A Brief Analysis of the Inscription Market

To gauge where the competitive threats lie in the inscription market below is a brief analysis:


Suppliers

There are 3 sources of herbs and inks for crafting: yourself by farming the herbs and milling herbs; a (legal) farmer that you hire to farm the herbs; and the AH to buy the herbs or inks. The cheapest source is yourself though the best time / gold source is a (legal) farmer that you hire. Most of us, though, will buy herbs from the AH to mill.

Technically, there is a fourth source and that is the ability to convert one blackfallow ink into each of the main inks (or 10 for each inferno ink). Therefore, on most servers, the price of the blackfallow ink will dictate the price of the other inks – as was the case with Ink of the Sea when it was the main ink – given it is the common currency ink.

If farming is your taste (and i occasionally do it - the best farming spot of herbs is whiptail at http://www.powerwordgold.net/2011/02/uldum-whiptail-hotspot-in-fresh-406-w.html). Without competition i can gather 20 stakes an hour which equates to 133 glyphs made for free and c30 inferno inks produced for free.

In all, there should be a good source of inks and herbs available to purchase and this is rarely a problem other than at patch changes which alter demand and supply.

Customers

Customers are price takers in my experience. When someone wants to buy a glyph they will take the cheapest one on offer at the AH at that time – unless it is priced off the dials (i have never had problems selling at my fall back price of 400 gold). See my opinion that glyphs are a capital item in a prior post.

Customers have two other sources for glyphs: firstly they can buy the herbs or inks themselves and seek out a scribe to craft; secondly they can seek out a scribe in their guild. In my experience, neither is a big threat to the inscription market.

Substitutes

For glyphs and certificates of ownership there is no substitute. No other item can replicate them and they don’t drop from mobs nor can they be acquired from any NPCs. Player scribes are the only source.

For off-hands, scrolls and cards there are substitutes and hence other items in the game compete against them.


Competitors

Because inscription lends itself to automation through addons the competition is intense. This is the killer in inscription. Don’t expect to put a glyph on the AH and it not to be undercut in under an hour off peak times, and in under 5 minutes on peak times.

It may look like the market is full of competitors but it is more likely there are a few hard core players with alts and then part time competitors. In any given month i will see one or perhaps two new entrants into the inscription market who will drop out after a couple of weeks, it that.

When a customer comes to the AH to buy a glyph, yours needs to be the lowest price. The customer will buy at almost any price – hence the deciding factor of the sale is whether you were the last to post that glyph in the AH. Lowering the price will not attract customers, so compete on “being there” not “on price”.

Threat of new entrants

The Barriers to entry to inscription are low. You don’t need rep, honour points, justice points, nor do you need complete any quests. In fact, you need never leave the AH in a main city to get access to all craftable items. All you need is the gold to buy the herbs to mill or ink to craft with and lots of time (2 to 3 months) to do the final research or (much) more gold to buy the Books of Glyph Mastery.

The rarity of Books of Glyph Mastery means that the profession is harder for new people to break into quickly - meaning the numbers of competitors in this market is slowly declining.

The initial outlay to stock up is low. For example, if you were to make 8 of each glyph then the initial outlay will be 33x8x10x15 = c40000 gold.

Fortunately, the barriers to exit are low as well – which is just as well given many new entrants leave when they realise how competitive the market is.


for this and other ideas on the glyph market please follow the link to the free Croda's Inscription Gold Guide

Why there is no Banking System in World of Warcraft

By Banking System – i mean an institution that takes deposits from savers and lends to borrowers.  The savers get a deposit interest rate and the borrowers pay a (higher) loan interest rate.

Occasionally interrupting my posts on making gold will come observations on the World of Warcraft economy.  These posts will have no gold making value, just observations from myself.

The economy of World of Warcraft that players can make serious gold from is almost entirely based on production of items, the farming of raw materials or the trading of items on the Auction House.  Hence, compared to the real world, the Industrial and Mining sectors are alive and kicking in World of Warcraft, with a dose of Auction House trading.

Services (repairs, transport etc) are supplied by vendors.  Sure, players can charge for portals and dungeon runs, but those are relatively rare.  Healing is done for free by healers and Blizzard provide the Law & Order, and keep the lights on.  Thus Health Care, Pharmaceuticals, Technology, Utilities, Retail and Financials etc don’t exist in this economy.

(Gold from mob drops and dailies etc is a gold earning venture but perhaps not a serious gold earner for this example.)

The gold required to set up production is the spend in levelling the profession (a similar concept to building a factory) and then add the spend in buying the initial raw materials to set up the first production run.  The next set of raw materials is purchased from the proceeds of selling the first production batch.  And the profits from selling production batches eventually repays the gold spent in levelling.  Likewise, the gold required to start trading on the Auction House is the initial spend to acquire underpriced items to repost them.

Furthermore, the constraint on players making gold is normally time, not their own lack of resources.  Whilst the process of levelling a profession requires gold, at some stage it also requires time in the form of dailies or cooldowns.  And the process of maintaining production requires gold but that is entirely financed from the returns made from selling your last batch of production.

Hence, the demand for gold to put into projects that generate a return is very low.  Of course, someone may want to borrow a few thousand gold to level a crafting profession, but that is very rare.  And plenty of people may want to borrow gold to buy their prized mount, but no-one will lend that gold given the low probability of seeing any of it back let alone making any sort of a return on the loan.

Indeed, i greatly suspect there is a surplus of gold that sits in banks doing nothing.  Not often, in a healthy economy, that the supply of money exceeds the demand for money.

Therefore there is no requirement for a Banking system in World of Warcraft – i.e. there is no need to invent an institution to bring together the suppliers of excess gold looking to make a return with those demanding loans to invest in projects.

To take this one step further, to invest in a project to generate a return it is always useful to have an idea of what return can be generated without taking any risk.  I.e. the Risk Free rate of Return.  In the real world US investors buying Treasuries, or UK investors buying Government Gilts, or German Investors buying Bunds would know what their risk free return is.  This risk free rate of return can then be used as a benchmark to determine the rate acceptable to receive in more risky projects.

With the exception of the old Obsidian Shuffle there is no project out there that can generate a consistent risk free return that i am aware of.  Can anyone else think of a process that generates a consistent return (i.e. sells an item for a profit to a vendor)?

If there is, then that would be where surplus gold could go to generate a return.


for this and other ideas on the glyph market please follow the link to the free Croda's Inscription Gold Guide

Description and Gold Making Potential of Inscription

To start my series on inscription i will start with an overview to a player that is not yet involved in the inscription market.  I will then follow with a post briefly analysing the glyph market, followed by a post looking at what changed the glyph market from a typical profession to the gold maker it is today before i get right in there and talk about how i make gold in inscription.



DESCRIPTION OF INSCRIPTION


Inscription is the milling of herbs into pigments which form inks and then combining the inks with parchments, and occasionally other components, crafted into glyphs, scrolls, certificates of ownership, off hands and various cards.  You can sell the pigments, inks or the final crafted items on the Auction House (AH).

The real money making part of inscription is selling glyphs.  Every character, no matter what class, will always carry their full entitlement of glyphs, and most likely carry a number of other glyphs if not all of them for their class.

GOLD MAKING POTENTIAL

The gold making is impressive but the competition is very intense.  Inscription needs perseverance and dedication.

The cash profits and margins are impressive:  On my server, it costs c15 gold to craft a glyph and the average selling price on my server is 100 gold.  Sell 100 a night gives profits of 8500 gold per night.

It is a large end market: The glyphs crafted are available to all classes hence it is one of those professions which has a large target market.  Each character will always purchase a minimum of nine glyphs (3 prime, 3 major and 3 minor), and most likely purchase every glyph for their character – and so you have forced buyers.  Broadly, there are over 30 glyphs for each class.  And there a 10 classes.

Glyphs are a capital item: Since Cataclysm once a glyph is purchased by a character, it need never be purchased again.  Therefore, many people will see that as making a one-off purchase (capital item) rather than repetitive purchases (operating item) such as potions, enchants etc.  People are willing to pay much more for a one-off purchase given the value into perpetuity they get from that one purchase.  Indeed, glyphs maintain their use to a character through new patches, whereas other items can be made useless as new gear is introduced.

But it’s a mature market: again, since Cataclysm once a glyph is purchased by a character, it need never be purchased again.  Hence the market size by volume is the number of characters on the server multiplied by the number of glyphs per class.  Given cataclysm has been around since November 2010 the main driver to the market size from here are alts levelling or new players levelling – most current characters will have bought their glyphs by now.  Indeed it is likely that the market size on most servers is in decline.  Hence, arguably this is a mature market, most likely in decline, and therefore highly competitive.

You can’t do it half cocked: It is one of those professions where it is best to be “all in” – each server will likely have established players and the competition is fierce.  For those players that are able to compete glyphs can be the best income generating profession.  But for the winners there are many drop outs.

There is no shortage of raw materials: Herbs are available in abundance.  Furthermore, the inks are readily available.  Hence, shutting out competitors by buying up the raw materials is near impossible.

Auction House costs are negligible:  Each item costs virtually nothing to list on the Auction House so cancelled or unsold auctions don't need to worry you.  Again, that then lends itself to a lot of cancelling and reposting, and hence intense competition.


for this and other ideas on the glyph market please follow the link to the free Croda's Inscription Gold Guide

Why did i start gold making in World of Warcraft?

When i first started in World of Warcraft in mid 2009 i knew nothing about the Auction House, i never knew it existed.  In fact i sold everything to vendors.  It was a constant battle getting the gold from questing to pay for my next level of spells for my fire mage.

I knew about professions and i was an alchemist and herbalist – though that was because a friend had told me that was best for a mage – and slowly  levelling them.  I did not really have a view as to what i was going to do with them other than make myself potions.

I heard the Auction House mentioned on The Instance podcast a couple of times and a friend mentioned it to me.  Though when i went to the Auction House it was all rather complicated so i continued to mostly sell to vendors.  I did not understand grey, green and blue items.


And then The Instance podcast mentioned the Greedy Goblin blog and the rest, as they say, is history.

This was at the time when Gevlon (Greedy Goblin Blog) was going through his Inscription business, highlighting his strategies and the thinking behind those strategies.  And perhaps more importantly how he went about it and step by step guides to working with Auctioneer.  I had no idea there were such things as addons.

The World of Warcraft economy caught my imagination.  I immediately dropped Alchemy and started inscription.  Cost about 5000 gold to get to the top level and start making money (Gevlon's blog introduced me to the concept of a Goblin does not farm their own materials – they either buy from the Auction House or employ a (legal) farmer.

I also had no idea there were gold making blogs, and, to be honest, it was perhaps not until mid 2010 that i started reading other blogs let alone listening to the podcasts.

The first 1000 gold was made, and then 5000 gold and then 10000 gold.  I remember using a snatch list to find a cheap item for about 2000 gold (i think it was a hat) and selling it at a mark up of 3000.  By the time 50000 gold came along i can say i was hooked.

The gold making blogs and podcasts are great fun - its not just the information on how to make gold but the thinking behind the information that can be used in so many other areas to make gold.

And now gold making is the main reason i play World of Warcraft.

Indeed, i only just recently levelled a character to 85 which is my first character that is in a real guild, not a guild bank!  But he is a level 525 Jewelcrafter and Alchemist - so i suspect he will be into the gold making routine soon.


for ideas on the glyph market please follow the link to the free Croda's Inscription Gold Guide

The Starting Post - a bit about myself

This is a first on many levels, for me at least. My first blog, my first blog post and my indeed my first blog post for making gold in World of Warcraft.

But lets start off with a bit about myself.

I have several alts on one EU server, all alliance, and all aimed at making gold. I have 1.2m gold at present and my gold making professions in order of importance are Inscription, Enchanting, Alchemy, Jewelcrafting and Tailoring.

I have all recipes for Inscription but still gaps in Enchanting Tailoring and plenty of gaps in Jewelcrafting and Alchemy given the latter two are more recent entrants to level 525 for me.

I have 3 level 85 characters that carry inscription + herbelism, Tailoring + Enchanting, Alchemy + Jewelcrafting.  And 5 posting alts that move from Auction House to mail box.

I play for a couple of hours a night and perhaps more in the weekend.

I made my million with inscription and hence that is where i first intend to focus this blog.

The blog can only get better from here, or cease to exist.  Doubtless it will be a journey for me!

Croda

 

for ideas on the glyph market please follow the link to the free Croda's Inscription Gold Guide