About Bulk Buying, or the Korean Apple Butter Parable. Shop owners, please read.

Discussion in 'Marketplace Discussion' started by Trapper777, May 23, 2016.

  1. Recently I've seen a lot of sentiment in this forum against bulk buyers, and I feel like people aren't fully aware of some of the fundamentals of economics that cause bulk buying, and what it actually is. This is meant to be a purely helpful, informative post.

    Imagine you open a shop — in the real world. In fact, you're a Korean apple butter salesman. The current going rate for a jar of apple butter is ₩10, but you've found a source that can get you the apple butter for ₩2 per jar, and you decide to sell it for ₩4. That's great! 100% profit margins and you're way undercutting the competition. You let the clerk do his job, and you leave the shop to go do whatever apple butter salesmen in Korea do in their down time. You come back an hour later — the shop is empty. Completely empty. You wonder what happened to, uh, your entire inventory so you ask the clerk what happened:

    "Well, when people saw your prices, they decided to buy a ton — after all, you don't see deals like this every day. Also, some of them realized they could sell the apple butter to the vendor next door for 6 won and ended up buying out the shop."

    Suddenly, the error of your ways becomes clear. You aren't mad (or at least you shouldn't be, you still made a handsome profit) but you realize you could've done better. Looking back at the younger, less wise you of a few hours ago you realize you had three choices, and you took the worst of them. What were the other two choices?

    Well, first you could’ve simply sold the apple butter for a higher price. If what you wanted was a steady income stream without having to constantly restock you could have simply sold the apple butter for ₩9 or 8. That would have still undercut the competition, leave room for further decreases if competitors lower their prices, let in a steady stream of income, and vastly increase the profit per jar, to over 300%. After all, when normal customers need some apple butter, they don’t much care if the cheapest shop is cheaper by 3 or 4 or 5 won, just that it’s the cheapest.

    Alternatively you realize that you could’ve sold to your competitors, and remove the middleman of your customers. You could have been the one selling the apple butter for ₩6 to the other vendors, and not only would you make ₩4 per jar, you wouldn’t need to hire a clerk or rent a storefront. No need for nearly as much advertising and small orders. It would’ve made more money and been simpler.

    Once you get in your next order of apple butter, you decide to set the price to a more reasonable ₩8. If you were less wise you might’ve gotten angry, sold the apple butter for the same price, and maybe even banned the people who bulk bought from entering your shop again. Your profits would’ve been down, your customer base shrunken, and in all likelihood you’d still run out of stock. Luckily, you were wise enough to realize that the problem wasn’t the customers who “bought too much” but simply that your price was too low compared to the going rate.

    Also yeah I know that that 10 won is like two cents USD. Add a few zeroes after the prices in your imagination if that makes you happy. This is all based on actual econ principles BTW.
  2. Bump.
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  3. Bump? Bump.
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  4. Well said.

    Understanding your options like this lets you own your shop, instead of it owning you :)

    A sad thing that many people don't realize is in most cases they can't both reliably service their smp AND have the lowest prices. Slightly higher prices can help you keep more stock, so that over time you are well known for having the items. As you're able to adjust to the market demands and find suppliers of your own, you might be able to drop prices even more later and still keep your store well stocked. In my case I started high and even though most major stores have raised prices far past mine, I can afford to keep mine low and even have discounts now.
  5. In order to better illustrate this phenomenon, allow me to present this compulsive Venn diagram:

    Best Minecraft Servers
  6. I feel like free market is poorly understood and often attacked, even if it's the simplest and most efficient system. I like this thread. And /v +bulk on smp8 embraces the market. Come sell everything you got, or buy everything. Bulk everything is promoted. Go nuts. I even lowered some prices knowing ill lose, but the market has fallen so I gotta keep up. Future trading due to a price closer to the market rate will help make up the loss. I could ramble all night really. Free market is the best.
    Trapper777, Gawadrolt and kevmeup like this.
  7. Note to self I gotta lower emerald and slime ball prices. Probably raise clay ball and andesite.
    Trapper777 and tuqueque like this.
  8. In the past, I have seen shop owners block competition from even being able to enter their shops so that shop owners couldn't "corner" markets by using basic supply/demand. Of course, I saw this as ridiculousness as Wal-Mart doesn't ban Target employees from shopping there and vise versa. Usually, when I saw this happening I would sell less to those stores (usually because the buy prices were also lower in those shops as well). When I was caravanning as a merchant I did end up making a few 100k rupees in few weeks and some of that came from buying/selling to move product around (Most of the profit was from good old fashioned farming where I would travel from outpost to outpost). I don't caravan anymore however, because simple economics now gets people banned from stores on EMC anymore.. :( ..So I stopped shopping around and deal exclusively with a couple of stores..
  9. i dont ban people from my shop who bulk buy unless i am positive that they are only doing it to sell in their own shop, then i just take buy perms away from them :D

    also comparing emc to real life stores isnt really a fair comparison, if you went and tried to make a superstore next door to walmart, they would put you out of business.

    while bulk buying from stores like todd and AC does not really affect them doing it to smaller stores makes the market aggressively competitive and usually makes them not have stock in that item, driving customers away.

    in your apple butter example, in real life, that empty store is now out of business. they no longer can afford to supply themselves at the previous rate and have lost their customer base thus they will get no more sales like that. the same principle applys in aggressive capitalism on emc.

    theres nothing wrong with bulk buying, but if shop owners dont want you to do it then just dont. simple
    Trapper777 and ShelLuser like this.
  10. If you run out of product you either restock your supply, increase the price or eventually realize that no one ever has stock of quartz (or gold right now) so don't expect that lol. If you don't want to restock your shop then you haven't figured out yet that having a shop is work. If you want a shop just to look pretty then well, you can do that too. If you want to sell only in small quantities then there is always the option to sell 1 each and to raise prices. This whole, I want to have a discount store is a bit silly if you think that its not gonna get bought out. I think the OP is pretty clear. That picture too... too true, too true.
    Trapper777 and M4ster_M1ner like this.
  11. I agree that obeying the wishes of others is a good idea generally, and in this case. A few useless bits of in-game currency aren't worth someone disliking you, and if everyone abided by empathy the world would be a better place. In an economy it is simply impossible for that kind of standard to be maintained, sadly. If your shop is open to the public you have to abide by economic rules. If a shop is getting bought out the problem can be fixed by raising prices, the typical EMC consumer values in-stock over cheap anyways.
    ShelLuser and M4ster_M1ner like this.
  12. Has anyone heard of "The Invisible Hand Of The Market"?

    Definition: The unobservable market force that helps the demand and supply of goods in a free market to reach equilibrium automatically is the invisible hand. Description: The phrase invisible hand was introduced by Adam Smith in his book 'The Wealth of Nations'.

    What does 'Invisible Hand' mean

    Invisible hand is a term coined by economist Adam Smith in his 1776 book "An Inquiry into the Nature and Causes of the Wealth of Nations". In his book he states:
    "Every individual necessarily labours to render the annual revenue of the society as great as he can. He generally neither intends to promote the public interest, nor knows how much he is promoting it ... He intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. Nor is it always the worse for society that it was no part of his intention. By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it. I have never known much good done by those who affected to trade for the public good."
    jkjkjk182 and Trapper777 like this.
  13. TL;DR

    People acting in their own self interest leads to a better world. People sell things cheap/well-made not out of the good of their heart, but because if they didn't sell as cheaply as possible or as well-made as possible they'd be out of a job. The lightbulb, car, airplane, etc were all invented and refined at least in large part if not wholly because someone wanted to make money.
    jkjkjk182 and Acemox2k like this.
  14. To wisely manage stock and adjust the prices is the art of shopkeeping.

    This is what I like on EMC very much - that we have an economy here that is not a set up game, but follows the needs of the community, follows demand and supply, where players can learn quite some lessons about economy, demand and supply, advertising, service to the customers, managing stock, adjusting prices, recognizing changes, make projections, make predictions, spread risk, etc, etc.

    It is now true even more with EMC moving further and further away from "buycraft" waters. I encourage everyone to support this development by supporting EMC - without expecting to have significant in-game advantage over "free members". I plan to make a separate thread after update to 1.9.

    With reduced influx of rupees and thus a shift in economic forces, I expect changes, but I have little idea about actual rupee reserves and how it can all play out. There is a potential for instability, but also a big potential for all of us to think about it, participate and learn. This also deserves a separate thread.

    Perhaps we can build an economic consortium and see if we can work out recommendations for monetary policy and fees policy on EMC. This would provide further learning opportunities for the interested and probably for the mentioned "average user" as well.

    I see this as a very good thing, that on EMC, a shop can not put other shops out of business by any means other than being really a better shop. This

    This will happen anyway: as soon as the small shop gets known and gets some customer base, if it can't keep up with the demand it will chronically be out of stock and will lose customers.
    If a small shops sells below the buy-price of other shops, then it's either a "factory outlet" or "farm outlet" which welcomes reselling, or it isn't really a "shop".

    Worth notice is that people will occasionally try to do things that would bring them profit while doing (far) greater damage to the free market and/or society and/or future generations. Wise politics is needed to suppress such activities.

    Back to original topic.
    Every why has it's because.
    The owners of "no bulk" shops are neither necessarily uneducated nor ignorant. They may very well have their calculation and their goals - mostly their profit is not in rupees or goods but something else. A nice example to study is /v +anon on smp6. :)

    About shop types: https://empireminecraft.com/posts/1115159
    Trapper777 likes this.
  15. Now, I'm not as determined with shopkeeping as some of you guys are (some shops are plain out impressive, not just the shop but also the way the owner keeps up with demand) nor is my shop a big one (just an attic sale ;)) but even I fully agree with the comments above.

    For more than one reason even ;) First and foremost: it's not as if people stole from you, they bought the products for a price which you deemed fair, so you made a nice profit. Why aren't you happy about it?

    I also experienced a moment when I started wondering why someone was buying out a certain product from my store every time. So then I did a bit of investigating and learned that another store bought that product for more than I sold it for. So what I did next? Simple: raised my prices a little bit and just kept doing what I did.

    To me that's not scamming nor abuse; it's being smart and making a bit of a profit. If I wanted more rupees then I should have gone to that shop and sold the stuff myself. Simple. If you're going to sell stuff on a server always check the other (bigger / popular) shops first so that you get a good impression of the going rates.

    In the end I got the rupees I wanted for it, so yeah... I'm definitely not complaining nor would I even want to bother trying to find out who did it. I honestly couldn't care less.

    Second thing is supply and demand.

    Never underestimate players shopping patterns. If they're used to going to your shop to buy something on regular occasions then chances are high that they won't stop doing that. Sure: they may try to find other sources if they really need that product at the time of buying when you're out of stock. But that doesn't have to mean you lost a customer already. Your shop is still within their routine, and chances are high that they'll check yours first before going to that other shop next time ("where did he put that stuff again? was it in the build section or the redstone section?").

    Nice guide Trapper, I really enjoyed reading it and I fully agree with you!
  16. ;)
  17. Well, you're onto me because sometimes I do that indeed: (try to) use both characters to approach both sides of a situation or discussion.

    But in this case it wouldn't work considering that all of Aya's shop chests are located in my shop and I'm the one who does most of the restocking :p

    When I do things such as that then I do try to make things believable :) For example: Aya has always favored the 1.9 update while I've been quite critical here and there.
    Trapper777 and M4ster_M1ner like this.
  18. Nothing personal, it was just the first name that came into mind after "Shell". :)
    Trapper777 and ShelLuser like this.
  19. I don't see the point of banning ppl for bulk buying after all they keep me in business and help balance the books against those who bulk sell.