your profits.

Demand is not the only influencing factor on prices.

If an item is overpriced, it will not sell regardless of the demand.

E.g. No wind shards on the market, so someone puts them up for 100000 gil each, they will be high in demand, but nobody would pay that for them.

To use your example, if I really need a wind shard bad enough and I am unable to obtain it myself, then yes I would buy it for 100k a pop. More to my point, we both know that certain materials/product are farmed/crafted more than others.

Lets take something that isn't readily avail, for example lets use a Black Pearl Ring +1. Now this ring is required for your GSM lvl 50 quest. I was able to go 3/3 on creating +1s so I put the other 2 on the MB. Saw that there were no +1s on the market and the last +1 sold for 8k. So I put my 2 up for 20k (2.5x the market history rate.) Within 24 hours both had sold, but a few others found that out and price dropped (my "niche market" was over saturated but I sold what I wanted.) Yes, it was stupidly high compared to the "sensible price" yet it sold cause there was a demand.

[ApolloGenX]

You are missing the point of that example:

Tomb mats do sell a lot faster than crafted items.

In the example the mats total market value was 200k, the finished item undercut to 150k.

Regardless of if the 150k finished item sells faster than the other crafter's 250k item, the undercutter is still in effect losing 50k easy profit, by not just selling the mats.

The fact he farmed all the mats himself is irrelevant, while the 150k may be "pure profit", it's still a minimum 50k loss on the gil potential and a senseless move on his part.

This is why I generally just up the tomb items and sell those... but if someone was stuck with inventory, they might cut the price to recover their investment.... especially if it has been sitting a while.

Frankly, the amount of time to farm the tomb mats isn't worth the marginal upgrade of crafted gear... and the more people that have comparable gear and collect myth stones... the less valuable that crafted gear becomes.... there are lots of factors as to why crafted stuff gets junkier and junkier with time.

Even so, better to cut your losses then have an overpriced inventory item that collects dust...but maybe someone made the junk, because -hey they leveled crafting and want to make the high level stuff at least once... even if it is junk.

(Don't forget the mats also fluctuate... if those dropped massively, it might have made sense to slash price on the finished product)

[Zigkid3]

You are missing the point of that example:

Tomb mats do sell a lot faster than crafted items.

In the example the mats total market value was 200k, the finished item undercut to 150k.

Regardless of if the 150k finished item sells faster than the other crafter's 250k item, the undercutter is still in effect losing 50k easy profit, by not just selling the mats.

The fact he farmed all the mats himself is irrelevant, while the 150k may be "pure profit", it's still a minimum 50k loss on the gil potential and a senseless move on his part.

You aren't completely wrong, but not completely right either.

if someone sold a good farming their own mats so COGS was 0, then they made money technically. You are right though in that if someone sold that item for 50k cheaper for no reason at all then they lost money due to their opportunity cost. (a drastic example would be farming for mats that took hours to obtain and then selling the finished product for a measly 5k, which means they lost money do to their opportunity cost because they weren't adequately paid for their troubles). So you are right in that sense.

However, there could also being a reason to sell for cheaper than the total mats required if someone farmed the mats themselves, and this depends on the inventory turnover which depends on the elasticity for the product depending on if it's inelastic or elastic. Of course this is assuming someone farmed the mats, in which the amount of time they spent gathering mats and how much they feel their time is worth is subjective. Also if someone is specifically farming mats over and over down to a routine, knowing what they're making etc... as opposed to people who happen to get the mats over time, then to them the mats would be cheaper (to themselves) than the ones on the marketboard, because they gained the mats more efficiently than most people due to economies of scale. Of course this is all assuming someone farmed the mats.

Now assuming if someone bought the mats from the MB, then made the finished product and resold them...then obviously they can't buy 200k worth and sell for 150k, as they'd lose from COGS alone. In this case, say item X costs 200k to make but it can only sell for 150k. this would be because if item X didn't have much demand to begin with. As a result, sellers won't produce item X because it is unprofitable to do so (assuming everyone buys mats), then supply would go down to drive the price up to the point where it would be greater than or equal to 200k.

[scarebearz]

Snip.

I agree, my example does not take into account all factors, but it was used to hopefully illustrate the foolishness of someone selling an item cheaper than they could sell the mats.


In terms of 2 star items being sold way below cost due to silly undercutters, I believe this is the main reason:

A crafter has been selling a lot of 1 star items and other things fast on the MB, they gear up and think "I'm going to make and sell some 2 star items!".

They list the item and expect it to sell as fast as their other items.

After a few days or less they get worried that it's not selling and a large part of their gil is tied up in this item.

They keep dropping the price / undercutting in large chunks because they are desperate to get back whatever gil they can ASAP.

[Megido]

Hi,

As a merchant, my goal is to sell first and sell it fast.

And what a great merchant you are.. Your goal should be to sell as high as possible with as little time required as possible. You on the other hand spend more time to sell at lower prices.

[Wulfies]

I agree, my example does not take into account all factors, but it was used to hopefully illustrate the foolishness of someone selling an item cheaper than they could sell the mats.


In terms of 2 star items being sold way below cost due to silly undercutters, I believe this is the main reason:

A crafter has been selling a lot of 1 star items and other things fast on the MB, they gear up and think "I'm going to make and sell some 2 star items!".

They list the item and expect it to sell as fast as their other items.

After a few days or less they get worried that it's not selling and a large part of their gil is tied up in this item.

They keep dropping the price / undercutting in large chunks because they are desperate to get back whatever gil they can ASAP.

I want to try and tie this back to the OP's posting regarding "Overflowing Stupidity" (as he so aptly puts) so here goes:

It is the crafter's responsibility to find markets which are or are not profitable. When I decide on a market to sell stuff I look not only at the going prices for the product(s) I will be making but also at the history to see how fast said product is moving. The transparency with being able to see profitable markets helps me make very informed decisions in how I spend my time crafting. This is why I am vehemently against implementing the blind bidding system that FFXI has.

A lot of these threads seem to be made by people who feel they are entitled to large profit margins.

+1 billion to this sentence.

People should be treating selling crap stuff on the MB like opening a "mom & pop" at the corner. Just like with any business, without the proper research and information you are bound to fail.

[Zigkid3]

And what a great merchant you are.. Your goal should be to sell as high as possible with as little time required as possible. You on the other hand spend more time to sell at lower prices.

I think you're taking it a bit out of context. I think what Wulfies is saying is that a merchant shouldn't be solely concerned with just price alone, but also the amount that can be sold at certain price points in given periods of time (the turnover rate). Ideally you want to sell at the point that gives you the best overall combination of net profit x quantity sold within a given time period (hence my earlier example).

@scarebearz: I at least can see where you're coming from.

[Wulfies]

Hi,
As a merchant, my goal is to sell first and sell it fast.

And what a great merchant you are.. Your goal should be to sell as high as possible with as little time required as possible. You on the other hand spend more time to sell at lower prices.

Hi. Just a couple of things. First, please use the entire paragraph as it explains my stance on this and do not take my words out of context (you miss the whole COGS effect.) For your reference here is the full quote:

Hi,

To Ricon, I ask "why not?" I do not know what your goals are, but when I put crap stuff on the market, I want the product to move and collect my gil as quick as i can. To me, as a person who farms everything, my CoGS (Cost of Goods Sold) are next to nil except for the time it took me to farm the mats. As a merchant, my goal is to sell first and sell it fast. I want to move more product and if i can do that cheaper than you and still make more profit than you, I can and I will. This is a basic business model.

Since you forgot to mention the CoGS, here is an example to illustrate my point. Lets use Mithril Ingots as the example (you can change this item to whatever you want).

Now lets say that the current "going rate" for said ingots is 150 gil each. Lets assume that if you were to buy the mith ore and the shards needed to make this ingot it would cost you 100 gil (this is your CoGS). Now me being a miner I can go out and mine the ores and the shards for free and all its costs me is 5 mins. Lets say i value those 5 mins as 10 gil (that is my CoGS.)

Now, if you were to sell your ingots at 150 gil your profit per ingot would be 50 gil per unit sold. To make the same profit per ingot, I would need to sell the ingots at 60 gil. Now, I want to make more than 50 gil and still sell it for less so I can/will sell for 125 gil. Since I have a lower CoGS, not only am I selling it for less than you (so people will buy mine before yours,) but I am making more money than you per item.

So....isn't that the goal here? So...how am I spending more time to sell at a lower price?

[scarebearz]

We can make many examples of people gathering their own mats, to argue against market stupidity. But the fact is there is a lot of market stupidity out there.

E.g. I used to check history for who had been buying tomb mats, out of curiosity. I've often seen new crafter's buy mats for a 18 mat item (560k in at the time + 15k for other mats). Craft the item that sold slowly for 900k (back then), then undercut their competition by 100k a time until around 500k.

This type of silly undercutting did get them their sale though, but more than a 75k loss. (tax)

[ApolloGenX]

E.g. I used to check history for who had been buying tomb mats, out of curiosity. I've often seen new crafter's buy mats for a 18 mat item (560k in at the time + 15k for other mats). Craft the item that sold slowly for 900k (back then), then undercut their competition by 100k a time until around 500k.

Maybe they saw it listed at ridiculous prices and thought it was selling for that much... but once they actually made it realized that no one is buying it for those rip off prices because it is junk and lowered the price to the cheap level it should be at because those products are junk. At that point, they probably realized they overpaid for those tomb mats, because they are used to make junk and got out of the market.

Meanwhile, someone has stuff listed at 900k that is junk, but it might eventually sell to a gil buyer - if no other junk is listed at a better price.

Not surprisingly, at some point -said ripoff lister- comes to the board complaining that they got some kind of temporary ban because apparently they were involved with a transaction related to gil buyers....either that or is here whining that prices get slashed on this kind of junk and they aren't selling for those ripoff prices anymore.

Eventually, the tomb mats prices fall, the marginal upgrade junk prices fall... and everyone moves on except the people that were charging outrageous prices, who curse the "undercutters".