Market Research

[Formulator]

Hey Reefers, I’ve been bouncing reefing related business ideas around in my head lately and wanted to test the waters a little bit.

Maybe this is just St. Louis, but we don’t really have any major aquarium/reefing equipment stores in the area. There are 3-4 places to buy fish and coral, and some of those places sell a limited amount of accessory equipment, but most of them have picked a brand and are loyal. Ex. If you are in the market for an ATO system, you could probably only find one to choose from. There is really no place to go look at new aquariums other than the aqueons at PetCo. So I’m wondering if there is an opportunity to open up a brick and mortar aquarium store that would sell everything from dosing pumps, roller mats, and skimmers, to large aquariums and AIO systems. I would probably stick to the equipment and leave the livestock to the already established LFS’s and maybe could convince some of them to advertise for me since they don’t sell the products I would stock.

Do other cities have stores like this already and are they generally successful businesses? If you don’t have this kind of store, do you wish you did or would you still default to ordering online from BRS, saltwateraquaria.com, topshelfaquatics.com, etc.

If you aren’t from the Midwest you may be questioning the viability of the St. Louis market, but believe it or not the metropolitan area is home to almost 3 million people and we are not all farmers

 

[MoshJosh]

Questions:

Will you have tanks up and running with livestock?

Will you offer shipping?

 

[braaap]

Nope. The overhead is massive. Always a market for an online site. But brick and mortar will be TOUGH. Most LFSs have stopped carrying dry goods like you mentioned due to the overhead.

 

[Formulator]

Questions:

Will you have tanks up and running with livestock?

Will you offer shipping?

No livestock. We already have several reef livestock stores in St. Louis, but none of them really sell much equipment and the big pet stores are more freshwater and beginner oriented. The idea is to be strictly an equipment store selling aquariums, AIO systems, sumps, pumps, skimmers, chemicals, media, etc.

I suppose it would be a good idea to make it a hybrid online and brick/mortar store to offset the overhead costs, so yes there would be shipping.

 

[Formulator]

Nope. The overhead is massive. Always a market for an online site. But brick and mortar will be TOUGH. Most LFSs have stopped carrying dry goods like you mentioned due to the overhead.

Perhaps a hybrid online and brick/mortar store could offset the overhead costs? Maybe we could also offer installation and maintenance services as another source of cash inflow.

 

[braaap]

Perhaps a hybrid online and brick/mortar store could offset the overhead costs? Maybe we could also offer installation and maintenance services as another source of cash inflow.

Pretty much every LFS offers that already. What you are suggesting is operating an LFS without the fish. So you are just a local store.

You either become a BRS with better service(good luck because they have buying power) or you become another person trying to make a couple bucks by drop shipping most things.

Better left to the big guys unless you plan to be a big guy from the jump. That means MASSIVE capital. In the tens of millions.

 

[PeterC99]

What are the margins on reef equipment? How much would you need to sell to pay your monthly rent, employees, insurance, marketing, utilities, etc.?

Need to work up the numbers to get an idea of the feasibility.

Owning a small business is a tremendous amount of work and risky.

 

[Jmp998]

This is just really a tough idea. You won't be able to beat BRS/Premium Aquatics/etc on price or selection, and would be less convenient than ordering online as well. Without livestock or something else 'interesting' to drive people into your store, I fear you will have little foot traffic and few sales. The need for 'emergency' equipment purchases-e.g. someone needs to replace a failed pump on the weekend-is not enough to sustain a business, and even that need is fading with Amazon same day/next day delivery.

As said above, the only way to maybe make this work is to have some sort of superstore/showroom with a big wow factor, but even that is likely to fail after a huge investment.

 

[Formulator]

Pretty much every LFS offers that already. What you are suggesting is operating an LFS without the fish. So you are just a local store.

You either become a BRS with better service(good luck because they have buying power) or you become another person trying to make a couple bucks by drop shipping most things.

Better left to the big guys unless you plan to be a big guy from the jump. That means MASSIVE capital. In the tens of millions.

The multiple LFSs in St. Louis do not really sell equipment. Strictly livestock and a few small gadgets, basic chemicals (usually from a single brand) and food.

 

[Formulator]

Alright, these are all good and valid points. I think you guys have talked me out of it.

 

[Malum Argenteum]

Gotta compete with Amazon on a bunch of stuff, and with the couple of midwest dry goods etailers that can often have stuff to me the day after tomorrow and offer price matching. Are you going to lose money on my sale so that I don't shop elsewhere?

The only midwest example of this that I can recall was Reef Werks in Sun Prairie, which crashed and burned hard. Might have been some factors other than market pressures, but that's the only example I can think of.

There's Big Kahuna in Madison, which started out as dry goods online only (FW and SW), but when they recently opened up a brick and mortar shop they added livestock. Not sure what that implies.

 

[exnisstech]

It's too easy to shop online these days. I understand what you are saying but I couldn't even guess at how much the start up costs would be along with all the expenses in rent ins etc. I have two lfs that carry equipment including Hydros apex and high end lights. But these stores have been around pre internet boom so the client base is pretty loyal. They both also service some high end systems for famous sports stars and such which is where a lot of the profit comes from I think.

I admire your willingness to even consider it. The way people are these days crying over nothing, disputing charges without trying to resolve the issue first, leaving crappy reviews, returning items after using them etc. This list why not to do it just goes on and on. JMO

 

[braaap]

The multiple LFSs in St. Louis do not really sell equipment. Strictly livestock and a few small gadgets, basic chemicals (usually from a single brand) and food.

The reason they don't stock goods is because they make little to no money on them. By the time they pay wholesale(which is marked up because wholesalers gotta make money) to the time they get it on their shelves and then spend the time and money to handle it. Things such as dusting, stocking, organizing, putting in point of sale etc takes time and time is money.

The people who make money are the ones who can buy directly from the manufacturers. If you saw wholesale pricing on some of the things from BRS(BRS offers wholesale accounts) you would be shocked how much markup we are paying on things like Radions and controllers. It is routinely 20-30% based on wholesale pricing from BRS to MSRP. The big vendors buying direct are likely making 40% on items they direct sell to consumers. Which is great but they have MASSIVE overhead. So their profit is probably in the 10-20% range if they are lucky.

 

[MoshJosh]

No livestock. We already have several reef livestock stores in St. Louis, but none of them really sell much equipment and the big pet stores are more freshwater and beginner oriented. The idea is to be strictly an equipment store selling aquariums, AIO systems, sumps, pumps, skimmers, chemicals, media, etc.

I suppose it would be a good idea to make it a hybrid online and brick/mortar store to offset the overhead costs, so yes there would be shipping.

One of my concerns would be the customers might want to see the equipment up and running, which means having a tank, which means having livestock, and not capitalizing on that by selling livestock, seems like a missed opportunity to me.

 

[paragrouper]

Hey Reefers, I’ve been bouncing reefing related business ideas around in my head lately and wanted to test the waters a little bit.

Maybe this is just St. Louis, but we don’t really have any major aquarium/reefing equipment stores in the area. There are 3-4 places to buy fish and coral, and some of those places sell a limited amount of accessory equipment, but most of them have picked a brand and are loyal. Ex. If you are in the market for an ATO system, you could probably only find one to choose from. There is really no place to go look at new aquariums other than the aqueons at PetCo. So I’m wondering if there is an opportunity to open up a brick and mortar aquarium store that would sell everything from dosing pumps, roller mats, and skimmers, to large aquariums and AIO systems. I would probably stick to the equipment and leave the livestock to the already established LFS’s and maybe could convince some of them to advertise for me since they don’t sell the products I would stock.

Do other cities have stores like this already and are they generally successful businesses? If you don’t have this kind of store, do you wish you did or would you still default to ordering online from BRS, saltwateraquaria.com, topshelfaquatics.com, etc.

If you aren’t from the Midwest you may be questioning the viability of the St. Louis market, but believe it or not the metropolitan area is home to almost 3 million people and we are not all farmers

You will have issues competing with online stores, as they are able to spread their overheads over a larger addressable marketplace.

 

[crazyfishmom]

Hey Reefers, I’ve been bouncing reefing related business ideas around in my head lately and wanted to test the waters a little bit.

Maybe this is just St. Louis, but we don’t really have any major aquarium/reefing equipment stores in the area. There are 3-4 places to buy fish and coral, and some of those places sell a limited amount of accessory equipment, but most of them have picked a brand and are loyal. Ex. If you are in the market for an ATO system, you could probably only find one to choose from. There is really no place to go look at new aquariums other than the aqueons at PetCo. So I’m wondering if there is an opportunity to open up a brick and mortar aquarium store that would sell everything from dosing pumps, roller mats, and skimmers, to large aquariums and AIO systems. I would probably stick to the equipment and leave the livestock to the already established LFS’s and maybe could convince some of them to advertise for me since they don’t sell the products I would stock.

Do other cities have stores like this already and are they generally successful businesses? If you don’t have this kind of store, do you wish you did or would you still default to ordering online from BRS, saltwateraquaria.com, topshelfaquatics.com, etc.

If you aren’t from the Midwest you may be questioning the viability of the St. Louis market, but believe it or not the metropolitan area is home to almost 3 million people and we are not all farmers

I've had this conversation with one of my local LFS owners and he does stock a wide variety of tanks, hardware parts for DIY, and lots of fish and coral as well. From his point of view, he makes pennies on the dollar for any of the larger tanks. He stocks them, largely because he knows he can get people in the door that want a tank today and then he can make money on all the additional pieces of equipment that they'll need (a variety of pumps, lighting, not to mention livestock). He's also very knowledgeable so he has tons of people that come in and come to ask a question and end up leaving with something small. The smaller items he makes a larger cut on usually. I absolute LOVE his store and support him versus any other business any chance I get and whenever I can buy something from him even if sometimes it costs me tiny bit more (it's usually very tiny if any at all), I go to him. He also knows me and my family by name and spends tons of time with me whenever I'm in. He seems to do the same for most of his frequent flyers, that's just good business practice.

I am a big supporter of anyone who wants to do this. Especially if you've done your homework and understand your market and potential foot traffic. It's no small feat however. If you do decide to open up shop, I would love to see what you come up with!

 

[Formulator]

One of my concerns would be the customers might want to see the equipment up and running, which means having a tank, which means having livestock, and not capitalizing on that by selling livestock, seems like a missed opportunity to me.

Well of course I would have to have a very large reef tank up and running in the store, but was thinking this would be inspiration and store decor rather than livestock for sale.

 

[Malum Argenteum]

The reason they don't stock goods is because they make little to no money on them. By the time they pay wholesale(which is marked up because wholesalers gotta make money) to the time they get it on their shelves and then spend the time and money to handle it. Things such as dusting, stocking, organizing, putting in point of sale etc takes time and time is money.

The people who make money are the ones who can buy directly from the manufacturers. If you saw wholesale pricing on some of the things from BRS(BRS offers wholesale accounts) you would be shocked how much markup we are paying on things like Radions and controllers. It is routinely 20-30% based on wholesale pricing from BRS to MSRP. The big vendors buying direct are likely making 40% on items they direct sell to consumers. Which is great but they have MASSIVE overhead. So their profit is probably in the 10-20% range if they are lucky.

When I worked at an LFS, one of the perks was that we were able to buy at wholesale cost (made up for the really low pay). I recall that dry goods tended to cost about 75% of retail -- so, a $100 whatever would sell to an employee for $75. Livestock wholesale was about a third of retail -- so, a $100 fish would cost us about $35. Now, dry goods don't die before they get sold, but still.

We did a couple transships (livestock purchased directly from overseas collectors, with the import handled though an agent who took care of the permits, had some facility in LAX re-O2 the bags, and lined up air freight), and the prices per animal were pennies on the retail dollar. Many of them were dead, though, and I never did the math on how much that contributed to cost, but the take home message was that livestock is really cheap at wholesale. That 7 day health guarantee on your fish doesn't cost the retailer much -- even if you kill it and they replace it, they're still ahead.

I'm involved in the reptile business, and it is basically the same situation -- if I wholesale something I produced to a distributor, I'm getting about a third of what a shop would retail it for (and somewhere around half of what I'd get selling directly to a customer).

 

[Serpentman2024]

The multiple LFSs in St. Louis do not really sell equipment. Strictly livestock and a few small gadgets, basic chemicals (usually from a single brand) and food.

There is most likely a reason for this. Brick and mortar retail vs online is a brutal. And with Amazon, even online stores are squeezed. I believe the majority of the profit in an LFS is livestock and maintenance services.