Undercutting Defined

[Gwynplaine]

I'm writing something up for my blog on "undercutting". And I'm trying to figure out how most people define the term because it feels very vague to me. Does undercutting occur any time someone sells something for less than the recent transactions? Or does it only apply to drastic price cuts? If there's a clear reason for the drop in value of an item is it still undercutting (e.g. if khroma ore suddenly started dropping off of treant saplings 100%). Or is it only when a certain individual appears to sell for drastically less regardless of any new changes to the game?

Tbh I think that most players sling this term around without understanding it or even caring to define it themselves. I get the feeling most the time it's an accusation made any time someone gets butthurt for having their item outbid at a lower price. What do you think?

[Jotaru]

I believe the definition is simply to sell at a lower price- there doesn't necessarily need to be a particular motive. If Earth Crystals are selling at 500g and I list mine at 490g so they'll sell slightly quicker, I'm still undercutting, even if they sell at 500g- I'm not sure how this term could be 'slung around' really, since its a pretty basic term

[Valisk]

Undercutting to me is when you reduce the price of the average last 10 transactions by 10% or more.

[Acturus]

Undercutting in a general sense is the process by which a seller believes that posting his items at the "going rate" (as evidenced by recent sales history) will result in his items not selling by the time the posting expires, and therefore reducing his posted selling price by some amount in order to sell his items ahead of those already posted.

To be specific, it's generally assumed that the seller is willing to accept a reduced profit margin or return on his investment in exchange for a faster sales turnaround, but this doesn't have to be the case. Oftentimes, specifically in the cases of NM drops, sellers might just be willing to accept an amount less than the going rate for any number of reasons, since I doubt most sellers of non-craftables take the time to quantify their non-gil-based investment (time, effort, etc.).

The primary factors that influence the act of undercutting are existing supply on the auction house, average time between sales, and the amount of time a seller is willing to wait for a return.

[Haxx]

There's a very large group of people that get so carried away with "undercutting" that they continually list items on the auction house for less then a vendor would pay. I can spend five minutes at the auction house, run to a vendor and be on the upside 10-15k.

[Aerides]

One players "undercut" is another player's "good business".

The amount can vary depending on multiple factors:

Is this is a high demand high turnover item with small margins? (saplings) 2% less than market might be considered undercut to you.

Is this is a lower demand, rarely seen item that seems to be trending down? Slicing 10% off to get it to sell on the first try, vs. relisting fees might be reasonable trade off.

Is this item something i make/sell regularly (therefore, I have a vested interest in the long term price)? If so, any asshole who enters my space and lists for 1gil less than mine I will call an undercutter. (When I do the same to him on an item I don't care about I'll rationalize it of course).

[cdgreg]

Undercutting = listing below the standard price.

It's not just an ffxi term either, if you watch any of the addictive "house flipping" shows the host generally recommends people undercut the current market price 1-2% for a quick sale. The idea being if you sell for $5000 cheaper you won't pay 3 months worth of mortgages while it sits on the market and devalues.

On the other hand sometimes a market just lowers in value because supply is greater than demand. See dragon talons when they were introduced to chocobo hot and cold as well as ISNM.

Everyone undercuts, as with most things in FFXI it's situational. I recently bought a full set of HQ staves from someone who needed gil fast and I got a great deal on them. I got them each for about 50k less than AH price. You'd better believe when I listed them I undercut a bit, I generally listed them 11k lower than AH price. I still made off with 40kish from each staff. It sounds shitty, but it's not my market, so I don't mind undercutting. As for Dusk feet, if a couple random people begin to undercut I'll just hold onto my NQ's or bazaar them for cheap, but I won't undercut the AH, I'll wait for them to go back up to sell/synth more.

For really high end stuff you need to remember there's only so many people on each server that can afford them at a certain time. Therefore your market base is incredibly small, things like KC, speed belts, or lesser items like Sha'ir manteels can potentially have very volatile markets. I've sold 5-6 KC's in the last 6 months all for 44-45m, but right now a few have sold recently and there's no one with the gil willing to buy. There's a chance the update will drop its value, and I've spoken with some others who say ya I'm saving, but only have 30mish right now. Is it an undercut if I drop my bazaar price to 40m to "dump" it to cover my ass? I got a little off topic here, but imo undercutting is a valid economic strategy even though it can piss you, and others off.

[tymora]

The way we use it in FFXI, it should be considered a derogatory term. In this manner, I consider it to be selling much under the going price for no good reason at all.

Otherwise, selling under the going price should be considered normal under many situations.

Valid reasons:
1. Large supply
2. Low demand
3. Combination of #1 and #2
4. Competition

Typical undercutter behavior:
1. You made a lot of X (probably in pursuit of HQ), and dumps all at once for a significantly lower price on the AH, instead of selling them 1 by 1 or 2 by 2 without affecting the overall going price. You get quick sales but don't have anything left to sell for a long period of time.

2. Very few units of X up on AH. You put 1 unit of X up for a significant Y% less even without competition.

3. You sell below going price even if YOU are the only person selling.

[test123]

An undercutter wants to monopolize and get all the "first" sales. So he makes sure his item is always is put up at the lowest price.

[urat]

When you take those ten second to sit the price to 38,998 gil instead of 39K.

We've all done it, but seriously:

I consider undercutting to be when you are selling your stock far lower to sell than what the current market would require, essentially killing the price unnecessarily.

Undercutting has a negative connotation to it and I don't feel that dropping your price a necessary amount to sell it is a bad thing, thats just business.

[Byrthnoth]

I sell everything for (____5110), (_9110), (_7110), (_110), (_10) or something along that pattern. The higher the value of the item I'm selling, the more I undercut to get it sold.

For me, it's just good business. I resell stuff for probably 80% of my income in Vanadiel, so whatever I'm listing it on AH for, you can be sure I bought it for less and want my capital back to reinvest. I'll take 5% less (that small fraction of the time that someone gets wise to my game) if it turns over faster and I can buy something else to make the more profit.

[BerenTebogo]

I'm writing something up for my blog on "undercutting"

http://incredimazing.com/static/medi...olStoryBro.jpg

Seriously.

[Rocl]

undercutting is how i sell items quickly

[nitsuj]

Unfortunately the FFXI Auction system is designed around "undercutting".

I mean, they take the lowest price item, and then if there are multiple "lowest price listed" they take the one that has been up the longest.

So the system inherits you to "reverse auction" it. The buyer is supposed to bid "the amount he's willing to pay" and the seller lists it for "the lowest he'd be willing to accept". That's why it's an auction, just in a very loose sense of the word.

So if we're encouraged to do this, and the lowest amount I'll take on my kraken club is 10mil, by definition I'm "undercutting" but really I'm just following game mechanics.

In my opinion, it's up to the next guy who sells to attempt to maintain the value, and if collectively people start selling it lower, well.... that's just how it goes.

[Celebrindor]

I personally love watching non-crafters resell their gear as they outgrow it with no regard to the prices. Then pop in with a large supply stored on a mule and throw the price back up 75% or more to what it was two weeks earlier, and see it sell just as fast once the supply drops.

As for what constitutes undercutting- Being the guy that sells for 2 or 3 gil less than a round number isn't undercutting. As has been said, its understanding the mechanics of the AH. Undercutting to me involves dropping prices to where the synth or time invested in a camp/etc. simply is no longer worth it. Or dropping a price of something below the NPC value....man how I love the Igqira Weskit days and Raxa!

[tymora]

A majority of players bid by considering the overall prices.

Putting something up for 100g for something that sells 1000g is undercutting. Putting something up for 39100g that sells 40000g isn't so bad. How does 399100 for 400000 look? Would you bid in increments of 1g, 100g, 1000g or 10000g for a 6,7,8 digit item? Someone people would, most won't.

So there is a very good chance that you'll be able to sell for the same price much faster.
Is this undercutting? Technically yes, but the end result usually doesn't affect the going price much. A small dent recovers a lot faster than a big one, and pisses off less people.

[Gwynplaine]

Thanks for your replies guys. It seems like there's some differences between what each person considers to be undercutting. Especially depending upon how much a person cuts the price from. But in general I think it can be considered anytime someone sells at a price lower than the latest sales.

Seriously.

Just for you Sath here's a link to my post.

[nitsuj]

Thanks for your replies guys. It seems like there's some differences between what each person considers to be undercutting. Especially depending upon how much a person cuts the price from. But in general I think it can be considered anytime someone sells at a price lower than the latest sales.



Just for you Sath here's a link to my post.

I don't know if I want to go there, Gwyn. If the "latest sales" are 2000 gil, and everyone lists for 2000 gil then the auction house system relies soley on the one that's been up the longest. (you list yours on Monday, I do mine on Tues... yours will sell first). This eliminates the entire functionality of the AH system, and the crafters ability to use it to their advantage.

It's hard to nail down, for sure, but I wouldn't say the guy who lists his item at 1901, or even 1501 is doing anything wrong. It's the guy who lists ALL his items at 1501 and let people catch on, dropping the average price to 1600 and ruining it for everyone else.

You gotta play smart.

[Fasl]

As a crafter I will always try to get the most for my items. Having said that my mules fill up quick when I am crafting a lot of stuff. I tend to sell lots of different things so I dont flood the market. I tend also to undercut by a small percentage when I sell to move my items.

For me, undercutting means profit. I never sell for a loss so the faster I sell, the more gil I make. I must admit to price wars too. When I put something up on the market and someone rolls in and undercuts by 25% or more to sell their boatload first, I tend to respond in kind. Used to see this in the RMT (at least I think they were RMT). In these special occasions I will play the war and undercut them out of the market. Sushi is a prime example. Most folks price their sushi to keep the market supplied and you see the pattern of undercutting and overpricing. I can make a stack of squid sushi for 4212 gil. (grow rice, farm crystals, catch fishies myself). I am sitting on over 100 stacks of sushi at any given time so I have the ammuntion for the war, just tend to never use it.

How about the opposite since you are talking about undercutting? How about underbidding? How many of you are like me and bid very low bids on something that should not be listed at that price only to find out you bought it?

Another thought - want to drive up the prices? Take tavnazian tacos for example and try this. Lots of folks fish. But Noble Ladies are a pain in the butt as you need to ride the ferry (usual fishing spot) to catch them. So Emperor Fish (caviar), Grimmonites, Bastor Bream are easy and the controlling fish tends to be the Noble Ladies. Buy every Noble Lady off the AH for 2 weeks and watch the price of tacos and Noble Ladies. UP up up. Then dump your material at a surprisingly good profit and let the market return to normal.

All in all, it is nothing more than our commercial business system now. What is your profit margin and what are you willing to live with.

See you on the AH.