Architect Archive
Thread: The problem with Architects & High Prices
The thing that kills price stability is that there's no difference between a Master Architect's small house, and a Novice Architect's small house, except the price. Every architect knows this, there's no incentive to produce a finer product, just sell enough small houses to pay for harvs the next day.
It's really... really.. really stupid.
Ok, lets see if I can give some constructive comments on this one. I'll go part by part so it doesn't sound like I'm digressing. :-)
"The Wal-Mart model works because of centralized purchasing and distribution. They use this to drive prices from suppliers down and then sell it for cheaper at the retail level. However, THEY are still making higher percentage margins then their competitors. In fact, Wal-Mart's gross margins lead their respective industry. They don't do that sellingitems atbelow market value. Compare this to your example. If I were using this strategy, I would use my leverage in buying millions of resources from miners per day and I would require them to sell it to me at 1.2 credits / resource. You pay LESS when you buy in quantity, not more."
: While it's true that 'buying-power' enables you to get a better rate on something, not even Wal-Mart can force a supplier to drop their price. The supplier drops their price BECAUSE Wal-Mart is buying in bulk, not the other way around. The supplier figures they can have equal profit on a large-volume cheap order vs a small-volume pricy order. They cannot MAKE someone like RCA sell them stuff cheaper, RCA agrees to do it voluntariliy because Wal-Mart buys huge quantities. The problem as it relates to this game is that resources are relatively scarace. 'Miners' know that architects are desperate for ore, and are willing to pay 5per. If the game market were a little more mature (like the wal-mart one), they would realize that selling in huge-quantities to an architect at 3per is more efficient than selling to little guys with small orders at 5per. We will see this shift as the market matures and the demand for ore goes down once everyone who wants a house has one. 
Since the server population is relatively fixed (not entirely, but you get the drift), there will eventually be a plateau in demand that will spur a more reasonable resource market.
"There is a point at which the volume model works, however you cannot properly apply it to this game. The architect is limited by his/her own resource collection/gathering methods to how many structures or items can be produced. No matter how many lots you have access to, without the help of the owners of those lots, you will not be able to consistantly reproduce a .8 cr/u resource cost. You'll have some harvesters sitting idilly by waiting for a favorable resource shift and those will add to your variable costs."
: True that we have a supply limitation based on lot availability, but it is in contrast to time. Right now, people are in a huge hurry to achieve self-fulfilling goals, such as home ownership. Architects are anxious to fill this demand quickly, and have already hit the supply limitation. SO, this causes them to seek other suppliers who can charge above normal prices (resources on the baazar at 5per) because the demand is so high. The problem with the volume model as it relates to this game is stock levels. At Wal-Mart, they're selling stuff already made. In this game, people are 'taking orders', and banking on the fact they can beat a resource-shift AND not critical fail in a timeframe quick enough to satisfy a customer. This does cause a big problem in the comparison, but for simplicity sake in my argument, I chose to leave that out. I figured I'd get a brainless flame instead of a well-thought arguement from a fellow economics person. :-)
"That being said, you CAN elect to HIRE people to gather and collect resources for you and by having them manage their own collection efforts, you enable them to be efficient in their work, keeping that cost down to the .8 cr/u, however you're going to need to compensate them for this, again adding to the total cost for building a structure."
: This is true if you cave into the 'Take orders for more than you can supply'. This relates to my statement above. Wal-Mart sells stuff they already have, not like we do now in-game. If every architect in this game ONLY sold what they ALREADY had a deed for in-hand, you would see a HUGE difference in this market. People would look around, and pay a BIG premium to whomever had it in stock. This is because these games are all about immediate satisfaction. They want the reward for their 'hard work', and they want it right now. While it's true that you will have to pay people to supply you resources, it will come down when the market matures. These miners will have large harvesters crankin out ore, and only be able to sell half of it at 5per. Since they don't want to sit on it, they'll sell the rest at 4per just to get rid of it. As time progresses, it'll get even lower. The Wal-Mart comparison fails in that the 'real-life' market is as mature as you're gonna get. :-)
"You are missing the big picture with your examples. Most of what you say is true, when taken from a singular person's perspective. It is erroneous to try to apply a business model based on a sole character and apply it to the economy as a whole. The single architect, owning and operating his/her own harvesters will ALWAYS be able to sell at a lower price then someone using the volume strategy, but they will not be able to keep up with demand. You could broadcast that you are selling large houses for 50k and take 1000 orders for them, but it will take you 6 months to fill those orders and remain profitable because you can't afford to buy resources on the open market. If the people who do this would realize that they can sell their structures based on what the open market resource cost is, then they could meet the demand, and remain profitable. On the few houses that they DO make based on personal resource collection, they would realize even greater rewards."
: Who says you HAVE to keep up with demand? People are doing this in-game because they have no concept of economics. They are so desperate to sell as many houses as possible, that they will buy expensive resources or whatever it takes to get those orders out the door. If they would listen to you, and take their time, the unfullfilled demand would cause an escalation in prices. In real-life, businesses know how things work. In games like this, the majority population of kids have no idea, and crank away at it, doing anything they can.
I appreciate you taking the time to discuss this with me. I have to admit, looking up at all those posts on this thread, I got a much better response than I anticipated. :-)
Finglefin,
I'm not on your server (I'm on Radiant), but you brought up a VERY good point. This is something that has been discussed in our server's thread by many architects.
Instead of complaining about the people selling too low, they are BUYING their houses. Then, they're turning right around and reselling it to fill their orders. Since there is absolutely no difference in quality, this is a huge advantage for them because they can forget about harv maint, factory main, crit failures, etc.
SO, the next time you see someone selling too low - don't complain, BUY THEM! :-) YOU know you can sell to your customers higher, so why not?
In fact, I have to admit I have done this several times already. When I see someone /yell in town an insanely low price, I swallow that up pronto, and talk to a few architects I know. They always have orders waiting to be filled, and are happy to make a quick buck easily. One man's plight is another man's feast. :-)
Heh some guy tried to convince me today that he could buy a medium hosue for 13,000 credits from another architect.. and wanted to know if I could make him one for free.
Um.. no. And if some one out there on flurryis selling a medium house for 13,000 credits, you sir, are an idiot.
I did manage to find someone selling one for 25k. He said he bought it for 35k, and wanted to upgrade to a large. Just some guy and not an architect.
Obviously I bought that puppy and resold for 60k 5 minutes later. :-)
13K tho? Sounds like he was BSing you in order to get something for nothing. Even I cannot comprehend someone selling it THAT cheap. hehe
he kept following me around inviting me to group too..even though he only talked in /say. Was a wierd experiance.
Heres why i charge minimum 5 cr per resource used to make an item.
1. All the hassle of getting to Master Architect. I earned it. If you want to know what I am talking about then level one up yourself.
2. I am working off of limited resources with more orders than I can possibly take care of. Therefore I sell to whoever can pay what I am asking. My prices are raised for larger more complex items.
3. Complex items require more time and planning to make, it isnt a simple gather 40k to 55k resources for that large house or PA hall and then bust out the item in the factory. You have to plan on using large amounts of identical resources to make identical items sometimes having identical components with the same serial number being required to make identical components to be used in the final product. It gets more expensive if you havent planned ahead because you will fail along the way.
4. Sometimes you have to outsource for missing items if you do make a mistake in the previous comment. It happens to the best of us and the customer who wants the item now should be expected to carry part of the burden of the extra cost.
5. I'm here to make money. Dont like it try buying it from someone who is leveling up and only cares about just maintaining the harvesters they are running. Otherwise you pay what I ask.
6. You are not my only customer, I also make stuff for my PA members and that cuts into my time and resources.
7. Everyone fails some of the time. Most knowledgable crafters add this unseen cost into the price. Its actually a higher cost on the part of architects since our final products when they fail take out so much resources in one press of the key it is unbelievable.
Obviously you're no marketing major in college. Ask most businesses like Wal-Mart or Super-K, and they would rather sell cheap. They make that up in VOLUME. It's a standard business practice used to put your more-expensive retailer out of the market. Sell LOTS, and sell CHEAP. :-)
It's already been done, but this statement is completely rediculous. There's no such THING as volume in architecture. Factories don't produce fast enough, resources are limited.
If I make 50 medium harvesters, the cost to me per harvester is the same as making 2. I can't buy mass quantities of resources cheaper than I can mine them myself. If anything, the cost of mass producing something INCREASES it's base cost, because you need to go to outside sources for the quantities of resources you need.
Selling lots of cheap deeds as an arch is just a bunch of work for no or little profit. There's more demand for the high end deeds than can be filled. Some moron selling PA's at 250k doesn't hurt my business at 400k. He can't produce 50 PA's a day, so his selling 1 every 2 days that low does NOTHING to me.
Until it becomes possible to make 50 PA's in 1 day for a lower cost/PA than building 1 in 1 day, selling low to "get better business" will only be what the unintelligent do. (Note: Those unintelligent ones don't stay in business very long--They're the ones hitting master & quitting with very little profit to show for their time: Some of them even close to bankrupt)
CyberDeity wrote:Quaydork,
Obviously you're no marketing major in college. Ask most businesses like Wal-Mart or Super-K, and they would rather sell cheap. They make that up in VOLUME. It's a standard business practice used to put your more-expensive retailer out of the market. Sell LOTS, and sell CHEAP. :-)
Clearly either you are also not a marketing major, nor a student of economics, or you sleep in class. Walmart is one business model, but not the only one. Ask Walmart or Kmart and you'll get the answer you assume, ask designer shops on Rodeo Drive and you'll get another. If you sell ten units to my one, but my profit margin is ten times yours (just an example) then we both make the same amount of profit. Now if you take into account time and effort in gathering the resources, creating the product and distribution, my costs are much lower to sell one unit than yours for selling 10.
The market will support both styles and so long as your profits are enough to cover your crit fails and other issues as they come along your cheap product model will allow you to survive. Of course if you value the ability to do something other than work all the time to keep your production at a high enough level to maintain your profit levels, there are advantages to not playing Walmart.
Tued the Master Builder
Quaydork,
Obviously you're no marketing major in college. Ask most businesses like Wal-Mart or Super-K, and they would rather sell cheap. They make that up in VOLUME. It's a standard business practice used to put your more-expensive retailer out of the market. Sell LOTS, and sell CHEAP. :-)
Funniest things ive read in a while, its amazing the such obvious balls up in this paragraph.
Harrods anyone?
Anyways ... First up, Wal-Mart or Super-k have what you call a world economy to play in, this allows them to make many many items,sell them cheap knowing that they havent sold to everyone they know.
Now if we flood the market your right we will sell lots and they would be cheap and profits would quite possibly rise .. for a short while anyways. but because we play in a game economy (which is much smaller incase you wasnt aware of that) If we flood our market .. we will put ourselves and everyone else out of business. Put wal-mart ingame with the same ability to mass produce items, they wont last long unless people like stacks of pa deeds (even though they would look the same as every other deed there is.
Also to add, in RL you can go into the red, in game you can not, there is no such thing as credit.
wait that means .. ooopsie daisy our whole economy which ismeasured on borrowing and spending has had half its function removed .. holy crap batman! why did our economy crash?
Anyways .. my bantering if off, im not even sure why i feel the need to justify my prices, if you think its too much for a house try elsewhere, you might even be lucky a week or so down the line ill stick to the 'i would really like a house this evening' bunch, they pay well and always look extremely pleased when the house goes down 2 hrs after ordering it.