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cosmoray Cosmoray Construction	Posted - 2009.07.24 19:35:00 - [1] I have been a large scale manufacturer for nearly 2 years. I build both T1 BS's and Cap ships (Freighter and Orca). I "assume" that most people when they build stuff they understand how much something costs to build (including factory slot cost) then they sell it ABOVE their cost base. So today I fly into Jita to buy minerals (or stuff to reprocess) so I can build ships, and I am astounded to see prices of so many things below their build cost (not quite reprocess value). Why don't people understand this? Example: Capital Capacitor Battery I have a well researched BPO for this (>me100), and before Trit price collapse the build cost was around 4.9M at Jita mineral price. After Trit collapse the price is around 4.7M. So in Jita today 47 modules on sale at 4.49M. Nice one, buy all of them and stick the BPO back in research slot. Free'd up 2 weeks worth of orca production. What are people thinking. If everyone who played the game could add up or use excel successfully no one would make any money. This is nuts. Why bother building anything if it makes no profit!!
Roguehalo Caldari RH Ship Brokers	Posted - 2009.07.24 19:40:00 - [2] They must be making stuff with 'free' minerals that they've mined
Breaker77 Gallente Reclamation Industries New Eden Research	Posted - 2009.07.24 19:52:00 - [3] Sadly most people think of EVE as a game
Petyr Baelich Taggart Transdimensional Virtue of Selfishness	Posted - 2009.07.24 19:58:00 - [4] Originally by: Breaker77 Sadly most people think of EVE as a game Don't most people who play games try to win?
Kazzac Elentria	Posted - 2009.07.24 20:04:00 - [5] Some of us have parts we have to liquidate cause of a failed IPO and feel waiting for adjustment would take to long
Breaker77 Gallente Reclamation Industries New Eden Research	Posted - 2009.07.24 20:09:00 - [6] Originally by: Petyr Baelich Don't most people who play games try to win? Define winning in an open-ended sandbox game?? Having the most ISK? Having the biggest ship? Having the most kills? Annoying other people? In eve there are a million things to "Win" at. Personally for me it's with ISK
Petyr Baelich Taggart Transdimensional Virtue of Selfishness	Posted - 2009.07.24 20:19:00 - [7] Originally by: Breaker77 Originally by: Petyr Baelich Don't most people who play games try to win? Define winning in an open-ended sandbox game?? Having the most ISK? Having the biggest ship? Having the most kills? Annoying other people? In eve there are a million things to "Win" at. Personally for me it's with ISK Any of those things are fine metrics. My point is I doubt many people would consider working at a loss "winning".
Breaker77 Gallente Reclamation Industries New Eden Research	Posted - 2009.07.24 20:23:00 - [8] Originally by: Petyr Baelich Any of those things are fine metrics. My point is I doubt many people would consider working at a loss "winning". I understand that completely. Then again how many T1 or even T2 producers use a spreadsheet or other program to see exactly how much something costs to build? Not alot judging by the number of items that I see underpriced daily. As far as they know they are making a profit.
Drab Cane Mining Emporium inc.	Posted - 2009.07.24 20:29:00 - [9] Originally by: Breaker77 Originally by: Petyr Baelich Don't most people who play games try to win? Define winning in an open-ended sandbox game?? Annoying as many people as possible seems be a popular goal :) ----------------------------------------------- - Who Dares, Wins
Garreck Amarr Border Defense Consortium Curatores Veritatis Alliance	Posted - 2009.07.24 20:44:00 - [10] A lot of folks don't necessarily get their minerals from mining; they purchase refinables instead. If one purchases enough minerals to build a given item through refinables by paying half the refined value of that refinable item, they can ask for less than the "accepted" production value of the newly produced item and still be turning a profit. And if they're turning less of a profit per item but selling at a faster rate, they're winning overall. If you're buying 100mil worth minerals in Jita, you're getting 100mil worth of minerals. If you find the right market niche in refinables, you could spend that same 100mil and get 200mil worth of actual minerals. That's how people can afford to undercut what most see as "production cost."
Petyr Baelich Taggart Transdimensional Virtue of Selfishness	Posted - 2009.07.24 20:49:00 - [11] Originally by: Garreck A lot of folks don't necessarily get their minerals from mining; they purchase refinables instead. If one purchases enough minerals to build a given item through refinables by paying half the refined value of that refinable item, they can ask for less than the "accepted" production value of the newly produced item and still be turning a profit. And if they're turning less of a profit per item but selling at a faster rate, they're winning overall. If you're buying 100mil worth minerals in Jita, you're getting 100mil worth of minerals. If you find the right market niche in refinables, you could spend that same 100mil and get 200mil worth of actual minerals. That's how people can afford to undercut what most see as "production cost." If you can buy minerals for 100m and sell them for 200m, why would you buy them for 100m and then turn them into something that can only be sold for 175m? Cost /= Value
Mystical Dawn	Posted - 2009.07.24 20:57:00 - [12] Originally by: Petyr Baelich If you can buy minerals for 100m and sell them for 200m, why would you buy them for 100m and then turn them into something that can only be sold for 175m? Cost /= Value This.
Garreck Amarr Border Defense Consortium Curatores Veritatis Alliance	Posted - 2009.07.24 20:59:00 - [13] Originally by: Petyr Baelich If you can buy minerals for 100m and sell them for 200m, why would you buy them for 100m and then turn them into something that can only be sold for 175m? The answer to that question depends. Sometimes I may not want to. If, however, I've found I can sell a produced item every day for 175 mil, whereas I've found I can sell 200m worth of raw minerals in a two day period of time...I'm better off selling the produced item at 175m and getting 350m in two days vs the 200m in two days selling the raw minerals. It's all about turnover. Time is isk.
Mystical Dawn	Posted - 2009.07.24 21:00:00 - [14] Originally by: cosmoray I have a well researched BPO for this (>me100), and before Trit price collapse the build cost was around 4.9M at Jita mineral price. After Trit collapse the price is around 4.7M. I think large portion of that is traders trying to resell fast to keep their trading going on. If you can buy that particular item somewhere with 2 M ISK or even lower, you can easily sell it under build cost.
cosmoray Cosmoray Construction	Posted - 2009.07.24 21:21:00 - [15] Originally by: Garreck A lot of folks don't necessarily get their minerals from mining; they purchase refinables instead. If one purchases enough minerals to build a given item through refinables by paying half the refined value of that refinable item, they can ask for less than the "accepted" production value of the newly produced item and still be turning a profit. And if they're turning less of a profit per item but selling at a faster rate, they're winning overall. If you're buying 100mil worth minerals in Jita, you're getting 100mil worth of minerals. If you find the right market niche in refinables, you could spend that same 100mil and get 200mil worth of actual minerals. That's how people can afford to undercut what most see as "production cost." Anytime you purchase minerals under current sell price is purely trading profit. Manufacturing profit can only equal value ABOVE what the minerals can be sold at. All the arguments you are using is just trading.
Vaerah Vahrokha Minmatar Dark-Rising	Posted - 2009.07.24 21:27:00 - [16] I routinely buy some key items at 70% of their production cost and resell them at about 5% above their production cost. To an external observer, all of this makes no sense, while in reality this item is a pure PvP playground where those who lose at manipulating it end up with such low value in their hands and put it back on the market (they prolly lack reprocessing skills). The complete independence between production costs and trading costs creates those odd "bubbles" both in positive and in negative. Other times - not in Jita of course - sub-value appetible items are sold at a station in order to have people stop by, and then buy overpriced "nearby" other articles, something well experienced in real life big distribution / supermarkets. - Auditing and consulting Before asking for investors, please read http://tinyurl.com/n5ys4h and http://tinyurl.com/lrg4oz
Garreck Amarr Border Defense Consortium Curatores Veritatis Alliance	Posted - 2009.07.24 21:58:00 - [17] Edited by: Garreck on 24/07/2009 22:01:58 Originally by: cosmoray Anytime you purchase minerals under current sell price is purely trading profit. Manufacturing profit can only equal value ABOVE what the minerals can be sold at. All the arguments you are using is just trading. Profit is profit. I return to my example: If I produce and sell an item for 175mil isk/day at a cost of 100mil isk/day, I'm making a 75mil isk profit each day. If I acquire those same raw materials at 100mil isk and sell them for 200mil isk but it takes 2 days for those raw materials to sell, I'm making a 50mil isk profit each day. Profit margin per item is a poor indicator of actual profit without time factored in. Maybe I'm missing the point? I'm simply trying to propose why people would be selling at prices that, on the surface, don't make sense.
Muestereate Minmatar	Posted - 2009.07.24 22:34:00 - [18] I just thought to run this in Material level Calculator. Besides calculating ME it gives you your price. I lean on it often for quick ideas cause it loads in a flash and calcs before i let go of the enter key. Was a good ap till now. I specifically used it in market because of its speed. It is now out of date. It was last updated in the spring of 08. Using buy prices in my area it gave me a price of 4 mill and with a minor tweek got it under that and thought tat a half mil profit per seemd better than 10%, WHats cosmoray talkin about. For some reason I gave him the benefit of the doubt. :) and fired up excel. Sure enough, Stuff produced with Microsoft Software costs more. I ran the numbers at perfect since that would be close enough and came in around 4.3. Boy did Trit tank today in this region I'm not going to buy the trading versus mfg argument here cause buying goods and shipping and broker fees is part of supply chain acquisition costs. If I was buying and reselling without any use for the goods, Iwould call that trading. Any acquisition costs shifted over to trading is just internal corp/accounting skullduggery in my opinion. But if anybody is using Eve Material Level Calculator to figure prices, you better check that the material levels it reports agree with the print. Maybe only a few prints are off, in his thread he does ask to be notified in thread so I'll catch that.
Selene D'Celeste Caldari The D'Celeste Trading Company ISK Six	Posted - 2009.07.24 22:36:00 - [19] Originally by: Garreck Maybe I'm missing the point? I'm simply trying to propose why people would be selling at prices that, on the surface, don't make sense. Your point assumes that selling the raws takes longer, which in most cases is not true.
Breaker77 Gallente Reclamation Industries New Eden Research	Posted - 2009.07.24 22:58:00 - [20] Originally by: Muestereate Sure enough, Stuff produced with Microsoft Software costs more. You just made my day
Kazzac Elentria	Posted - 2009.07.25 00:34:00 - [21] Originally by: Selene D'Celeste Originally by: Garreck Maybe I'm missing the point? I'm simply trying to propose why people would be selling at prices that, on the surface, don't make sense. Your point assumes that selling the raws takes longer, which in most cases is not true. Depends on the amounts we're talking about. Moving 5m to 10m min units in a few days... sure. How about having to try and move 107m, ontop of the other minerals. And keeping the price point at whatever it might be. These are the quandaries you are left with when you are building carriers and dreads. I have to move this ship, and sure I should adjust the price upwards of 10% to account for the price spike, but then the ship won't move until the next build cycle. So I sell it at what is then technically 3% over margin and the next one currently in the cooker gets marked up correctly cause really, we needed the capital to keep the production line moving.
Julian Koll	Posted - 2009.07.27 21:38:00 - [22] This explains how some people do math in a comic enjoy
Kylar Renpurs Dusk Blade	Posted - 2009.07.27 22:46:00 - [23] Edited by: Kylar Renpurs on 27/07/2009 22:46:50 One solution to what you present cosmo is just: - Player has skilled for manufacturing on an alt on their PVP account. AKA minimal requirements, mass/adv mass prod and Prod Efficiency. I.E. No refinery efficiency. - Surely you acknowledge that, in a months time, the price of minerals can swing considerably. A month is the longest (and thus, smallest commitment of time) to a public factory slot run. - One month later (heck, more if the player is lazy and just leaves them in the oven for a week or so after finishing), they pull it out. Prices dropped, but hey, I don't have refining skills to get the full 4.7mil back in minerals. 10% of that is, what, 400k ISK? So I sell for 4.49 because that's what they're selling for and it's a smaller loss than refining at 10% refinery loss. - Also add the CBA factor. It's a PvP pilot, not a marketing/industry guru. They'd just cut their losses and hope it improves next week. "The path of least resistance" so to speak, even if it incurs an ISK loss. And for that player, "winning" eve is killing, not having ISK (which would then go into one of my anti-0.0 alliance rants, but that's another story) EDIT: Do you need ISK to kill? Sure, but that's how single-minded people can get.
Ava Santiago Minmatar	Posted - 2009.07.27 23:19:00 - [24] Edited by: Ava Santiago on 27/07/2009 23:19:55 I suspect, given that this is Cosmoray, that this thread is targeted at someone. However, in defense of the seller, sometimes, you need to move from actuality to void (see Sun Tzu), where void is isk, and actuality is hard assets. If the opportunity cost of not getting into void fast enough to deploy the cash as actuality elsewhere is greater, then the total profit of the enterprise can be diminished. Several other caveats: Never assume the guy on the other side has a brilliant plan, or has forgotten to do the math when he updated prices last. (It's a lot of fun to post small batches of goods, watch the traders undercut you, buy them out, and recycle their large stacks of goods for a significant mineral profit.) Also, the turnover argument is quite sound. I would rather make a per item profit of 500 over a very very short time frame then a per item profit of 2500 over a long time frame. High volume, low margin businesses make it very difficult for the competition to enter the market. And if you can force manufacturers to abandon their production processes to buy your goods, you will reap great rewards from volume over long periods of time. Concord doesn't provide consequences. Concord provides insurance payouts.
SencneS Rebellion Against Big Irreversible Dinks	Posted - 2009.07.27 23:38:00 - [25] Edited by: SencneS on 27/07/2009 23:40:45 Large volume sales at low profit margins is actually more efficient in EVE then one might think. The price of material goes up and down, while your goal may be make the most ISK, it can also lead you to zero in sales. Take something like a cruiser for example - Selling a Cruiser at something like a 5% margin for quick sales, then turn around and build another, after 20 sales, you can build 2 cruisers. Now you're building 2 at 5% margin, it only takes 10 cruises to be able to build yet another cruiser. So now you've sold 30 cruisers, and you can build 3 and make a 5% margin. Which is three times as much as before, trying to sell 1 Cruiser at 15% margin may take a long time. The thing to consider here is price of build materials. As mentioned above prices can go up and down, a large margin is gambling on the fact that material will go up in price. They place a 15% margin on their cruiser, if material goes up 10%, they are matching the margin for the manufacture that sells a low margins. Anything larger then 10% and they are now cheaper then the high volume low margin price. However, like all manufactures there is a pressure to keep material cost low, so it's better to gamble on the fact material price will go down. A high volume, low margin seller will sell their cruisers are a more variable rate. This allows them to grow and shrink with the market easier then the low volume high margin seller. It could get to the point where the material drops so far in price the 5% margin sellers sales price is actually less then the 15% margins manufacture cost. Volume also does one other thing, kinda nasty but it does saturate the market. The poster above said it makes it more difficult and less attractive to enter the market for that item. However, it also makes it less attractive for resellers. Large volume low margin items and keeping them that way keeps away resellers from buying up your stock and re-listing it at a higher margin. If you constantly sell at the same margin the reseller will unlikely attempt to control that product. Amarr for Life
Jana Tanaka Caldari Tanaka Industries Inc.	Posted - 2009.07.28 00:43:00 - [26] Edited by: Jana Tanaka on 28/07/2009 00:46:15 I gave up to believe in the existence of the homo economicus in Eve a while ago. The main problem is that there is no actual consequence, for economical behavior that would result in ruin in reality. There is no measurable capital depreciation, operational cost are negligible in the majority of cases. Material and capital is easily acquired and in the end just functions of the time invested in acquiring them. The only major cost is that of the monthly subscription fee per account, which can be expressed as value of one PLEX. Where in reality someone selling goods below cost, would rather quickly be confronted with the harsh reality, in Eve the same person can go, run some missions, mine some roids and sell some GTCs to stay operational. What we need are more substantial operating costs, taxes, wear and tear on machinery a.s.o., that would force to produce and trade economical, or face the consequences in form of hours of grinding or real life expenses for GTCs.
Zamaranth Sesta	Posted - 2009.07.28 02:06:00 - [27] I wouldn't be surprised if a fair number of people enjoyed the imaginiary self image of being a ship building magnate. By day they might be copier man, by night producer of heavy assault ships and way rad missle launchers. They might not get the same imaginary sense of accomplishment by just reprocessing things and not building things. Still, I can see how it would take the fun out of it for you, who probably also likes the idea of building things too but finds a good part of the joy of game immersion coming from what you'd expect to be a rationally functioning economy.
Psade	Posted - 2009.07.28 11:32:00 - [28] I don't understand the fervor in these types of discussions Amusing, sure, but long theorycraft arguments always seem to crop up. If you can profit from someone else's stupidity by buying and refining, do it and enjoy the isk. Who cares about the psychological moment of the chump that gave you the opportunity?
Mordou Mordou Manufacturing and Trade	Posted - 2009.07.28 12:27:00 - [29] Originally by: Psade I don't understand the fervor in these types of discussions Amusing, sure, but long theorycraft arguments always seem to crop up. If you can profit from someone else's stupidity by buying and refining, do it and enjoy the isk. Who cares about the psychological moment of the chump that gave you the opportunity? Well, my theory on the matter is if they can figure it out, then perhaps they can engineer it to happen in the future to make even greater profits off of stupid people. Thats just my theory, but you never know...
Justinius Augustus	Posted - 2009.07.28 23:14:00 - [30] Originally by: cosmoray This is nuts. Why bother building anything if it makes no profit!! I've been wondering this, myself. I only recently started playing, and I run a very, very low profit business as I learn the ropes, so I'm no great brain yet with regards to the EVE market. That said, I was originally thinking to start my operation by producing frigates. So I checked out the cost of the BPOs and then investigated the cost of the materials that go into producing them, and discovered that given the market prices for those ships, I would never ever earn back the cost of the BPOs. Or make any profit, really, because more often than not, players were selling beneath the cost of the materials, themselves. So I gave up that dream and moved to an out of the way region where I wouldn't see a lot of competition, and I just sell ammo and missiles all day and turn a small profit that allows me to pretty much avoid doing missions and still be able to afford to buy the things that I want. I really don't understand some of the economics going on in the trade hubs. While EVE presents--by far--the most dynamic and interesting economy of any MMO (in my experience), there are still oddities. Of course, these oddities present opportunities--which I like. As soon as I train scrapmetal processing, I think I can do pretty well just purchasing underpriced items on the market and reprocessing them for the minerals.

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