Are “Basement Vendors” Ruining The Reefing Industry?

[BeanAnimal]

I’m guilty of being a “basement vendor”, but I only sell at a couple local swaps, and I don’t advertise. The business is registered and sales taxes are paid. But it is very much a side thing for me. I could never make the same amount of money with the benefits as my career by opening a full time store in my area. So I try to be fair to those that do depend on coral and fish sales to pay their bills, but also to the Reefers. I don’t do it to help pay for my reefing, I just do it to get out and see everyone.

I would also guess that when you add everything up fairly, your profit is not what you think it is

 

[PharmrJohn]

I remember when Netflix first came out (when they JUST sent you disks -- No streaming available). The local Blockbuster hated them, stating that they were horrible. I disagreed. And look what happened! In this case, it was a complete take over that led to changing the industry. While basement operations with corals are unlikely to have the same impact, they DO have some effect. And the LFS will, of course, not like it. Lower overhead leads to better prices. There may not be the same choices available, but to aquarists such as myself, I'm not affected by decreased choices. I think all corals are beautiful.

 

[BeanAnimal]

Does anyone remember when we enjoyed taking a frag of a highly prized coral and giving it away to another enthusiast? To me it is one of the most rewarding things in the hobby. Without exception these corals received extraordinary attention from their new caretaker. If nothing else, you have an 'offsite' backup in the event of a disaster which we strive to never have happen. Enjoy

Tank is over 20 years old. I have only recently purchased corals. In the prior 20 years I purchased maybe (5) pieces of coral. A pearl bubble, some xenia, a lobo and a candy cane.... Everything else came from club members donations, trades or club raffles. Likewise, I have never once sold a piece of coral until recently when I traded some to a local LFS for credit on some new fiji stuff. The rest (20 years worth of frags) were all donated to the club raffle or just given to people.

 

[Reefer Matt]

I would also guess that when you add everything up fairly, your profit is not what you think it is

I think I actually lose money. Especially if I turn down overtime at work, as the swaps are always on Sunday. I hide my prices from the other vendors before the Reefers come in so they don’t try to buy up certain things. Then put out my price tags when the show starts. I also don’t claim any business write offs. Sole proprietorship.

 

[Ef4life]

I’m sorry to the local lfs thats charging $50 for bubblegum digi if im undercutting you,

But I offered you my frags exclusively as very cheap local grown wholesale and you didnt want them

 

[I never finish anythi]

Can you show your "greedy" math, please?

You may not be happy with their pricing, but that does not make them greedy or dishonest. Blanket statements like that indicate a lack of understanding of what it costs to run a business.

You obviously ain't been to my lfs then

 

[BeanAnimal]

I’m sorry to the local lfs thats charging $50 for bubblegum digi if im undercutting you,

But I offered you my frags exclusively as very cheap local grown wholesale and you didnt want them

Likely because there is not enough margin for them.

 

[BeanAnimal]

You obviously ain't been to my lfs then

Can you show me your math? (I am not kidding). I think a business like that costs a LOT more to run than you can fathom.

 

[danreef55]

Can you show me your math? (I am not kidding). I think a business like that costs a LOT more to run than you can fathom.

I was a wholesaler and saw many LFS come and go. I have no current info been out of this for years. The successful LFS had one thing in common... they all did custom installs and maintenance. Over 50% of what they purchased was already sold. Maintaining the stores was their hook to get people into the hobby and marginally profited from retail livestock sales. Ancillary revenue came from selling the solution to problems.

 

[I never finish anythi]

They ask £60 for a Kenya trees . 2 head of zoas ( rasta) £45 , pink gonipora with around 4 heads £100. A dunkan with 6 heads £150 .
I know they are running a business and have overheads but there corals are insane prices .

 

[bradreef]

I will say that basement growers and stores serve different purposes but do overlap. All of the stores near me aren't equipped to grow lineaged high end so frags. The stores are much better equipped to sell fish though and many other types of coral and livestock such as inverts. They will always both exist because there is need for both.

 

[rhitee93]

... I think a business like that costs a LOT more to run than you can fathom.

This. Running a business by the rules, especially a brick and mortar business, is almost impossibly expensive these days. Not defending it at all, but the harsh reality is that it is true. Everytime we think we have come up with a new "Cheat" to get around the cost of doing business, we are just sweeping the true cost under the rug.

Do the basement folks hurt the LFS? I doubt that it has much impact as I think they are different markets. It probably hurts the big online retailers more than the LFS.

 

[Mr. Mojo Rising]

The basement mafia exist because there is a need in the market, simple as that. Personally I rather pay $20 than $60, everyone else can pay what they want IDC

 

[Punchanello]

I'm not in the US and basement operations are not as common here in Australia, but I will say one thing - I have great difficulty not producing a lemon sucking facial twitch when anyone making money in the industry accuses anyone of ruining it.

Sadly, a very substantial part of this industry is based on selling to people who don't know better and won't know until they have sunk a few thousand and it's too late, youtube shills, pumping up fad corals and products with absurd dynamic pricing, snake oils, not fit-for-purpose electronics and warranty that isn't worth the paper it's written on.

Personally, I'd prefer to deal with a hobbyist-***-small businessman.

 

[JoJosReef]

For me, it’s not only that hobbyists tend to have cheaper corals, it’s also hard to find a local LFS that has corals comparable in both health, variety, and lineage some of the more advanced local hobbyists in my area.

This. I'm drawn to go see what's in an LFS, but I get easily turned off when I see huge aiptasia in their tanks, clumps of GHA, and worst of all, corals with parts of their skeletons showing.

Lots of locals run very nice tanks with healthy and very attractive corals. Some are a bit crazy when they try to sell a shroom with a tumor for $500, but in general, you can get nice corals for your collection from locals at decent prices.

 

[SliceGolfer]

I’m guilty of being a “basement vendor”, but I only sell at a couple local swaps, and I don’t advertise. The business is registered and sales taxes are paid. But it is very much a side thing for me. I could never make the same amount of money with the benefits as my career by opening a full time store in my area. So I try to be fair to those that do depend on coral and fish sales to pay their bills, but also to the Reefers. I don’t do it to help pay for my reefing, I just do it to get out and see everyone.

This reflects my current position in the hobby. I want to have a reef related business. I have desired so for years. It's on my life bucket list. I've jumped through all the hoops to register a business, tax id, reseller permit, online retail website, etc, etc. I have gone so far as to approach a certain vendor and offered to be a sales representative. That outreach turned out to be a non starter.

Next in my journey is to start a frag tank specifically for grow out. I'd like to sell or trade to locals in my area, or within driving distance. I've even considered locating retail space that could support the size of business I have in mind. Shipping livestock would be out of the question. No interest in that headache.

I'm not looking at this as a primary source of income. It's something I want to do, but don't need to do. If I do it, I want to do it right, and often wonder is the juice worth the squeeze? If I haven't done it by now, I think I have my answer

 

[Kodski]

I think ultimately the reason we hear this is due to complacency and laziness of store owners. Its small business 101, there are a hundred other stores that provide a service or product like yours, success doesn't hinge on you offering the best price, it hinges on you offering something that the others do not. Quality, service, specialty product, knowledge, ect. They act like they need to be the only place people go yet do very little to provide an experience or product range to stand out in the consumers eye, and STILL have the audacity to complain about it. IMO a business that complains about this and doesn't have the business smarts to do something about it SHOULD fail.

So many LFS have diseased livestock or coral pests. Most of the online and home vendors make the extra effort to keeping livestock super healthy, pests out of their grow out tanks, and yet offer competitive prices. So when you go to a LFS its very easy to take one look and go, I can get better quality else where for better prices. Why wouldn't consumers turn and walk out the door?

One of my LFS aquacultures 99% of his corals, quarantines his fish even after he buys quality fish from a vendor that quarantines everything. He also has a 40+ year background in marine biology. Is he the cheapest option out there? Heck no! But do I and others support him? Sure do, he offers the knowledge of the hobby, quality fish and corals, and in the end that trumps prices. Will some people still scoff and say I can get it cheaper? Sure, there will always be price shoppers out there, but that doesn't mean that LFS will suffer.

 

[BeanAnimal]

They ask £60 for a Kenya trees . 2 head of zoas ( rasta) £45 , pink gonipora with around 4 heads £100. A dunkan with 6 heads £150 .
I know they are running a business and have overheads but there corals are insane prices .

We can get into specifics if you wish and Whales is not the US but retail is relative.

A 1,500 retail fish store with (4) employees would cost $500,000 to $600,000 per year in overhead (rent, utilities, consumables, professional fees, etc.) Before any taxes, profits or losses (shrink) are accounted for and considering $20K or so loan repayment on a $100,000 loan used to open the business.

That is close to $1600 per day in gross sales just to break even.

The owner did this instead of having another 9to5 so let's assume he needs $100K a year (before taxes) out of the business. Add another $250 per day.

Account for shrink from theft, dead livestock, returns, expired or damaged good, etc. Livestock death is a huge factor, but let's lowball and go 5% total shrink.
That is another $80 per day.

So that business needs to do $1930 in business every day (assuming they are open 7 days a week) just to keep the doors open and we have certainly not covered all of the expenses.

So yes your $50 frag is more expensive at the LFS than it is from some guy living in his parents basement, or from an online vendor who pays lower overhead in non retail space using fewer resources.

I was a wholesaler and saw many LFS come and go. I have no current info been out of this for years. The successful LFS had one thing in common... they all did custom installs and maintenance. Over 50% of what they purchased was already sold. Maintaining the stores was their hook to get people into the hobby and marginally profited from retail livestock sales. Ancillary revenue came from selling the solution to problems.

Absolutely - most do custom work and maintenance. The maintenance is RMR that can be counted on with add on sales as things ore consumed and need to be replaced.

 

[Uncle99]

This is a touchy subject, but I’d like to know what you think. A LFS in my area claimed this to be true. Business owners can feel free to answer honestly as well. I just think that most reefing vendors and businesses started off selling from home, but now they are concerned about the ease of others to do it without a store and “dilute” the industry. Or is there room for everyone?

Competition is great!
Helps keep outrageous margins, somewhat in check.
I shed no tears for LFS.

 

[Joe462]

No. and if they are, then it means the "reefing industry" isn't very robust and needs a reset