I really don't want to moan about undercutting but....

[Artemiz]

Sometimes the undercutting is just silly, Vanya Robe of Healing is now selling for around 50k on my server, Potash is 4k each so by the time you've got all the mats and used food there is very little profit left. At that price it's a no brainer, don't sell the finished robe, sell the raw materials instead as they will sell faster and possibly for more profit.

Why would someone who took the time to be able to HQ 2 star synths then go and make almost no money at all from the actual craft? Makes no sense.

[Asdamine]

It's because of Crystal Tower. The demand for Vanya has dropped considerably.

The people that undercut down to 50k gil has probably had those goods in their storage for a couple of weeks now and they are frustrated to not being able to sell them.

Personally, if you want them to sell, fit in materias.

[LineageRazor]

It's because of Crystal Tower. The demand for Vanya has dropped considerably.

I'm actually kind of surprised by this. For Hands, Feet, and Legs, it makes sense - but considering that Crystal Tower is the next step up from Darklight, I would suspect there's a huge market for Body and Head. A mage with Darklight runs CT, and wins body or head - suddenly, they have an empty head or body slot they need to fill, and who knows how many weeks it will be until they fill it via CT? The obvious answer is Vanya.

My sister, who plays a BLM, is dealing with this very problem: Had Darklight Cowl of Casting, got Crimson Circlet and is now trying to save up the gil to buy a Vanya Robe of Casting.

[Kakure]

Sometimes I sell crafted items for little or no profit to spite people who insist on selling their items for one gil less than mine.

Pricing your item .002% lower than your competitor might look like undercutting, but it's not. That's selling the same thing for the same price, but doing it an underhanded way to ensure yours sells first. It does nothing to move the market toward equilibrium. It does not benefit buyers in any real way -- saving one gil on your Vanya Robe is like saving a fraction of a penny on a PS4. Rather than incentivizing efficiency, it encourages crafters to stand in front of the market board for hours constantly rejiggering their prices.

It is the economic equivalent of elbowing your way to the front of the line; rude, devoid of benefit to anyone but the person doing it, and detrimental to the community in its perversion of economic incentives. Crashing the market for a few days is my way of disincentivizing this behavior.

(P.S. You're welcome, Balmung.)

[Wilbow]

Pricing your item .002% lower than your competitor might look like undercutting, but it's not. That's selling the same thing for the same price, but doing it an underhanded way to ensure yours sells first. It does nothing to move the market toward equilibrium. It does not benefit buyers in any real way -- saving one gil on your Vanya Robe is like saving a fraction of a penny on a PS4. Rather than incentivizing efficiency, it encourages crafters to stand in front of the market board for hours constantly rejiggering their prices.

It is the economic equivalent of elbowing your way to the front of the line. Crashing the market for a few days is my way of disincentivizing this behavior.

Oh, please try that. It's not like people with money won't, you know, buy your item for half price, re-post it, undercut by 5 gil anyways, and make a ton of cash. No wait, I will. Keep on doing that.

And you know what? Those small undercuts add up over time and MAKE a stable economy; most items, like dyes, can decrease about 10-25% in value a day if they're overpriced. All you do is screw over yourself as the crafter and make the price of items vary wildly, never hitting equilibrium, making it impossible for anybody to ever know if they'll be able to afford something beforehand (or make a profit if they sell something).

God forbid that I get rewarded for raising the skills to 50, buying the crafting gear, melding it, finding markets where demand exists, projecting the cost of items and balancing profit margin with the rate at which I can sell something, esp. with limited slots for selling. Oh no. We get deluded, self-righteous people like you DEMANDING that intelligent and reasonable people do something incredibly stupid, and then try to sabotage a marketplace when people don't listen to your incoherent rambling, which backfires because we see that pathetic crap, exploit it, and make more cash.

Cry more. Or maybe if you have a REALLY big boo-boo on your oh-so-hurt feelings, buy the items from the guy that isn't undercutting instead. It only works because people let it work; if people suddenly STOPPED buying the item that is 5 gil cheaper, it would stop. However, people obviously have no reason to punish people who are attentive enough to keep undercutting their items because that constant warring DRAMATICALLY lowers the cost of everything they buy.

It's simple, you go by percentages. On an item that sells for 50k+, undercutting by even 1k is meaningless. If you start undercutting by 5k or 10k, you discourage your competitors who are looking to undercut you in turn from doing so, as it would mean they would have to drop by the same amount.

No, I don't have to. Why would I have to do that? In fact, most people either:
A) Undercut you by 1-10 gil, which means that they get their item sold first (you'd have to FORCE the market board to have you undercut by a certain %, which would basically screw over crafters and buyers, as then I'm forced to overprice the hell out of whatever I'm selling so that any of us crafters makes a profit; it also gives rich trolls an easy way to collapse markets).
B) If you undercut ENOUGH and the market is hot enough, I'll simply buy and re-sell (like I said before).

[Kakure]

Oh, please try that. It's not like people with money won't, you know, buy your item for half price, re-post it, undercut by 5 gil anyways, and make a ton of cash. No wait, I will. Keep on doing that.

What I am talking about: Expensive crafted items. Only a few of these sell each day on the market board.
What you are talking about: Not that.

And you know what? Those small undercuts add up over time and MAKE a stable economy; most items, like dyes, can decrease about 10-25% in value a day if they're overpriced.

What I am talking about: People who readjust the prices of their expensive crafted items every few minutes, ensuring that theirs are the lowest priced by a single gil.
What you are talking about: Not that.

[Kakure]

It only works because people let it work; if people suddenly STOPPED buying the item that is 5 gil cheaper, it would stop. However, people obviously have no reason to punish people who are attentive enough to keep undercutting their items because that constant warring DRAMATICALLY lowers the cost of everything they buy.

People unthinkingly click the first item in the list because most consumer behavior is unthinking. That is why beer commercials work. It is why free samples work. It is why people will drive across town to save less money than they spend on gas. It is why car dealers encourage you to agonize over decisions with no monetary importance, like the color of paint you want, before trying to sell you power steering and other expensive additions. It is why realtors work to make you feel that you are competing with other prospective buyers and why waitstaff at restaurants leave you two or three mints per person.

If people actually thought about it, they would recognize that selling expensive items for one gil less than the next seller has only negative systemic implications, discouraging real undercutting and discouraging crafters from taking the time to sell stuff in the first place.

[Wilbow]

People unthinkingly click the first item in the list because most consumer behavior is unthinking.

Yes, this is why we do it...

If people actually thought about it, they would recognize that selling expensive items for one gil less than the next seller has only negative systemic implications, discouraging real undercutting and discouraging crafters from taking the time to sell stuff in the first place.

Keeping prices from going down discourages crafters from crafting, while massive undercutting ENCOURAGES them? Are you high? No seriously...how's the view in Denver?

[Kakure]

Keeping prices from going down discourages crafters from crafting, while massive undercutting ENCOURAGES them?

I craft a Vanya robe to sell. I list it at 85k gil. The next day I check back to find that two people are selling the same item for one or two gil less than mine. I see that four people bought this item since I last checked, all for one or two gil less than my price. I lower my price by a thousand gil. When I check back the next day I find the same thing.

It soon becomes clear to me that cutting the price of my robe isn't the way to sell it. I realize that the best way to sell expensive crafted items is to sit in front of the market board for hours compulsively checking my auctions, trying to monopolize the few sales of each item each day. If someone else is just going to come along and keep the market board stocked with the same item for one gil less than me, lowering my price isn't doing anything but cutting into my own potential profit.

[Karilyn]

Not sure if this counts as a necro; thread is still on the top page, and I had something meaningful to add... sooooooooo... my apologies if I'm out of line.

IN DEFENSE OF REALLY BIG (greater than 5%) UNDERCUTS:
PROVING IT'S EFFECTIVENESS BY MATH!
(AKA: Making myself look like an asshole, and defending it with large profits)

Pricing your item .002% lower than your competitor might look like undercutting, but it's not. That's selling the same thing for the same price, but doing it an underhanded way to ensure yours sells first. It does nothing to move the market toward equilibrium. It does not benefit buyers in any real way -- saving one gil on your Vanya Robe is like saving a fraction of a penny on a PS4. Rather than incentivizing efficiency, it encourages crafters to stand in front of the market board for hours constantly rejiggering their prices. It is the economic equivalent of elbowing your way to the front of the line.

Oh, please try that. It's not like people with money won't, you know, buy your item for half price, re-post it, undercut by 5 gil anyways, and make a ton of cash. No wait, I will. Keep on doing that. [...] All you do is screw over yourself as the crafter and make the price of items vary wildly, never hitting equilibrium, making it impossible for anybody to ever know if they'll be able to afford something beforehand (or make a profit if they sell something).

It's simple, you go by percentages. On an item that sells for 50k+, undercutting by even 1k is meaningless. If you start undercutting by 5k or 10k, you discourage your competitors who are looking to undercut you in turn from doing so, as it would mean they would have to drop by the same amount.

If you undercut ENOUGH and the market is hot enough, I'll simply buy and re-sell.

Thank you Wilbow, players like you help me fistfuls of money in MMOs. Let me explain with an actual example from a few days ago. I'm relatively new to FF14 (but not to MMOs a genre), so I'm going to use a low level example, but it still gets the point across why players in MMOs re-selling my items makes me a bigger net profit than they make, despite them making a larger revenue.

Short answer: When I sell a 2000p item which costs 500p to craft for 1600p, and someone buys it to resell it at 2000p, I've already won. Because I made a 1000p profit (post-tax), and they are making only a 300p profit (post-tax). I've made triple what they'll make, and I literally created a buyer out of thin air, where there wasn't a buyer before. And the re-seller now has double the inventory they have to find buyers for. It's almost enough for me to feel sorry for them, but it's their decision to buy to re-sell from me; and they were not who I'm trying to sell to, re-sellers are just an added bonus on top of the players who are going to use the items themselves. When you buy to re-sell, you are effectively your own con-artist who is busy scamming yourself.


[LONG ANSWER (AKA THE REST OF THE POST)]:
I am currently leveling Armorer. I recently sold 4 Iron Kite Shields (A level 27 item) on the Market Board in less than 8 hours for 6400gross/4400net profit, with no HQ. Which, I think, is pretty healthy profit for such a low level, especially considering it only took me like, 5 minutes to craft and post them, and I needed to craft something anyway to level up Armorer, so I might as well make 50k+ net profit per hour of crafting, if I'm going to be crafting low level garbage anyway, it's not like it takes me more than a 5-10% increase in time to post the items on the Market Board instead of vendering them. (Forgive me if that sounds really low to a level 50 crafter, as I haven't gotten there yet, because I got the game a week ago, but just like any MMO, this principle should scale to work at any and all levels in this game, just like it does in every other MMO). But anyway, onto the explanation...


[MATH PART]:
Iron Ingots are used in my expense calculations below, as they are cheaper on my server's Market Board (55p) than crafting your own (13p shard + 18p iron ore from a vender * 3 iron ores = 67p). This took me about 30 seconds to figure out by checking the Market Board, and while it only made me an additional ~336p across these 4 transactions, it added up 4000p across all crafted iron ingot items I sold that 8 hours. Not only that, it cut the time it took me to craft the shields by over 50%, as I didn't have to craft the raw materials, only the finished product; a worthy investment of 30 seconds, as I basically doubled my gil per hour spent crafting, and exponentially increased my EXP per hour spent crafting, as I wasn't wasting time crafting low-EXP materials when I could be crafting high-EXP final products instead. (Gil per hour is a concept worth an entire 5000 character post explaining)

So the total cost of the materials is...
7 Iron Ingot = 55*7 = 385p
2 Earth Shards = 13*2 = 26p
7 Ice Shards = 91p
Total = 502p


[WHY WILBOW MAKES ME RICH]:
The going price for Iron Kite Shields on my server's Market Board currently is 2000p. I sold the four Iron Kite Shields for 1600p each, which is admittedly an insanely large 20% undercut, but it only cost me 500p in materials, and I'm still making over 1000p net profit, so that's okay. Of the ones I sold, 2 were bought and resold by another player. 2 were purchased by someone who used them. I made ~1000 profit per Iron Shield sold, for 4000 total. The person who tried to resell my items, still hasn't sold them 48 hours later, and even if he did he'd only make about 600-800p total profit, a fraction of what I made total. He may have made more revenue, but I not only made more profit, I also made it in less time and that's what ultimately counts. His reselling will ultimately net him about 50% profit per sale relative to the amount I made per sale, but, as I sold 4 within 8 hours, and he still hasn't sold his 2 within 48 hours later, I'm literally making over 24x as much Gold per Hour, even if his sold right fucking now.

24x more gold per hour, and I'm doing massive undercuts, in the 10-20% range, depending on the item. And that doesn't factor in the fact that I'm not just pushing Iron Kite Shields, but I'm also pushing dozens of other items. So in reality, I'm probably making over 100x the gold per hour that someone who is buying my items and re-selling them at a higher price would be making by reselling them. Thanks dudes like Wilbow! You totally account for about 50% of all my revenue. You guys rock <3


[EXPLANATION OF TECHNIQUE]:
This is what I call "Pricing to Move." It's dickish to other sellers, it makes buyers (not resellers) love me, and makes me obscene amounts of money. There's a lot of reasons it works well. A level 27 player might be unwilling to spend 1000p on an item that only gives them +1 Strength over their previous item. Give them a different item, that also only increases their strength by +1, but is selling for 1600p instead of 2000p, suddenly they will jump on the huge 20% sale. It's part of human psychology.

This is an economic trick that many real life companies (such as JC Penneys) use. People will buy something that has a large discount, even if it would cost them more than a cheaper item that they wouldn't be willing to buy because it isn't on sale. In layman's terms, with my large undercut sale-price, I was able to create a larger market for the items than there would've been otherwise, due to people purchasing them who probably would've just skipped it. And by creating a larger market, I achieved a greater net profit than I would've been selling to a smaller market at a higher margin.

And immediately after my items sold (which all sold within 12 hours), the price was back at 2000p, because either my items are selling too fast for anybody to undercut me by a penny, or nobody wants to undercut me at how low my prices were. So even with my insanely large undercut, I didn't cause the market to crash.


[40 ITEM LIMIT]:
To some extent, I consider this technique more important than ever in FF14, because you can only have 40 items for sale on the Market Board at the same time. I used to play WoW, and on average I would push around 2000 different sales on the Auction House at any one time, completing well over an average of 1000 sales per day (batch processing hooooo). Because of the 40 items restriction, I have to push items that much harder and faster, in order to still pull what I consider to be a reasonable profit. If I don't think I can sell the item within 8-12 hours, I'm not going to put it on the Market Board at that price. As my net profit is going to be tied not to the margin per item, but rather the speed I can get that 40 items to sell at, allowing me to post new batches multiple times in the same day.

And that's my argument in defense of large undercuts, that simultaneously makes me an asshole, which I can mathematically defend with large profits. You're welcome.


EDIT:
[DISCLAIMER]:
This doesn't mean undercutting by 5-20% is always the most ideal thing. This is for getting items to move that don't move easily, such as equipment. For things which move faster and easier, it's often better to overcut by 5-20%. Furthermore, the correct amount to overcut or undercut can change based on the day of week or even the time of day. There is no one-solution fits all thing. This post was just narrowly and specifically addressing certain situations in which deeply discounted undercuts can be the most profitable action. It does not address situations where overcutting is more profitable, or address gold per hour, or any of a number of different factors that can go into play towards creating the largest net profit, even if you aren't making the largest per-item revenue.