Reducing Costs to Increase Profits



Often times, the key to increasing profits on the Auction House is not increasing the sale price of an item, but decreasing the cost of the materials. About a month ago, I wrote about ways to manufacture Maelstrom Crystals. The post was rooted in finding ways to reduce the cost of Maelstroms so that I could make more profit (either by undercutting competition below their cost and selling more product or just increased margins). Commenter Larns gave the suggestion of simply disenchanting the Avengers of Hyjal (Firelands Faction) reputation cloak. That option never crossed my mind since rep-based gear is often not disenchantable, so I never bothered to check it. Whoops.

Using this method, depending on your reputation and guild perks, you can actually reduce the cost of crystals to as low as 146 gold. Because I'm not exalted, my actual cost/crystal is a little higher, but it's still been great for increasing profits. Between selling the crystals (and Heavenly Shards from shattering) on the Auction House and the enchants that come from the crystals/shards, it's been an absolute gold mine.

So how do we translate this to different markets? Simply put, time spent reducing material costs will increase your overall profit margin. Here are some common ways of reducing costs:
  • Always keep your farming and disenchanting toons in a guild with Bountiful Bags (Level 23). This is a free 20% additional yield for mining, herbing, skinning and disenchanting. That's the equivalent of a 16.6% reduction in material costs. (Example: You mine 10 pyrite ore normally and value them at 5 gold each [50g total]. With Bountiful Bags, you'd actually mine 12. If the cost of 10 was 50 gold, then we divide the 50 by the new total count of ore [12] for a price/unit of 4.17. The original 5 gold/unit times .166 equals the savings of .83/unit [5 - 4.17].)
  • When purchasing vendor supplies, try to use a toon with exalted reputation (20% discount). Level 24 guilds get Bartering, which adds another 10% (for a total of 30%) to the discount. While this seems small, considering how much it saves over time with repeated vendor supply purchases like vellums, jeweler's settings and more, it can really add up. (Consider: Jeweler's Settings go for 1g 50s. At a 30% discount, they cost 1g 5s. That's a savings of 45s. Now imagine you're doing the shuffle and turning low-value gems [Alicite, Jasper and possibly Hessonite/Nightstone depending on your volume] into rings/amulets for disenchanting. For every 1,000 rings/amulets you make, you're saving 1050 gold.)
  • Build relationships with farmers on your server. You can often get reduced rates on goods by bypassing the auction house. Advertise in chat for bulk purchases, then start negotiating with the sellers for repeated business. This has the added bonus of driving up prices for your competition over time if they rely solely on the Auction House for their materials.
  • Offer to buy out competition or disenchanted players. If you're frequently in an undercutting war with a competitor, offer to buy out all their stock at the lowest price they'll post, then sell it for a nice markup. You can also advertise in trade chat for people who are tired of toiling in the market and then try to buy out their stock. 
  • You might also check for people who are quitting the game. Offer to buy all their accumulated junk/materials before they go. Tell them the value of the items will only go down while they are away so it's better to have gold, or that they can give away the gold to their friends in-game before leaving.
What other ways have you found to reduce costs?

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