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Reef Exports Hit Hard By Ongoing Regulatory Issues

Ongoing regulatory issues mean high-end livestock availability has suffered, but retailers see a silver lining in aquacultured animals.


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Livestock sales are the cornerstone of the local fish store business model, retailers and industry experts reported. While other segments of the pet industry have moved away from sales of live animals, aquatics specialty retailers have seen this aspect of their business grow in recent years. Still, while this has proved a competitive boon for smaller aquatics retailers, increasingly, environmental pressures and regulatory issues have crept up and are now affecting the trade in aquatic species.

Regulatory issues are on the minds of almost all aquatics retailers. The recent Indonesian coral export ban highlighted the power regulatory changes have over the future of the hobby.

“The Indonesian coral ban has had a major impact on business,” said Joseph Verdino, owner of Joefish Aquatics in Fort Myers, Fla. “Indonesia was the go-to source for a majority of the corals that were coming in. They’ve also restricted maricultured specimens as well.”

Although the ban has reportedly been lifted, retailers dealing in corals from Indonesia said this doesn’t appear to be the case.

“There are no coral of any kind coming out of Indonesia,” said Jim Pedicone, manager at Beyond the Reef in Schaumburg, Ill. “I get most of my coral now from domestic distributors, and they’re getting their livestock from various other places. From what I’ve heard, it may not ever open back up, and, even if it does, it won’t be for five years. I think a lot of the people who are saying that it’s going to be opening soon are just engaging in wishful thinking. That’s my belief.”

Obviously, the ban is affecting retailers who carry corals the most, but few local fish stores focus exclusively on freshwater species, and the ban continues to hit the aquatics industry as a whole.

“The Indonesian ban is making things quite interesting right now,” said Jess Viscovich, manager of Diablo Corals in Concord, Calif. “It’s still in effect. They’ve attempted to ship a few boxes here and there to a few distributors. But from what we’ve heard, it sounds like their [government] is very against sending anything from the reefs outside of Indonesia. The worst part is, it’s affecting the mariculture side of the industry, too. This ignores what mariculture not only offers to the reefs, but what it offers to us as end-users not taking from the reefs, as well.”

Marine fish availability is also directly impacted, even though these aren’t yet prohibited under the coral ban, because of how species availability overall is limiting distributors’ ability to ship fish.

“Before the ban, I could get marine fish direct along with coral, and then it made dollars-and-cents logic to be bringing fish in as well,” Pedicone said. “Otherwise, if you’re just bringing fish in, it’s not something that’s going to be cost effective weight-wise for freight.”

There’s growing concern within the hobby that many coral species won’t be sustainable in the wild in the long-term, and retailers are already feeling the squeeze when it comes to limited availability.

“It’s affecting everyone,” said Juliane Chambers, assistant manager for the Aquarium Center in Clementon, N.J. “I don’t know if I’m 100 percent against [the ban]. Corals are disappearing in the wild. It is a problem, and everybody needs to acknowledge it.”

Though widely publicized in the hobby, the Indonesian coral ban isn’t the only regulatory consideration on retailers’ and industry professionals’ minds.

“We now have statewide sales bans of puppies, cats and rabbits,” said Laura “Peach” Reid, president and CEO of Fish Mart, a supplier of tropical and marine species, headquartered in West Haven, Conn. “Activists have also focused on fish, the latest being the betta. Yellow tangs have become much more difficult to obtain and are more expensive. The city of Cambridge, Mass., banned all animals from pet shops except fish, and they thought about banning them, as well. Everyone in the pet community needs to understand this very real threat and become engaged on the legislative level to responsibly protect our rights for pet ownership—be it fin, feather or fur.”

Competition

Hometown Advantage

While local fish stores still retain a competitive edge when it comes to actual livestock sales, regulatory changes and market pressures are such that online competition continues to ramp up.

“We definitely crush the big-box stores because they don’t really offer a lot when it comes to livestock,” said Joseph Verdino, owner of Joefish Aquatics in Fort Myers, Fla. “They can’t compete with the little guys. However, online retailers have the resources behind them. They do cut into the livestock market. Still, I find that over 90 percent of my clientele want to see livestock before they buy it.”

This remains the biggest competitive advantage to aquatics livestock retail, industry experts reported.

“Customers definitely want to look at what they’re buying,” said Juliane Chambers, assistant manager for the Aquarium Center in Clementon, N.J. “If you buy online, you don’t know how the fish looks. You don’t know if it’s going to show up alive. It’s just a lot better buying experience in-store. You feel like you’re more connected to what you’re getting.”

Hobbyists can comparison shop for aquatic species in-store with their smartphones, and this is impacting local fish stores, but, for the most part, brick-and-mortars still have pricing power.

“Being able to see fish in-person is a big factor,” said Jess Viscovich, manager of Diablo Corals in Concord, Calif. “We have a large number of customers that come in who are on their phones looking at LiveAquaria.com or BlueZooAquatics.com, the larger online vendors that can send out fish at a cheaper cost. So we do find ourselves every once in a while having to be super competitive with online pricing. For the most part, though, we can still set our own price. I’d say probably 70 percent of our customers still rely on us for the knowledge of what they’re putting in their tanks, which allows us to put a premium on our fish.”

Offering superior service, including educational advice and customer attention, is also a major factor in what keeps local fish stores competitive.

“Stores that cater to their clientele’s specific needs have the best competitive advantage of all,” said Laura “Peach” Reid, president and CEO of Fish Mart, a supplier of tropical and marine species, headquartered in West Haven, Conn. “Stores that carry livestock and have excellent, knowledgeable customer service win every time.”

On the Market

What’s Available?

The coral ban has hindered the arrival of new species in the aquatics hobby to an extent, but most new arrivals to retailers’ tanks are generally captive-bred now anyway, industry insiders reported.

“Most of [what’s new] is coming in by way of various types of clownfish that are constantly being bred,” said Jim Pedicone, manager at Beyond the Reef in Schaumburg, Ill. “As far as new species of fish, it’s very minimal now. Especially since the coral trade has taken a hit in the last eight months or so, we’re not seeing as many interesting types of coral coming in.”

With shifting availability, many retailers have had to look to different geographic regions to supply their livestock needs. Most corals in the trade are still collected from the wild or maricultured, and while Indonesia previously accounted for roughly 80 percent of the trade in such corals, retailers reported, demand has shifted to Fiji, Australia, Vietnam and other locations to fill retailers’ tanks.

“We’ve been having to go the Fiji route to get the bread-and-butter stuff because [livestock from] Australia is just too expensive,” said Jess Viscovich, manager of Diablo Corals in Concord, Calif. “It’s different. It’s not the same quality. The corals aren’t the same. We’re able to get small, maricultured acros [Acropora spp.] from Fiji that are similar in shape and size to what we would get from Indonesia. That helps. We’re also able to get leathers and some cheaper Euphyllia corals from them. But they’re still not Indo.”

Several types of coral are popular, including mushroom corals, acans, acros, small polyp stony corals and others.

“We’re doing a lot of Aussie stuff, and there’s a little bit of stuff coming out of Vietnam,” said Joseph Verdino, owner of Joefish Aquatics in Fort Myers, Fla. “Without a doubt, rose bubble anemones do well, and any of the Euphyllia corals, such as hammers, torches and frogspawns, also do well.”

Overall, fewer coral color morphs are appearing on the market.

“Our industry is constantly seeing new and different color morphs of corals that bring excitement to hobbyists,” said Cynthia DeLillo, media manager/in-house biologist for Quality Marine and Aquatropic, an aquatic livestock wholesaler based in Los Angeles. “However, due to certain countries being shut down for coral export, we have seen fewer new color morphs and species circulating.”

With fewer varieties appearing in retailers’ tanks and mature coral colonies being difficult to find, coral frags are gaining market share.

“I’m selling a lot more frags now, that’s for sure,” Pedicone said. “Small polyp stony corals, of course, are always popular. As far as marine fish go, we’re mostly seeing new stuff in the clownfish trade, and not a whole lot beyond that.”

Marine fish are still seeing new species introductions to the hobby, DeLillo noted, including several aquacultured varieties of clownfish, the nursalim flasher wrasse (Paracheilinus nursalim), and aquacultured white moon angels (Pomacanthus maculosus cf.). In general, what’s new is coming from the aquaculture trade.

“There’s more new in terms of what’s available on the captive-bred side,” Viscovich said. “There are a lot of cool clownfish variations from Sea and Reef Aquaculture called black storms. Other breeders have been using these black storms for breeding, and they’ve been out long enough that now we’re already starting to see crossbreeding with the onyx. We’re getting orange storms now as well.”

Most bread-and-butter fish species, including community fish, peaceful reef-safe fish and relatively common marine fish, are still very popular in the hobby.

“Our top saltwater species are yellow tangs, coral beauty angels, royal grammas, six line wrasses and just about any type of clownfish,” Verdino said. “On the freshwater side, I don’t really have big competition for freshwater species in my area. I have over a hundred tanks of freshwater species in my store. African cichlids, any of the peacocks and bread-and-butter community fish do well. Predatory fish are a big deal in my area.”

Margins and Merchandising

Making the Most of It

Regulatory issues are putting pressure on retailers’ coral profit margins, industry experts reported.

“Our margins are definitely getting squeezed,” said Jim Pedicone, manager at Beyond the Reef in Schaumburg, Ill. “We have to revisit pricing and see what the market will bear.”

The ability of retailers to pass additional costs for livestock on to customers may be limited, but so far the profit squeeze hasn’t hurt business too badly.

“The hardest part for us is [that] the cost to land corals right now is high,” said Jess Viscovich, manager of Diablo Corals in Concord, Calif. “It does adjust our pricing. My markup is suffering. Even though we’re getting premium pricing on the corals, we also have to increase the base price of the coral because of what the landed cost is of that same coral. As much as we would like to say we’re holding value on corals retail-wise, I’m not sure if we’re holding the value or if people are starting to realize that the price of everything has gone up since the Indonesian coral ban. It’s forced our hands. I still haven’t seen a huge increase in customers saying our corals are too expensive. They’re still spending, which is nice, but our profits are not the same.”

Regardless, livestock sales continue to be a major contributor to local fish store profitability, experts stated, and there are various methods retailers can use to help drive sales.

“There are loads of great ideas to grow customer loyalty, from the tried-and-true loyalty cards that provide discounts to gift cards,” said Laura “Peach” Reid, president and CEO of Fish Mart, a supplier of tropical and marine species, headquartered in West Haven, Conn. “Offering in-store programs on setting up a goldfish pond, a community tank or reef tank help drive interest and sales.”

Social media is also an excellent outreach tool for retailers, enabling efficient direct contact with livestock customers and keeping them engaged with the hobby.

“Many [local fish stores] do an exceptional job at marketing,” said Ryan Voth, sales manager for Quality Marine and Aquatropic, an aquatic livestock wholesaler based in Los Angeles. “What seems to make the biggest impression these days is advertising via social media such as Facebook and Instagram. Once customers are in the store, it’s up to retail staff to steer consumers towards success by offering up great instruction and advice so they don’t fail with their aquarium and get frustrated to the point where they stop being aquarists.”

Social media offers great opportunities to bring in new customers.

“It’s all about getting new customers in,” Pedicone said. “While we love long-time customers, they’re sometimes already maxed out in their tanks. If I don’t continually get new customers, we stop growing, and then at some point it becomes impossible to stay in business. Our [social media] ads are designed to … bring people in and make little to no money on the things that I’m putting out there for sale, just to get new customers in to create new relationships.”

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