Economic Side of Our Hobby

[smcnally]

BTW, Jeremy at CRA has an online store...Maybe he'll chime in and let us know if it works well for him or not.

 

[RichConley]

I'm curious as to the last time on of the big online stores mentioned in this thread donated a substantial piece of equipment to assist the BRS in moving forward with any of it's mission statement projects such as school or aquarium tanks set up to educate and inspire folks. When is the last time they went above and beyond with a donation - I could well be wrong here but I'm curious.

Also, how comfortable are we asking them? How likely is it that the BRS is that important to them?

I think a lot of the extras that at least the sponsor stores or some of them anyway that generate CASH for this club are quickly forgotten.

We have significant donations from online vendors for every auction. IME, they seemed happy to donate, unlike some of the sponsors, who keep calling us "the cheapers"

 

[RichConley]

what cracks me up about threads like this, is some guy this time we'll call him oooo say Rich always takes some PFA number "50-75%" throws it out there, makes a blanket statement like all LFSs are ripping us off next thing you know it's being tossed around like it's fact
Once again that type of misrepresentation is not only arrogant and irresponsible. It's insulting to the store owners that work hard to make it and be fair and to the people that shop there.

If your going to make or bandwagon on a baseless, inaccurate comment like that at least preface it by saying something like "I heard some stores mark up 50-75%.

Marco, I can get a Mag5 online for $42. I have NEVER seen one in an LFS for less than $65. How am I making stuff up here?


Working hard has nothing to do with it.

 

[RichConley]

I hope all the local LFS owners are taking notes here, maybe learn a thing or two!

Theyre not. They think theyre doing everything right, and we're just cheap.

 

[smithcreek]

Theyre not. They think theyre doing everything right, and we're just cheap.

I'm sure they're not, but like I said before, I don't think things are as dire for the LFS as people make it out to be. If things are that dire for certain ones, then they aren't doing what they need to do to stay competitive.

Reminds me of the music instrument retail business. First there was the huge threat from the "national chains" then there was the "internet." In both cases small stores that refused to adapt closed and stores that changed did very well.

What did close were lots of crummy little stores with cheap instruments. Stores that distinguished themselves by having excellent selection, excellent service, specializing in a particular market like acoustic instruments, the latest gear at decent prices, vintage instruments, etc are still around and many of them have a presence on the internet.

 

[Alex]

The good stores will stay open because they offer value to their customers period.

The ones that don't won't survive and shouldn't. Why shoud the public foot the bill for their inifficiencies? Competition in the long run leads to higher productivity and better value for the consumer. Before the internet I think some stores operated essentially as monopolies due to the fact they essentially owned the area they were in. Now they have more competition. From a business standpoint you either compete on price or you differentiate yourself from your competition. If you can't do either of those things you fail.

I'm always amazed at some of the ideas I see in these threads. For instance I loved Rich's comment about the sand. Why not buy up a bunch of Magflake at a reduced price at the end of the winter and sell it all summer long in small quantities to reefers instead of stocking expensive additives that are essentially the same thing. I know I would drive to an LFS to buy a scoop or two at a serious mark up to what HD was selling it at and probably drop another 150$ on fish when I walked thru the door.

If educated consumers only make up a small portion of business why are the stores in so much trouble from online retailers? Perhaps a larger percentage of their customers are becoming educated buyers which means you have to change the way you do business. It really is a total chicken and the egg probelm. You can say we don't make up a significant portion of your business but is that because we don't spend money or is it because you don't do anything to attract the educated consumer. If you think this is a problem now wait another generation. The kids coming behind us live on chat boards and online clubs. They are your future customers.

Again the bottom line is that the stores that offer a better value will stay in business the ones that don't are in trouble.

 

[clamm]

I understand your response to my post...My thought is if you haven't made an effort to get to know the players of the store you support, you will never learn as much as you could...etc...

Its up to the consumer to decide the type of relationship they want with there store...

I think many can have those type of relationships...


for example... -b- at AG...offered to come over after hours and help me out once...


Scott of oceanflo...i have been with him many times when he as stopped by a fellow reefers house just to help out...

I have heard Mark on the cape has done so as well...


So I guess you get what you give...


I dont disagree with your response, but I think you have the power to form relationships with the key people.

BTW, Jeremy at CRA has an online store...Maybe he'll chime in and let us know if it works well for him or not.

 

[JeremyR]

In it's current incarnation, it's not a real money maker.. if you don't have wide variety, you don't get sales because people don't want to shop at 5 places and pay shipping 5 times. Even if you had the best price on widget A, if they want B, C, and D as well and you don't have them, they'll go elsewhere. While some of the responses in this thread about diversification are certainly valid, most are overly simplistic and ignorant of how business in general works. Obviously times are changing and stores must change with the times, but it's not nearly so simple as throwing some crap on the internet and suddenly cashing in on this huge market. I think most of you are also underestimating the time investment that requires. I also find it amusing that people think buying direct from manufacturers is as easy as banding together with one or 2 stores.. they won't even talk to you with that kind of buying power. Is the future for the LFS as grim as some let on? The next few years will be interesting. We are going to try new things, and have been working on some new things for awhile now.

For comparitive purposes.. todays distributor wholesale price on a mag 5 is 57.36. Marine Depot (regardless of some places lower prices, they are the gold standard) is 52.99. Obviously the only way to get in their range is to buy direct from Danner, and that would require tying up many thousands of dollars just in mag pumps, if you could even convince them the need another direct contact, which isn't easy with many of these companies. MD also has the advantage of owning their own wholesale company besides their own large warehouse. Competing with those people on price alone requires a huge amount of capital or some inside contacts that the average LFS is never going to be able to generate. The average mom & pop has 10-50k in total inventory in their fish section.. to get good pricing, they need that much in every single brand.

In closing.. $65 bux at an LFS for a mag 5 is in my opinion perfectly reasonable and for most stores much cheaper than they can really afford to sell them for. Times are changing for all kinds of local level business whether for better or worse.. stay tuned.

 

[RichConley]

For comparitive purposes.. todays distributor wholesale price on a mag 5 is 57.36. Marine Depot (regardless of some places lower prices, they are the gold standard) is 52.99. Obviously the only way to get in their range is to buy direct from Danner, and that would require tying up many thousands of dollars just in mag pumps, if you could even convince them the need another direct contact, which isn't easy with many of these companies. MD also has the advantage of owning their own wholesale company besides their own large warehouse. Competing with those people on price alone requires a huge amount of capital or some inside contacts that the average LFS is never going to be able to generate. The average mom & pop has 10-50k in total inventory in their fish section.. to get good pricing, they need that much in every single brand. \

The real question here is, if Marine depot is $52.99, and your Distributor has them for $57.36, why they heck are you buying from the distributor? You'd save $5 on every pump if you bought from marine depot, and could either make $5 more on each pump, or sell the pumps cheaper. Win/Win.


(FWIW, I think you're doing a lot more innovative/adaptive stuff than most of the other shops I've seen)

 

[Alex]

Great post Jeremy. I agree that we are over simplifying and I also understand that running a successful business is a real challenge. If it weren't everyone would start up a new business and prices would plummet. That's part of the reality of business if you find an easy one with low barriers to entry eventually and if there are profits people will move into your industry until there is so much competition that profits approach 0. The industry is changing and will continue to change. I don't know if you can say it will be for better or for worse but it will be different.

I do know that I will always be willing to drive an hour or two to a place like Aquarium Gallery where I know I will get to see some cool stuff. To me this is a great example of a store that has differentiated themselves from the average LFS. Of course don't tell me that I must pay 3x the price for something just to keep an unimaginative store in business either.

 

[RichConley]

I do know that I will always be willing to drive an hour or two to a place like Aquarium Gallery where I know I will get to see some cool stuff. To me this is a great example of a store that has differentiated themselves from the average LFS. Of course don't tell me that I must pay 3x the price for something just to keep an unimaginative store in business either.

Exactly. AG has basically set themselves up as the "If you want something wierd, we probably have it" place. You pay a premium for some stuff, but they've got stuff that nobody else has. They serve a purpose, and fill a niche.

 

[JeremyR]

A: Shipping & Philosophical reasons. Plus, even at 5 dollars off, everyone will complain that it's too expensive after markup when they want you to price match to marine depot. Obviously you can't sell it for a competitive price if you are paying what the competition sells it for. Business 101.

B: We don't sell mags due to the poor margin at this time. We try to stick to brands we can be more competitive on.

 

[Alex]

Exactly. AG has basically set themselves up as the "If you want something wierd, we probably have it" place. You pay a premium for some stuff, but they've got stuff that nobody else has. They serve a purpose, and fill a niche.

You either compete on price or you compete in differentiation. That's really one of the basics of equity analysis.

Of course I must disclose that I have been brainwashed into this stuff by the CFA institute.

 

[JeremyR]

In other diversification news, we have 800 tomato plants at the greenhouse and are selling heirloom tomatoes from now till frost..

 

[RichConley]

A: Shipping & Philosophical reasons. Plus, even at 5 dollars off, everyone will complain that it's too expensive after markup when they want you to price match to marine depot. Obviously you can't sell it for a competitive price if you are paying what the competition sells it for. Business 101.

Yeah, they'll still complain, but they'll complain less than they were with the previous price.

Whats the philisophical reason? They're a competitor? Getting the product for cheaper is always better, whether or not you're buying it from a competitor. Why do you think Intel buys things from IBM? Because its cheaper then buying them from anyone else, even though they are direct competitors.

 

[JeremyR]

Rich.. if you buy a pump at 52 bux, even if shipping is free.. what exactly do you think the biz has to sell it for to make a profit considering the overhead retail provides? I'd rather put the money into a different brand that I can actually make money on... because obviously if I"m paying the street price I"m not going to be anywhere near what you think is reasonable after I mark it up and they aren't going to sell particularly well.

 

[RichConley]

Rich.. if you buy a pump at 52 bux, even if shipping is free.. what exactly do you think the biz has to sell it for to make a profit considering the overhead retail provides?

Less than if you pay $57 from the distributor.


Jeremy, I'm not saying you should sell Mag pumps. I hate the damn things. I'm just saying that a lot of LFS are buying from these distributors when they'd be better off buying elsewhere, or being more creative with their purchasing.

 

[clamm]

have you tried what you are saying...

stores have to deal with economics. I doubt any store when they do an order buys 1 item...for the same reason if you order online, you probably wait to pick up a few things...rather then order one at a time..

Do you have a reasonable understanding of overhead...

Lets see...

How much per month do you think it take to run say...the aquarium gallery?

do you think lfs are getting rich...im just not understanding your arguement...

Less than if you pay $57 from the distributor.


Jeremy, I'm not saying you should sell Mag pumps. I hate the damn things. I'm just saying that a lot of LFS are buying from these distributors when they'd be better off buying elsewhere, or being more creative with their purchasing.

 

[marco67]

Wow I just don't know how to respond to this,
Rich how is Jeremy ever going to convince you to come down and buy a pump from him?
How will he / they ever live without you ?

 

[Moe_K]

Just a reminder to think before posting. Please don't engage in personal attacks - doesn't matter what you think of somebody's post. If you can't post without taking a shot at another user who irks you, then just don't post.
Thanks.