Retail vs. Wholesale

Hand in hand with the whole buy low sell high mantra comes this little gem that is so rarely employed:

Never buy retail, and never sell wholesale.

How does that fit into World of Warcraft gold-making? Through the two prices we set on products in the auction house: the minimum bid and the buyout price. A buyer can place a bid between those two numbers, and if no one else outbids him, he gets it at the price he bid. This is a great way to buy, but it’s a terrible way to sell.

Buying Wholesale

I frequently see items posted with a spread of 10-20% between the minimum bid and the buyout price. If it’s an item that feeds into one of my various production chains, I usually bid the minimum (or current) bid. Very rarely do I choose to pay the full buyout price in those cases.

After all, I make it a point to have large reserves of my various supplies, and their levels rise and fall with the uneven production and prices of my suppliers. The material I’m purchasing now won’t be sold as a finished product for two to four weeks. I’m in no hurry to snatch this particular bit. I can wait a day or two to see if anyone outbids me. Frequently they do. No worries, there will be more tomorrow.

About the only time I pay the full price in this case is when the full price is so low that it warrants snatching it up now, even though I could try for the lower price of the bid. If it’s cheap enough, I just grab it. Fortunately, I have add-ons that automate most of that logic for me. I set price levels and adjust them according to market price and the size of my current supplies. I typically end up paying about 5-10% less than what is considered to be the bottom market price, and that extra margin goes straight to profit. This is what I call buying wholesale instead of retail.

Not Selling Retail

Meanwhile, I never post items for sale with a spread between the bid and the buyout. Sure, I can understand the temptation to do so. I’m putting down a small deposit to put it up for auction. I can certainly hope to get the full buyout price, but if it doesn’t sell, then I lose that deposit. Wouldn’t it be better to put out a bid price that’s 20% lower so that if someone undercuts my buyout price, I’m still likely to sell it and not lose that deposit?

The problem is that most people going to the auction house are looking for an immediate purchase. If they had the patience to wait on a bid, they would also have the patience to go out and farm or grind for the item. The two exceptions to this rule are 1) high-end bind-on-equip epics where folks are willing to delay if it might save them 10%, and 2) people like me. Everyone else wants to buy it now, and when they come along and see your item, they’re going to just pay the full price and take immediate delivery. If someone has undercut your buyout price, then they’re going to buy his instead, never even looking at your cheaper bid price.

But… but… NO

But still, isn’t it better to sell it to an industrialist like me than let that deposit vanish? I would say yes if, and only if, the spread between bid and buyout is less than the deposit. Otherwise, you’ve effectively lost the deposit anyway, plus whatever further discount you provided me. You sold to me at a wholesale price instead of demanding I pay retail.

So, when you’re posting items for sale, never EVER do this.

Unless you’re one of my suppliers, and then I urge you to keep on giving me extra profit.