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Industry - why do people sell below cost?
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Charax Bouclier
Silvershield Universal
#1 - 2014-08-19 17:44:57 UTC
As a budding miner/industrialist (for now), I am kinda surprised when I see people dump goods on a market that is clearly below the market value of the component parts.

I understand my cost structure may be higher than others, but it still seems that certain goods are being sold below cost.

Why is this a thing? Are people just stupid? Are they hoping to drive out other players from certain markets and then raise prices? Is it just trying to dump finished goods since they haven't had luck selling it against marginal price discounters?
Jonah Gravenstein
Machiavellian Space Bastards
#2 - 2014-08-19 17:53:45 UTC  |  Edited by: Jonah Gravenstein
Charax Bouclier wrote:
As a budding miner/industrialist (for now), I am kinda surprised when I see people dump goods on a market that is clearly below the market value of the component parts.

I understand my cost structure may be higher than others, but it still seems that certain goods are being sold below cost.

Why is this a thing? Are people just stupid? Are they hoping to drive out other players from certain markets and then raise prices? Is it just trying to dump finished goods since they haven't had luck selling it against marginal price discounters?

I've underlined the main reason, for some bizarre reason some people think that the minerals they mine are free, they fail to take into account the market value of those minerals, or the opportunity cost of gathering them.

Excellent question by the way.

In the beginning there was nothing, which exploded.

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Feyd's Survival Pack
Charax Bouclier
Silvershield Universal
#3 - 2014-08-19 18:04:45 UTC
Jonah Gravenstein wrote:
Charax Bouclier wrote:
As a budding miner/industrialist (for now), I am kinda surprised when I see people dump goods on a market that is clearly below the market value of the component parts.

I understand my cost structure may be higher than others, but it still seems that certain goods are being sold below cost.

Why is this a thing? Are people just stupid? Are they hoping to drive out other players from certain markets and then raise prices? Is it just trying to dump finished goods since they haven't had luck selling it against marginal price discounters?

I've underlined the main reason, for some bizarre reason some people think that the minerals they mine are free, they fail to take into account the market value of those minerals, or the opportunity cost of gathering them.

Excellent question by the way.


Heh... well... it's encouraged me to look at industry closer and learn about "research" and how to reduce my production costs. Once I think I kinda get something, I scratch a bit more and discover yet another layer.

Having lots of fun with this and thanks for the reply. :)
Paranoid Loyd
#4 - 2014-08-19 18:10:53 UTC
Recent changes to industry made the build cost for items higher, you could also be seeing the remaining stock being sold off below what it costs now but above what it originally cost to build.

"There is only one authority in this game, and that my friend is violence. The supreme authority upon which all other authority is derived." ISD Max Trix

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Jonah Gravenstein
Machiavellian Space Bastards
#5 - 2014-08-19 18:37:14 UTC
Paranoid Loyd wrote:
Recent changes to industry made the build cost for items higher, you could also be seeing the remaining stock being sold off below what it costs now but above what it originally cost to build.
There is that too, didn't even consider the industry changes when I posted.

In the beginning there was nothing, which exploded.

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Christopher Mabata
Northern Accounts and Systems
#6 - 2014-08-19 19:06:58 UTC
Also dont forget about research levels, every level of material efficiency reduces your costs further, and they could be buying their ore using buy orders not from sell orders which can shave another few mil off as well.

Then you have teams to consider and where they build or such its really hard to determine what cost is now post crius because there are so many factors in play.

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Chainsaw Plankton
FaDoyToy
#7 - 2014-08-19 19:35:53 UTC
Paranoid Loyd wrote:
Recent changes to industry made the build cost for items higher, you could also be seeing the remaining stock being sold off below what it costs now but above what it originally cost to build.


that is one of the big ones. heck it used to cost under 50mil to make some of the battleships. I think I was buying/selling geddons and domis around 49mil at the low point, and ravens for 80 something mil. It got to the point where you could buy ships off the market, buy insurance, self destruct, and make money. That is when CCP started nerfing loot drops, and changed insurance to be more flexible with the market. and then with tiericide they added extra mats to most ships to bring up build cost so all ships of the same class were similarly priced.

there is also the possibility they killed someone and got the items in loot, or stole the stuff and would rather have isk than stuff. I would assume this is a far smaller percentage.

and there is always the possibility they made it when it was profitable to make but now just want to dump stock and move on to something else.

and always the "minerals I mine are free" crowd.

@ChainsawPlankto on twitter
Mr Epeen
It's All About Me
#8 - 2014-08-19 21:17:30 UTC
Honestly, who cares why they do it.

All you need to know, op, is to buy up anything that is below build cost and sit on it until you have the skills to reprocess it efficiently. Or just flip it for instant profit.

Mr Epeen Cool
Charax Bouclier
Silvershield Universal
#9 - 2014-08-19 22:08:36 UTC
Christopher Mabata wrote:
Also dont forget about research levels, every level of material efficiency reduces your costs further, and they could be buying their ore using buy orders not from sell orders which can shave another few mil off as well.

Then you have teams to consider and where they build or such its really hard to determine what cost is now post crius because there are so many factors in play.


Yeah, after I made this thread, I was looking up all the ways I can cut costs (researching mat efficiency for my blueprints, transaction/broker/accounting cost reduction, learning about where to manufacture etc). Phew. This is an interesting kind of PvP - trying to win on the markets.

Quote:
Honestly, who cares why they do it.

All you need to know, op, is to buy up anything that is below build cost and sit on it until you have the skills to reprocess it efficiently. Or just flip it for instant profit.

Mr Epeen Cool


True, but as a new player, I want to make sure I'm not missing an obvious factor that is making me uncompetitive.

I have bought out some things and relisted, but others bear a huge risk due to the sheer volume of underpriced goods that are being dumped in certain markets. Gotta build up my bank before I get too aggressive with this.

BTW everyone - really do appreciate all of your input on the various threads I toss up. It's a pretty great community you have here. :)
Sabriz Adoudel
Move along there is nothing here
#10 - 2014-08-19 23:26:16 UTC
As someone that is currently selling one particular item below build cost, it is because I expect that particular item to trend down even further in the short term, and want to cut my losses on it.

I paid 1300m for my stock and sold a billion of it at about cost. For the last 300m worth, I could demand 360m and never get it, or I could accept 210m, learn from the error I made, and avoid that market until its margins justify its volatility in the future.


The most common reason small-scale producers build at a loss is the 'Minerals I Mine Are Free' syndrome. The most common reasons for medium-scale producers to do so are twofold - either producing for immediate local use (e.g. I just built 25 of a specific ~10m item to use as precursors to build something more expensive, these 25 items would have been cheaper to just buy but would not have been in the right place), or production that incorrectly anticipates future trends.

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erg cz
Federal Jegerouns
#11 - 2014-08-20 08:10:22 UTC
[quote=Jonah Gravenstein
I've underlined the main reason, for some bizarre reason some people think that the minerals they mine are free
[/quote]

Your underlined reason for your bizzare reason misses the whole reason of free minerals paradigm - they are mined AFK. The reason I am posting here is just an explanation of your reasons, I do not sell under price and I do not mine AFK myself.

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Areen Sassel
Dirac Angestun Gesept
#12 - 2014-08-20 10:29:46 UTC
erg cz wrote:
Your underlined reason for your bizzare reason misses the whole reason of free minerals paradigm - they are mined AFK.


Whether they're mined AFK, mined at-keyboard, or dropped from heaven, they're still not free, because they could then be sold directly and so there's an opportunity cost for not doing so.

I suspect (to the OP) it's slightly self-perpetuating. Another reason to sell something at or below cost is that there's no prospect of selling it at any better price. Once you've made it, it doesn't matter what it cost to make, only what you can get for it.

Also, I manufacture and sell some items cheaply because I generate minerals by reprocessing items that are too cheap to be worth selling, and also generate (by exploration) blueprints that would be too fiddly to sell via contracting. Manufacturing with the minerals is not the most efficient way to make money from them, but doing so lets me monetise the blueprints and more than recoup my losses on not just selling the minerals.
Marc Durant
#13 - 2014-08-20 10:41:49 UTC
Charax Bouclier wrote:
Are people just stupid?


Yes, lazy and stupid. Too dumb to come up with or accept basic logic in regards to opportunity cost, dumb enough to stick to what they're doing even if it's explained to them in a "well, I do what I want /special snowflake" kind of way. They're also too lazy to read guides, forums, youtubes and ask others in game.

People on planet earth are dumb as fck and this is the one MMO that allows you to take advantage of that in so many different ways. Might as well do it.

Yes, yes I am. Thanks for noticing.
Jonah Gravenstein
Machiavellian Space Bastards
#14 - 2014-08-20 10:56:43 UTC  |  Edited by: Jonah Gravenstein
erg cz wrote:
Jonah Gravenstein wrote:

I've underlined the main reason, for some bizarre reason some people think that the minerals they mine are free


Your underlined reason for your bizzare reason misses the whole reason of free minerals paradigm - they are mined AFK. The reason I am posting here is just an explanation of your reasons, I do not sell under price and I do not mine AFK myself.

Regardless of whether or not they're mined AFK those minerals still have an ISK value, they are not free.

AFK mining is bad for miners, manufacturers and market entrepreneurs alike.

In the beginning there was nothing, which exploded.

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Baneken
Arctic Light Inc.
Arctic Light
#15 - 2014-08-20 10:58:41 UTC
On some items such as T2 ships you have null sec cartels and t2 BPO owners undercutting you as I unfortunately found out back in the day when I did some T2 inventing and building for my alliance.
Only ships that were barely making a profit were EOS and some other ships that had high prices because no one was making those 8and for a good reason I might add).
Had my alliance actually owned a tech/dyspro moon we would had made huge profit from the margins alone and I highly doubt the situation has changed that much over the years.
Deck Cadelanne
CAStabouts
#16 - 2014-08-20 11:09:54 UTC
Charax Bouclier wrote:
As a budding miner/industrialist (for now), I am kinda surprised when I see people dump goods on a market that is clearly below the market value of the component parts.

I understand my cost structure may be higher than others, but it still seems that certain goods are being sold below cost.

Why is this a thing? Are people just stupid? Are they hoping to drive out other players from certain markets and then raise prices? Is it just trying to dump finished goods since they haven't had luck selling it against marginal price discounters?


1. You don't know what their cost base was. Maybe it was very low or even zero.

2. Maybe they are deliberately trying to drive the market price downwards.

3. Maybe it's a combination of 1 and 2 above (e.g. steal a large quantity from a supplier then dump it on the market well below that supplier's asking price)

Or they may in fact just be dumb.

"When the going gets weird, the weird turn professional."

- Hunter S. Thompson
Quinn Hatfield
The Scope
Gallente Federation
#17 - 2014-08-20 11:20:21 UTC
Deck Cadelanne wrote:
Charax Bouclier wrote:
As a budding miner/industrialist (for now), I am kinda surprised when I see people dump goods on a market that is clearly below the market value of the component parts.

I understand my cost structure may be higher than others, but it still seems that certain goods are being sold below cost.

Why is this a thing? Are people just stupid? Are they hoping to drive out other players from certain markets and then raise prices? Is it just trying to dump finished goods since they haven't had luck selling it against marginal price discounters?


1. You don't know what their cost base was. Maybe it was very low or even zero.

2. Maybe they are deliberately trying to drive the market price downwards.

3. Maybe it's a combination of 1 and 2 above (e.g. steal a large quantity from a supplier then dump it on the market well below that supplier's asking price)

Or they may in fact just be dumb.
Dumb is a firm favourite.
Hanlon's razor wrote:
Never attribute to malice that which is adequately explained by stupidity.

I don't burn bridges, I merely steal a bolt a day.
Deck Cadelanne
CAStabouts
#18 - 2014-08-20 11:32:30 UTC

Hanlon's razor wrote:
Never attribute to malice that which is adequately explained by stupidity.


True, dat :-)

"When the going gets weird, the weird turn professional."

- Hunter S. Thompson
Sabriz Adoudel
Move along there is nothing here
#19 - 2014-08-20 12:15:50 UTC
Remember, folks. The "minerals I mine are free' people are idiots. But they are useful idiots.

I support the New Order and CODE. alliance. www.minerbumping.com
Velicitia
XS Tech
#20 - 2014-08-20 12:19:47 UTC
Marc Durant wrote:
Charax Bouclier wrote:
Are people just stupid?


Yes, lazy and stupid. Too dumb to come up with or accept basic logic in regards to opportunity cost, dumb enough to stick to what they're doing even if it's explained to them in a "well, I do what I want /special snowflake" kind of way.



Had several of those guys in a former alliance.

They were bad enough to tell me what they were making ... profits galore. Cool

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