Are “Basement Vendors” Ruining The Reefing Industry?

[vadryn]

Most of my LFS don't carry much hardware... even salt, because they can't get enough margin to make it worth their time competing with online. Money is in the livestock and I imagine service contracts.

I've spent a small fortune (for me anyway) on corals, always looking for a good deal because I'm still learning and trying to increase my success rate. "High End" shops aren't marketing to me. If I sell something to a fellow reefer it's not often and it's on the cheap for something I've had good luck with. I wish there was more of that. I think most people you bump into in the hobby see $$ instead of corals. They would take a free frag to sell it, not grow it. How many frags could I get out of that? How much $$ can I make on this colony? I buy stuff I want to see grow.

The control we do have is to vote with our wallet. Frequent the store(s) that provide the service you value.

 

[Reef-Mart]

Personally I’m for selling from home, I met one of my oldest friends in the hobby that way. If you’re good at keeping reef tanks you will need to trim and sell eventually anyways.

 

[Coinzmans Reef]

There is nothing wrong with selling corals on the cheap to make room in the tank.
Its nice to recover some of the cost we put into growing our corals.

If I had to imagine all the corals we have not bought from the LFS that are in our tanks we could probably populate a decimated reef somewhere.

It would really be nice to never pull another coral from the reef, give me a home grown any day!

 

[jrill]

Of course basement stores hurt thr lfs. Every coral they sell is a lost sale to the lfs.

 

[vlangel]

I have been close to both sides of this topic, and so can see merit from both sides. In the 90's I got a job at a LFS. It was a great place to work and the family who owned it worked really hard to train their employees to be knowledgeable about all aspects of the products and livestock they sold. That was not an easy feat when a lot of their employees were HS or college kids and there was a lot of turnover. I was not a HS or college kid but a mom making extra money so our HS and someday college kids could go on to higher education. It was a store that I was proud to be a part of and I worked there for 12 years. The last 5 years I maintained the store's tank accounts. Anyway, I bought my son a marine tank when he was in HS and he really took to it. In fact so much that he was able to buy coral, grow them out and frag them and then pass the frags on to new hobbyists for a cheap price. Online forums were just picking up steam at that time so he was networked and folks came to our house regularly to buy frags from him. At least back then it did not feel like he was undermining the store I worked for because my store sold colonies, not frags. My boss set up state of the art aquariums for businesses and homes that were well thought out and frankly excellently built. The folks my boss sold to were not the new hobbyists coming to our house to buy my son's frags. And who knows that some of those new hobbyists haven't matured into serious hobbyists who buy from a reputable LFS now. I know I personally want to see fish before I buy and most kids in their parents basements are not selling quality fish. And I will buy nice coral too if the store has healthy looking livestock.

 

[HomebroodExotics]

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.


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.

Certainly the business owner can just become a basement grower of corals instead of an lfs if that’s where the money is right?

 

[Sumbub]

I see it two ways.

Business type LFS has a massive overhead and maintenance of said brick and mortar place. They also have to place a large enough quantity order of materials (ie. fish/corals/dry goods) to fill said shop and keep prices relatively cost effective. Add in rent, electricity, water, salt, equipment costs, maintenance, insurance (business and medical), taxes, and employee costs, shrinkage, advertisements,(I may have missed a few, so feel free to add on), that coral/fish has to be at a certain profit margin to break even and/or make profit. The overhead is just massive. LFS is the main introduction for most people into the world of fish and corals. Without them, the hobby would be a lot smaller than it is.

Basement types usually have only costs of electricity, water, salt, maintenance, equipment costs, and stock. Many don't pay for a business license, so no taxes to pay, insurance, employee costs, rent, shrinkage, (I'm sure I'm missing some stuff here too so feel free to add in as well), you can see that they're way ahead in the overhead game. Basement sellers keeps the hobby more interesting and selling the higher end types that the more experienced reefers start searching for. Yes, cost is less, but the overhead is massively less as well.

Both types serve their purposes. So I don't believe that they interfere with each other. But the overlap does in the end, can cause LFS some issues. Many want to sell to the LFS so they can keep higher quality stuff in the shops, but if you're selling them a superman montipora for say, $20 a frag and the going rate is $30, they're not gonna take em because that margin won't keep them in business.

Both types also suffer from the usual issue of profiteers. Just like any other business/hobby. We'd like them to all be fair, nice, and value. But without these profiteers, then the next price down will be branded the profiteers. It's a neverending cycle to the bottom that way.

 

[danreef55]

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

Best of luck. I have been down this road. Propagation - wholesale and retail. If you have any questions just ask.

 

[smitten with ocean life]

nope! im glad for options!

 

[tsharpe291]

There is nothing wrong with selling corals on the cheap to make room in the tank.
Its nice to recover some of the cost we put into growing our corals.

If I had to imagine all the corals we have not bought from the LFS that are in our tanks we could probably populate a decimated reef somewhere.

It would really be nice to never pull another coral from the reef, give me a home grown any day!

this, I completely agree. I feel the home grown are more hardy as well. better chance for success for new reefers.

 

[Devaji]

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.

how knows how long wild collected corals will be harvested. I think we as reefers and coral lovers need to under stand that. learn how to grow coral and pass them on to fellow reefers.
i know it can be tempting to get some $$ back and that is fine and all but lets get back to the hobby of it.

sadly not much of a reefing seen around these parts. but I have plans to grow out some nice softies and other corals and gift them or trade.
such a good feeling.

 

[BeanAnimal]

i know it can be tempting to get some $$ back and that is fine and all but lets get back to the hobby of it.

Everyone is involved for different reasons. Heck we had a club member who was only around to social climb and didn't give two hoots about fish, coral or aquariums. I mean they pretended to, but it was just a costume to social climb... long story and funny but so oddly true.

Some people do it because they want a cool room center piece. Others because they like nature, and others because they like to tinker with things, etc.

Anyway. I don't fault people for selling instead of giving away or donating (at all). We all participate differently.

 

[Steven Garland]

If LFS's were so worried about said basement vendors taking business from them they would lower their prices and stop robbing people blind for Sakura Sunrise zoa's and charging $100 for 5p.

I live in Central Florida,so you know all the stores around that are located down here and I appreciate the hobbyist. I understand they have overhead,and all that but jeeze..

I do shop the big stores,when I need dry goods instead of ordering online because I don't like to wait if I can get it local. I will get frags but on sale or search and search until I find something at a decent price. Put it this way I never get anything if I know I can get it for 50%-75% less from a hobbyist.

 

[KK's Reef]

Basement vendors aren't the ones to be worried about. They are not direct competitors to LFSs. The LFS sells a much more varied set of goods, while the basement vendor only sells coral.

If vendors are worried about basement vendors, they have no one to blame but themselves. Coral naming and coral pricing have been out of control - and these are set by the big-name vendors themselves. If anything, basement vendors are making the prices come back down to baseline. I would rather buy a healthy, chunky frag from someone growing it out in their garage, than a big box coral store that sells a tiny nub of the same coral for twice the price.

 

[Reefer Matt]

Basement vendors aren't the ones to be worried about. They are not direct competitors to LFSs. The LFS sells a much more varied set of goods, while the basement vendor only sells coral.

If vendors are worried about basement vendors, they have no one to blame but themselves. Coral naming and coral pricing have been out of control - and these are set by the big-name vendors themselves. If anything, basement vendors are making the prices come back down to baseline. I would rather buy a healthy, chunky frag from someone growing it out in their garage, than a big box coral store that sells a tiny nub of the same coral for twice the price.

Actually basement vendors can get wholesale accounts without having a store.

 

[alindell]

Stores are expensive but offer variety and ease of purchase rather than meeting some shady guy who sells coral out of their basement. I've had some weird encounters with "reefers". While the deals are good on livestock and equipment there are certain things I like to get from vendors that you can't from reefers. Also I sell corals for cheap $10 to $20 usually. It promotes the hobby, gets to spread certain pieces around so more of those pieces exist and can be shared, and it makes the hobby more affordable. I can tell you there are so many people that love this hobby and would like to get certain pieces but they can't because of the cost so basement vendors help encourage the hobby to grow. Sucks for the lfs because they can't compete with basement vendors prices

 

[danreef55]

Actually basement vendors can get wholesale accounts without having a store.

I can tell you that none of the major wholesalers are going to sell to an individual without a store front. They have too much to lose. Maybe there is some new loophole that I am unaware of.

 

[Reefer Matt]

I can tell you that none of the major wholesalers are going to sell to an individual without a store front. They have too much to lose. Maybe there is some new loophole that I am unaware of.

I have a few accounts with major wholesalers. I am also a Hanna Instruments authorized retailer. They all know I don’t have a store. Most have minimum quotas though. The retail game has changed with online sales, though I don’t sell online myself. Also, a lot of wholesalers sell direct to customer now too (at retail price).

 

[BeanAnimal]

If LFS's were so worried about said basement vendors taking business from them they would lower their prices and stop robbing people blind for Sakura Sunrise zoa's and charging $100 for 5p.

Robbed blind?

Simple questions:

What makes you think there is that much wiggle room in their prices or that they can even fathom competing in that environment.

Would you rather those Zoa's be $50 and they raise the price of each box of salt $5 to make up the margin? The margin has to come from something or they go out of business.

If you owned a business - would you sell items at break even or a loss just to be a good guy? What items would you make the profit or loss up on?

If you owned that business and did $500K a year in sales to cover $500K a year in expenses to run the business what would be a "fair" profit for you to take home? Is more than that "robbing somebody blind"?

Lastly - if the store has a given set of prices and stays in business, would it not be logical to assume that most of their customers are happy and see some benefit of being a customer?

If you owned a retail business you would not see what they are doing as "robbing people blind" but rather simply trying to survive in and offer a good selection and hope that customers find value in their presence and what they have to offer.

 

[danreef55]

I have a few accounts with major wholesalers. I am also a Hanna Instruments authorized retailer. They all know I don’t have a store. Most have minimum quotas though. The retail game has changed with online sales, though I don’t sell online myself.

I am going to assume you have a business license. Wow things have really changed. I spoke to a very well-known wholesaler who will remain nameless. Called to ask about the rock situation. Told him I was setting up a tank for myself and understood he couldn't sell to me. This was less than three months ago. I was a distributor for many dry goods manufacturers. Twenty years ago and some of their minimum orders were $5000.00