The Future of LiveAquaria…my thoughts

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While I try to be an optimistic guy…I am not so optimistic about the purchase of Drs. Foster Smith, and ultimately LiveAquaria, by Petco. I am pretty sure that I do not need to really explain myself on why that is the case.

I don’t think that Petco doesn’t care about the husbandry of fish or understand the market dominance of fish/reef…but it is not an advantageous business practice when you are a large corporation and all the matters is the highest profit margin possible (of course there are other things that affect it, like minimum wage employees that don’t have the passion as we do for fish and really don’t care…but I am sure you can understand the generality of the statement). When you look into the cost of fish, shipping costs, electricity, water, salt, loss of life, employees and what we actually pay for fish, you can logically infer that there really isn’t that much of a markup for the fish store owner. I also have spoken with people who have fairly in-depth knowledge of LiveAquaria and their actual numbers; LiveAquaria is basically a loss leader for the bigger picture of Drs. Foster and Smith, in regards to their dry goods side of their business model.

Considering LA’s fairly competitive prices, unheard of guarantee, top notch husbandry care, immediate and stellar customer service, I fully believe the whispers I have heard. It does make sense as a privately held business and it’s practice, if you buy fish from LA, chances are pretty high you will buy from their dry goods section, which has a much bigger mark up.

While an individual can survive off such a modest income…a corporation that has bloated executive budgets and shareholders to keep happy, will find it not worth the venture to try and pursue the reef/saltwater trade. My assumption is that Petco mostly just wants the dry goods, Drs. Foster & Smith, book of business and not so much the LiveAquaria portion. However, I am willing to venture that the owners want to just sell it in one whole lot and retire. They don’t want to sell a piece of it and run the other portion or sell a piece and then have to find a buyer for the other remains, they just want to sell and be done with it.

Here are few scenarios that I see happening:

1- Petco buys it and then immediately sells the live portion to a private investor or two and just washes their hands of it. We can hope that the private investor(s) keep the staff on board (especially Kevin) and allow it to function as it has and continue it’s very prominent and positive reputation.

2- Petco tries their hand at running an already proven business model, keeps everyone on board and let it run how it has been running and follow the model of, if it ain’t broke don’t fix it.

3- They treat Liveaquaria as they do the rest of their fish sections and it takes a massive dive and it becomes dismal at best. We then have one less option of the best places online to buy fish, that are some of the most well cared for and one of the best success rates in the biz and best guarantees as well.

While I am just speculating on what could potentially happen, the only real way I see LA sticking around as we know and love, is for Petco to sell it off to someone who isn’t big corporation minded, instead is small business minded. I do think that will be a very tough nut to crack, as you would need a vast knowledge of the saltwater and freshwater industry and I am guessing a sizable portion of cash to try and entertain the offer of buying it. However, there is one possible avenue I see that could with some real possibility of working and that is, Marine depot. They have recently started up the live portion of the coral and fish sales, of their business. They were pretty prominent in the online coral and fish game, but I think just didn’t see the value in having a “divers den” or WYSIWYG and kind of lost out the battle to LA and some of the others that offer that service. I do believe that they could potentially have the capital to purchase LA and the right mindset to pretty much leave it alone and follow in lockstep with it’s very much proven business model.

I do hope for a healthy and successful transition for LA and the current staff involved. It would be a shame to see it disappear into the night. What are your thoughts on the future of LA?

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  • that_Reef_Guy

    As someone who works in the Fish Industry I can tell you that you are wrong. Livestock has by far the highest markup.

    Dry Goods are much less.

    And there is 10 Times the markup on freshwater fish than saltwater.

    Were do you get your information that the money is made off dry goods?

  • Brandon P.

    that_reef_guy
    I do see where to confusion came in, i used mark up where the word profit may have been better used…but please note, I was speaking about profit margins, as the prelude to where the confusion happend…I applogize for the confusion there.
    However, Do not confuse mark up with profit…there is a very big difference.
    Fish may have a higher mark up, but they usually yeild much less profit once you factor in ALL things that go into the entire process of livestock (the shipping from the distributor, to housing and costs involved there and then selling the fish).
    My information comes from having worked in a fish stores and having very close relationships with local fish owners and speaking with them about their cash flow. I also know wholesale prices from many of the companies that sell wholesale in both fish and dry goods. Since you have been in the industry, you know that usually the more you buy, the cheaper the price is. While dry goods may not be as dramatic as a money make as it is for companies local fish stores…it is for these big copmanies that can buy in HUGE volume and sell in that same big volume.
    While I do not know the numbers of Petco…my business knowledge tells me that if fish were much more profitable, they would invest more time and money into their fish sections and actally try to make that a viable place to make money…but the reason, their fish sections, in regards to salt mostly, are dismal at best is because they don’t see the financial benefit as much as they do from dry goods or even the fresh water side.
    Also, keep in mind, that you can not copmare, soley the mark up on fish/livestock vs. dry goods, but the continious volume they sell in. I buy drygoods way more ofthen than I buy livestock. This further extrapolates on how company views which area is a much bigger money maker than others.

  • Brandon, I totally agree with your assessment… both of the future of LiveAquaria and your unintentional mis-use of the terms “mark up” vs “profit”. Profit = markup on ACTUAL cost (item cost + transport + taxes + maintenance + loss) X volume. There’s not a lot of volume in livestock, and retailers that lack the resources or desire to properly care for livestock can pretty much guarantee a high loss rate. Those with resources and interest in proper care of livestock pay more for maintenance of the creature. Most retailers try to move livestock before it dies to lower their losses without increasing maintenance costs. Livestock is often viewed as a “loss leader” because if the loss rate isn’t killing their profit margins, the cost of maintenance is. And stores so often compete on price rather than quality. It is very difficult to maintain a focus on quality with the price pressure as high as it is. It takes thick skin, lots of patience and really a kind of faith to wade through the pressure to create something as good as Divers’ Den. There’s a reason you don’t find many folks like Kevin in this industry.

    Love your blog, keep on reefing!

    Tracy Rhodes
    Crystal Sea Texas

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