I wanted to write something simple about a new merchanting trick I learned in Runescape, but it seems to have turned into an essay. The short version of the following is this: buying and selling rune plate is profitable because it has a reliable supply, demand, and price range.
The long version is this:
Runescape is a popular MMORPG that, among other things, features a very active economy based on the buying and selling of in-game items for in-game money. I've written about Runescape merchanting before, but since that time, I've hit on an investment strategy for simple and reliable profit.
The following paragraph is a simple explanation of a merchant's role in Runescape. Most buying and selling between players goes through the Grand Exchange (GE), an in-game market where players can put up buy or sell offers, for example "selling 10 lobsters for 300gp each" or "buying 40 lobsters for 250gp each." Now take these scenarios:
1. A fisherman fishes 100 lobsters, investing time to create a product with value. They sell the lobsters on the GE. Prices fluctuate based on supply and demand, and the fisherman can price the lobsters higher or lower to have them sold slower or faster. For example, if the median price of a lobster is 300gp, selling the lobsters at 350gp will result in more profit but will take longer to sell because fewer buyers are willing to pay 350gp for a lobster.
2. A warrior wants to buy 100 lobsters to use in combat (eating food restores health). They buy the lobsters on the GE, specifying a price per lobster. Offering to buy at 250gp will be cheaper for the warrior, but will take longer because fewer fishermen are selling lobsters at 250gp.
In other words, whether buying or selling, players can choose to save money or save time. A merchant, buying low and selling high, profits from players who want to save time, e.g. warriors who buy lobsters at 350gp because they want to go off fighting now, not later. In the above scenarios, a merchant will offer to buy 10,000 lobsters for 250gp each and then sell these lobsters for 350gp each in a process known as flipping. Because of the way (explained above) that exchange works, flipping at a smaller profit margin (e.g. 290gp to 310gp) runs quicker on a per lobster basis. The fun of merchanting, then, is finding the items with the best profit margins and the quickest flips: this balance is key.
The best item for flipping I've found so far is rune platebodies, expensive F2P armor that is bought and sold on a regular basis, but not usually in bulk. I buy for 37,501gp each and sell for 38,499gp each, resulting in a profit margin of about 2.6% per transaction. There are two big reasons why rune plate is a good investment:
1. Players often buy and sell rune plate in small quantities. As I mentioned, rune plate is relatively expensive and is difficult to craft and find. Any one player selling rune plate will probably only have 5-10 items to sell, so the tendency is to sell at below-average prices to get quick money: if a person's only selling 2 rune platebodies, it won't matter to them whether they get 76,000gp or 75,000gp.
In the same way, players tend to buy high, wanting to get their armor in a hurry. If a warrior has just lost their armor and needs to buy a replacement at the GE, they would usually prefer to pay 39,000gp and get it immediately than offer 38,000gp and have to wait half an hour.
A question arises here: if players tend to sell low, why don't casual buyers get low prices? The answer, of course, is merchants. If there are two offers on the GE to buy an item at the same price, the older offer will go through first. A merchant could put in an offer to buy 1000 rune platebodies at 37,501gp and this order will slowly be filled up by players selling low. If a warrior comes in a few hours later and tries to buy one platebody at 37,501gp, their offer won't be filled until the merchant's offer for 1000 has been filled.
Long story short, most buyers and sellers of rune plate opt to save time because they're exchanging small amounts. Merchants fill the relatively large gap in between (2.6% is a decent margin by Runescape standards).
2. High alchemy ensures that the price of rune plate stays relatively constant. Alchemy is an in-game spell that turns items into gold and, using the right runes, a rune platebody can be turned into 39,000gp. Because of this high alchemy value, the price of rune plate is kept artificially high and stable.
Rune plate used to be more expensive then it is now. As better armor was introduced to the game and rune plate got easier to get, the price fell and would probably be much lower if it wasn't for alchemy. Because of alchemy, though, if the price of rune platebodies falls below 37,000, for example, magicians would begin to make huge profits by turning rune plate into gold. This would have two effects: rune plate would be taken out of circulation (decreasing supply), and people would be buying rune plate to turn into gold (increasing demand). Alchemy is a brilliant economic balance that keeps the median price of rune platebodies generally between 37,900gp and 38,300gp, a relatively small fluctuation by Runescape standards. Because of this, I can consistently use the 37501gp to 38499gp margin and not have to worry about following market trends.
I started trading rune plate with 20,000,000gp and after several months of trading, I have a bit over 40,000,000gp. My current transaction rate, approximately 1000 rune platebodies a week, means about 1,000,000gp profit per week for 5 or 10 minutes of in-game work.
This is all well and good, and I do find the Runescape economy very entertaining. The question, then, is this: can I bring any of these skills into the much more complicated realm of real-world money management? Time will tell.