I thought I’d have a little fun with words today. I may be doing more of this in the future because words can be a lot of fun depending on how you look at them.
Joey is a decent kid. He gets great grades in school, deliver’s papers (always on time and never into a puddle in the yard I’m told) and holds down a part time job on the weekends.
He’s got this dream. He wants to get into professional music in the worst way. Then recently the worst way made him an offer he’s having a really hard time refusing.
You see Yoga guy is at it again. While many in town thought he’d be leaving soon (and indeed it seems there is a real chance he might) he’s still doing his thing with the four AM “concerts” that feature horrible music played way too loud while he does his excercises in his front yard.
The deal he offered Joey is similar to what he’s offered many others in the past. He’d get Joey a brand new yamaha ypg 235 electronic grand piano and all the various bells and whistles that go with it if Joey would agree to perform at his “concerts” for a month.
Joey knows about yoga guy and what having anything to do with him can do to a person’s hopes for any kind of musical career. Yet the offer is tempting in the worst way. You see he’s been wanting that exact instrument for quite a while.
He’s read all the details about it many times and is about as close to being an expert on this portable grand piano as anyone could be and not own one already.
I think though that in the end Joey’s going to make the right choice. He’s had to make a few hard choices before and every time he’s made the right one. I doubt he’s ready to kill his music career before it even gets a chance to start.
The short answer to the question in the title of this post is “Never”.
Here’s the long answer:
If you’re selling something like ammunition or other items that have a low profit margin which is made up for by large sales volume then it’s obvious that undercutting your competition by large amounts is going to very rapidly eat into your profits until finally you will find yourself selling whatever it is for less than what it cost you to buy or manufacture it.
Based on my casual observation of market prices of high sales volume item prices over the course of several weeks I would say that most people seem to get this when dealing with these items. They know that the profit margin is small and they only undercut competition by 0.01 Isk, thus preserving as much of their profit as possible.
The same cannot be said for many of the people who are selling things that have a low sales volume.
For example as of Sunday afternoon (Oct 19,2014) Eve Central shows that the Capital Shield Emitter can be bought for 8 million at Charra VII – Moon 19. The current sell price at Dodixie IX Moon 20 is 11,799,998.99.
On the surface it looks like it would be a good idea to buy several of them and haul them to Dodixie and make a tidy 3.7 million Isk profit each.
The fly in that ointment however is the fact that while there are sell orders in Dodixie for that much, they are not actually selling. The price history tab on the market browser shows the number of orders, the quantity (actual number of units sold), and the high, low and average prices for each day going back six months.
Here’s the entry for the last time a Capital Shield Emitter sold in Dodixie:
You can see from this that trying to sell these in that station is going to be a waste of time. For that matter, since the market browser shows information for the entire region, you can see that there is no point trying to sell this item anywhere in Sinq Laison and if it does sell, the regional average price is 7.4 million which would be a loss if you bought at 8 million.
Nevertheless, I’ve seen people trying to sell things that, according to market history, only sell a few units every week or two.
Frequently when their item doesn’t sell after a few days it seems they get the idea that a large price reduction will attract buyers and thus they start making huge undercuts. First they cut 10,000 off the price, then 50,000, then 100K, then 500K. A day or two later their price is down several million.
It’s obvious to me that these people never bothered to look at the price history for the item they want to sell. If they had they would have seen that no matter how low the price goes, that item is NOT going to sell any faster.
I have watched a number of sell orders, many of them competing with my own, have their prices cut so deeply that they end up listed for a million or more less than what *I* paid for the item and I assure you that I’m a careful shopper, when I buy something I’m getting it at the best price available anywhere.
The difference here is that I *DID* look at the price history. I *KNOW* that these are low sales volume items. In fact that is one of the reasons I chose to sell those items.
When I undercut a competitor, I *NEVER* undercut by more than one cent. All I want is for my order to be on the top of the list when it’s sorted by lowest price at the top. Any cuts larger than that simply eat profits needlessly.
You see, I’ve figured something out about these low volume items. The people who buy them could easily get a better price by flying off to Jita but they don’t.
This is because they only buy these items when they actually need to use them and they don’t want to take 15 to 30 minutes to fly to Jita, buy the item(s), and then take another 15 to 30 minutes to fly back. They want convenience. They want the item NOW and while I’m sure they want the best price they can get, they don’t care about price nearly so much as they do about getting it quickly.
This is why so many low sales volume items can sell for the high markups that they do as long as you understand they will not sell quickly and are willing to exercise patience and restraint in your undercutting. If you get impatient and start cutting your price by large amounts, you’re only hurting your own profit margin.
Not only that but it’s very possible. even likely, that one of your more patient competitors will wait until you cut the price below their cost, buy it from you, and re-list it at the “right” price.
They’ll do this because they know that you’re selling the item at a loss and will likely not try to compete with it again because you lost money this time.
Disclaimer: While I do deal in many low sales volume items I have not at any time bought or sold Capital Shield Emitters, I picked that item purely as an example.
I have to say that one of the things I like about living in a small town out in the butt end of rural Arkansas is that salesmen doing the door to door thing are extremely rare. However there are sadly exceptions to this rule.
The first thing is that Nutjob Hills is perhaps the only place I’ve ever heard of where not only do salemen still do the door to door thing, many of them choose to do so at four A.M.
Not long ago I was on the way to bed when the banging started at the door. Based on previous experince I knew that if I didn’t answer I’d not get any sleep.
He started in the very second the door began to open. Seeminly without pausing to take a single breath he launched into a sales pitch that expounded upon the wonders of the highly rated Fender T-Bucket acoustic guitar.
He talked aobut it’s new holographic inlay design and the quality maple and mahogany woods used in it’s construction, going into considerable detail about how it’s design made it one of the best sounding instruments of it’s kind anywhere.
I’ll be the first to admit that it sounds like a pretty good deal and if I actually played guitar and he’d not pounded on my door at four A.M. I would even consider getting one.
Does your skin get dry, cracked and rough in dry weather like winter? I’ve got a solution for you that might not cost you anything.
If you tried to read this blog in the last day and a half or so you got an error message instead of the blog itself. This is because there was a hiccup in the MySql database as my hosting provider updated the machine it’s hosted on to a new version of Ubuntu linux.
Obviously of course, all is working again now.