Dominate Your Market with Barriers to Entry

Author: Laura.

Hi JMTC readers,

If, like me, you hate having to go through the continual cancel repost cycle in order to get decent
sales then hopefully this post will give you some ideas on how to you can erase the need to babysit
your auctions but still log on to a mailbox full of gold.

What I am going to be discussing in this post is how you can create barriers to entry in order prevent
potential competitors from entering your market. Barriers to entry are literally as they sound,
obstacles which prevent competitors from entering the market, if competitors are deterred from
entering the market then not only can you leave your auctions be as you rack up the sales, but it’s
likely that the amount of sales you make will rocket as well as your market will have no choice but to
buy your goods!

Barrier to entry = more money + more time away from the AH!



There are two major strategies which you can use to prevent competitors from entering your
markets. The first is to control resources, for example, I dominate the market for 2H and 1H agility
heirloom enchants as I ensure that I buy up all of the essence of air and essence of water (can be
transmuted to air) that appears of the AH even if I don’t need them at that point. Thus preventing
anyone else from crafting these enchants unless they fancy a nice long farm.

This kind of strategy works great if you are crafting something where one component is relatively
rare i.e. not being farmed bots. You only need to focus on keeping the AH clear of just one material
for a craft to successfully deter other players from entering the market. Without other players being
able to enter the market you can set the price as you see fit post you auctions and collect your gold
when they sell.

The second strategy involves predatory pricing to discourage players from entering your market.
This means not squeezing every last copper you can from a single sale but keeping your prices low
enough that it doesn’t seem profitable for a competitor to enter your market. To be honest very few
players understand costs and profitability so they may think that a price is too low for them to enter
when you are actually making very good profit on each sale despite the perceived low price.

This is a great method when dealing with very saturated markets, for example I am active in the gem
market but prior to patch 4.2 the market for cut inferno rubies was crazy and I was being undercut
every few minutes and as a result I was making only 1 or 2 sales per day when I had a massive supply
of rubies to sell. The general price was hovering between 70-100g so after determining each gem
cost me between 3-17g each I decided to put up 10 cut inferno rubies at 50g each. NO ONE under
cut me and I sold them all over a couple of hours, I kept that wall up over several days and I saw
many people stop posting their gems despite the fact that if their costs were like mine then they
would still be making good profit per gem by undercutting me.

To clarify the benefits of predatory pricing, I went from selling 1-2 inferno rubies on average each
day with around 75g profit per gem to selling 20-30 inferno rubies with a minimum 33g profit per

gem. Although I was selling at lower profit margins my overall profit jumped massively and as a
result had a ton more gold coming in and on top of that I didn’t have to babysit my auctions once! All
this strategy requires is for you know you costs and break-even point for each item you sell and you
will be miles ahead of other players in this game.

Knowledge is Gold Making Power!

As an extra thought, as players there is only so much we can do to influence a market as Blizzard
controls and creates barriers to entry as they see fit. One of the most recent examples Blizzard
creating a barrier to entry is the change to the vendor price of common gems down from 5g to
75silver. Players wishing to enter the gem market post 4.2 are likely to face quite substantial sunk
costs (these are costs which cannot be recovered) if they don’t have enchanting and/or alchemy
when buying ore to prospect. The common gems can no longer be vendored to recover costs and
they cannot be sure that they will receive enough red, orange and purple rare gems to make profit.

So basically I have seen the price of rare orange purple and red gems skyrocketing now that the
initial 4.2 rush has died down as fewer players are entering this market as they cannot guarantee the
market will be profitable due to pesky RNG when prospecting. My server gem market has gone from
a highly saturated to only a handful of suppliers; Blizzard has actually made the shuffle even more
profitable for some! The point I am trying to make here is that as well as creating your own barriers,
pay attention to what barriers Blizzard puts up as for a wise player they can create huge gold making
potential.

I hope you enjoyed this post, cheers for reading


Do you want to write for JMTC? Send in a post to Markco and if it makes it past the initial screening process then I will publish your submission on the blog. JMTC pays 50% commission to writers on the day that their post goes live.

4 comments: on "Dominate Your Market with Barriers to Entry"

  1. Lifedream of Black Dragonflight said... July 28, 2011 at 9:48 AM

    Great post. Thank you Leo.

  2. Very nice read, a profit is a profit anyway you look at it whether its worth the time is another matter. Although with addons such a TSM posting cycles on the AH is alot easier.

    1 of the better posts i have read on here in a while :)

  3. I rarely comment here, but just have to say this is one of the better guest posts I've seen. Nice writing style, easy to read, and excellent information, thanks Leo.

    I can confirm the ideas presented here, as I've done the very same a number of times, with obscure things like Righteous Orbs (Crusader enchant), and with common things like Elementium Ore -- I think I'm one of the main reasons that ore on my server is rarely below 50g per stack. For a while, it was still competitive, as folks were churning through their stockpiles, and I kept Gem prices low, so there wasn't much profit. However, at this point, ore continues to be expensive and I own our Gem market now, in which even the blues and yellows are selling for over 50g each. I'm easily pulling around 40k per day with Gems right now.

    Combine the tips in this post with some patience, and you'll reap some fantastic rewards.

    Markco, keep this guy around. :)

  4. The top of the article states that Laura is the author, not Leo ;)

    But the points of the above comments are still valid; this is a well written and constructed article. Great information that is often not considered.

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