Are “Basement Vendors” Ruining The Reefing Industry?

[Cichlid Dad]

I have a "garage seller" that was in charge of the local LFS coral for a long time. Here garage and home is full of tanks and coral. Way more than the LFS, more selection, small colony's as apposed to small frags and way cheaper. She is 5 minutes away has become a great friend, great knowledge of coral and reefing. She has a lot of old school acro that is hard to find on the interwebs. As far as them making a dent on brick and mortar? I think the few people that buy from the home sellers in my area are far out numbered by the ones that go to LFS or online.

 

[Cichlid Dad]

A few notes - because you have it 100% backward.

Coral naming (mostly) started with Steve Tyree and Jason Fox. At that time LFS did not have named coral and people trading coral at home did not have "names" other than a few generics like "green slimer" or "pulsing sinularia". Both Steve and Jason were asking easily 10x more than the LFS for corals FRAGS while the LFS were still selling full colonies.

Your LFS was then talked into setting up a Tyree or Fox sales tank exclusive to their NAMED and VERY EXPENSIVE exotic corals.

From there the "basement coral" people started buying them and culturing them and naming corals for frag swaps which then turned the events from "swaps" into full blown traveling coral sales shows and the naming wars and prices exploded.

Your LFS was still selling full colonies and very few got into the "frag" business. Imports got more expensive, internet sales for hard goods exploded and your LFS found itself struggling to keep customers attention. So the LFS started selling frags too. They did not start the trend or set the prices, nor do they control it now. They are along for the ride trying to keep their heads above water and keep people coming with popular stuff.

Fish have become extremely expensive to import - so their prices have gone up and margins have disappeared. Dry goods prices have skyrocketed also and LFS are held to MAP pricing and competing with AMAZON and other places that get goods through backdoor distribution and undercut MAP. So dry goods and fish have smaller margins that ever, rent, utilities and labor have basically doubled in price so there is no margin. Coral frags are one of the few places they can make a little margin back. So no, some pressure from basement sellers is not going to drive coral prices down.

Thank you, this shines a big light on this.

 

[jordlr]

I'm in the UK and my independant LFS has been going for 25 years and the owner has 35+ years in the industry. When i first got into the hobby 15 years ago, he was making around £1k a day profit. He sold dry goods at RRP and fish/corals at a modest markup but there was no competition from online vendors. Move forward 15 years and he has had to move his shop out of town to a small industrial estate where only people already in the hobby know he is there, due to business rates and taxes tripling. On top of this, utility prices are at an all time high, triple what they were only 5 years ago.

Online sellers are selling dry goods below the RRP with free delivery so he price matches which reduces his profit. The whole sale price of fish and corals has risen, combined with the increase in import costs and duty, yet the customer isn't wanting to pay more so they go to a 'basement' seller that has no where near the same amount of overheads and costs.

He has started buying frags from hobbyists, but he then needs to sell them on, which suddenly makes his frags more expensive than the guy he got them from who also sells them on Ebay or classifieds so he has started aquaculturing himself at home to sell in shop, but this obviously incurs a utility cost too.

At this moment in time he says he is struggling to stay open and makes virtually no profit from corals and dry goods. His only income is from fish, RO and salted water supply and home visit maintenance fees. He had to lay off his staff as he can barely afford to pay himself a salary. And this is a shop that has no competition. The next closest shop that deals with saltwater is 50miles away which in the UK is a long way.

I just question that when the bricks and mortar shops are gone due to online businesses and home grown frag sellers undercutting them, where are we going to get our fish from? I know for sure I'm not buying a fish online. I want to see it swimming and eating in front of me. And if the brick and mortar shops go, then the big fish importers and captive breeding suppliers will cease to exsist as well. The hobby will literally collapse and die if the LFS are not supported.

 

[miyags]

Bottom line is if you are successful at growing coral, sooner or later you frag and sell, give-away. And yes, throw the corals in the trash..Most of the beautiful tanks on YouTube are overloaded with frags and small colonies..That never stop growing..Are basement vendors ruining the reefing industry,,NO

 

[Cool tangs]

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.

We are too busy complaining about colonies costing $60-$90 Aussie dollars forgetting how good we still have it

Unless it's some high end niche import coral, I don't think frags will ever take off in Aus. But who knows with the current condition of reefs in Australia maybe frags might be all we get in the future!

I agree though, super rare to see basement sales in Aus and it could never keep up with demand if it did. Normally it's because some one knows some one who knows a guy who knows a guy who has this coral that some one desperately wants

 

[stewy14]

well, when you start out, you will most likely go to a lfs, buy stuff their, get advice from them, and you'll be loyal to them, its cheaper to buy from lfs IME, you dont have to pay for shipping, they can bargain with you, you know the system, you know that their product is good, they are professionals at this stuff, whereas basement sellers, you have to pay for shipping, sometimes its more expensive, it takes time to get the item sold to you, you dont know their systems, you dont know THEM, they could be scamming you, its risky.
But basement sellers are the reason that some people come into this hobby, they see that they are able to sell at home, they go to their LFS and they buy a ton of stuff, and the lfs earns money.
I think that basement sellers are good.
and if the lfs's are still in business and arent struggling, then its fine!

 

[Reeferbadness]

From my experience, most LFS make a large % of their $ from maintenance. Newbies come into the shop, buy a tank and then need help to set it up and maintain it. They keep only a decent amount of coral and fish but don't really focus too much on exotic / pricey corals or fish. I buy my corals mostly from a "basement" seller and also have a fish guy that doesn't have a shop but orders wholesale, Qts the fish and delivers them to me once they are ready. I can ask him to find whatever fish i'm looking for. This works much better for me. I do have someone come ever few months to help clean the pumps as i'm not a very good plumber. My $0.02

 

[BeanAnimal]

1500sq ft space in Los Angeles is about 5k a month plus insurance & electric, & misc another 5k so 10k a month, 4 employes, 2 a day @ 8hr a day for 30 days @18$a hour is 8640 a month. Let’s round that up to 10k
So far 20k plus another 5-10k for loans & nutrients & consumables .

So a small store like the one you’re talking about is about half the operating costs you mentioned.

Still high considering this is a smaller market than most

Thanks for the response.

$3 per square foot for retail space. Yes, I guess I should update my post with a range. I did opt for the high end (Mall, or other high traffic high profile retail). Strip mall or other areas may be as low as $3 or $4 per sqft/m, especially with extended multi-year leases.

We can also go back and forth with labor costs etc.

No argument there. The point that I was trying to make is that the numbers are not (at all trivial) and overall margins are nowhere near where people think they are. Retail (especially in a market where you are competing with big box, online and home based) is tough.

 

[BryanM]

My take on this is its hard to find quality. Its hard to know the LFS is doing good, has good water, etc. Sometimes its hard to find knowledgable people at the LFS, last time I was there I was treated poorly. I'm also not a fan of most LFS stores zero guarantees. I've been bit 3x, early on (not that I'm that long in to this journey mind you).

I've changed my mind and I focus on aquacultered fish and corals, and all of those items (approx 9 in the last 2 months) are thriving.

If I find the local bay area scene and go to any events and start talking to people, I'll probably find some cool local people, make friends, and deals that way, and assuming my tank stays successful I'm going to have to prune somethings, and I'd rather sell them cheap(er) or give them away than throw them in the trash.

 

[stevieduk]

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?

Its the shops that ruin things charging to much for years

 

[hatred_inc.]

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?

I believe that in a “free market” capitalist society, if it’s legal and ethical, open competition is the driving force behind whole idea.
If there is complaining “brick and mortar” business, they may want to change their model to accept and compete with what may become the next new norm…

 

[NuclearCorals]

150$ frags are what's causing this. It's sad you have to pay that much for a neat 1 inch piece. This isn't the way ....

 

[Flame2hawk]

Businesses have been looking for a competitive advantage forever. If they can cut some of the expense of the traditional supply chain and offer products at lower prices while still keeping a healthy profit margin, then all the best to them. The internet distribution channel is another example. It’s actually part and parcel an indication of healthy free enterprise system. Innovation always pushes older models to evolve to stay competitive which usually benefits the entire eco system.

 

[hatred_inc.]

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.

It’s starting to look very possible that the improbability of “brick and mortar” businesses being un profitable and an obsolete model by 2030 is unavoidable. Being an owner since 1992, I’ve never had to make as many changes and allowances till approximately six years ago. Now even to present a viable business plan it must include the “basement business” competition and very aggressive allowances for the growth of AI. Good luck finding any bank financing without these factors in your 5/10/20 plan…

I’m 54yrs old and have seen a couple things… my prediction is that by the year 2030 the traditional way of doing business will be obsolete and other than “daily needs” retailers, that operate from “brick and mortar”, they will all be GONE and a thing of the past.
The fear is real and financial institutions are planning for this. Remember what the W.E.F. is planning “by the year 2030, the average person will own nothing and be happy”. It been said many times, in many formats by the world banking institutions…

I prey for all business owners. We are in the decade of change…

 

[ryanjohn1]

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’m doing the exact same thing. Basically I do it so I can also get really cool stuff. Also the people I sell to usually end up becoming friends. And usually they are semi new reefers so I can help them when they need it. Btw everyone if you saw the prices at import level it would make you sick!

 

[Doctorgori]

…if you look at the freshwater segment you simply can’t get certain fish like killifish and some cichlids if it weren’t for the basement vendors…
Saltwater is similar with corals just more limited with fish:
..seahorses need special care and LFS won’t give you much for “most” clowns..

still you do have to recognize the tax/overhead advantage of basement breeders

 

[motortrendz]

I remember when I first started in salt, ther were 3 lfs in my area. And only one constantly sold coral. And they were your typical jakara, Bali mariculture. Then they started getting ausi wild colonies. But everything was atleast the size of the fist. For 50-120$ and you had to learn the scientific name for them. Then with tyree and occulus aquatics started naming coral and selling at a premium. I'm sure there's others like fox but I feel like those were the first 2 or 3 anyway. I think with the advancement of technology we've as a whole become more successful at growing coral and coloring Them up better than what we used to only see on a zeovit system. I think that's about the time I bought my first shallow tank specifically for propagating coral. And I would clip my colonies and create a back up for my tank. Which then became my trading tank with other local guys. Online sales and overnight shipping is what kille the LFS, not the basement hobbiests. (In my opinion of course) bc most of us local basement traders were really only trading corals we got from our LFS.. swaps started to broaden our taste and availability. But once online sales and shipping came along you just can't compete. Unfortuanlty at that time frags were still over 1in. You'd get 3-4 head acan frags(which used to come from a cali wholesaler that way(i forget their name, I think like occulus, they're gone now too) when the Walt Disney craze started i think that was the birth of the 800$ frags and they were like 3/8" but bc we were all willing to pay those prices supply and demand drives the market. Undortunalty for LFS their margin doesn't change and tey just can't effectively compete. I hope they can, but I se more and more disappearing. We have none in my area now. And the hobby is completely sustained dby mail order and local fags grow in frag tanks and clippings from displays.

 

[UtahReefer]

I think it’s a good thing…. As long as these guys are serious and do it right, offering quality, healthy corals it helps the hobby. I bought from WWC for a while. Seems like the frags are getting smaller but the prices are going up. Last batch of 5 I purchased were so small it was ridiculous. In addition, they are cutting these frags, mounting them and shipping them before the even know if the frag will take. You spend the money and then you take the chance that the frag will take the stress and make it. Not right. Having better luck with basement vendors that allow the frags to heel before the sell them.

 

[Damien Buckley]

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?

Retailers angry that people are selling at non-extortion level prices and providing services like quarantine so your tank doesn’t get nuked? I’m shooketh…

 

[BigReefDaddy]

In my area, I have two LFS. One is crazy high priced, and the other is trying to get out of the business and retire. The high-priced one is in a shopping center, so the overhead has to be high, and the soon to retire business owns their building and has been around over 40 years. I just started my own business out of my house and I see both sides of this coin. Some distributors only want to do business with full time businesses with an established brick and mortar and the few I've found are ok working with the mom and pop shops working out of their homes. Can't be mad either way. Everyone has to start somewhere.