So you want to open a LFS...

BonsaiNut

Premium Member
If you are a member at Reef Central, odds are that you have been in the hobby for a while. If you're like me, you intimately know every LFS in the area, and spend weekends driving from store to store, where you almost know the floorplans by heart and the names of all the employees.

So how come so many passionate hobbyists open stores that are doomed to failure? Why do you see people making the same simple mistakes over and over again? How is it that you can walk into a new store, and in a heart-breaking moment know that that store will not be open in six months?

I thought I would start a thread for people to talk about retailing 101 from the consumer perspective... what makes a great store and what are some reasons you don't return to stores. I am not trying to write a white paper about leasing agreements, insurance, and employee benefits... but rather what we as hobbyists want to see when we open a front door.

Here is MY list of a dream store.

(1) Location is not super critical. If you are an awesome store I will come to you. Do not pay a huge premium to get into an expensive location if it means you can only afford a small space or can't stock it adequately. Reefing is NOT an impulse activity. If you are awesome I will find out about you.

(2) Do not kill yourself by being open 80 hours per week... but BE THERE when you say you are open! There is NOTHING that irritates me more than when I show up at a store that is supposed to be open and no one is there. It means (a) you don't care about the store and (b) you don't care about me.

(3) Cleanliness is key. Aquarium stores require a ton of labor to keep clean. If you aren't CONSTANTLY cleaning it shows. Salt on glass, wet/dirty floors, rust, are all turnoffs. I understand if you are busy that you can get some short-term messiness, but if I am the only person in your store and you are sitting at the front register while your store is dirty... no good.

(4) Messiness. This is associated with (3). Have an organized store layout. Be neat and organized. Your front register area should not be cluttered with bills and receipts and god-knows-what. Your fish/invert packing area should be clean and organized. If you do tank construction or have plumbing parts, have a cleanly delineated area where you do this work. Do not have mops and brooms and buckets lying all over the place.

(5) Health. EVERYTHING ON DISPLAY needs to be 100% healthy. ANYTHING that is sick/injured should be relocated to a hospital area of the store that is not open to the public. Dead stock needs to be removed INSTANTLY. If you don't understand this basic tenet - get out of the business instantly.

(6) Store space. Use your space wisely. If you have display tanks, they need to be pristine examples of the best tank that you can create - or else don't have them. All livestock tanks need to be stocked, or in the process of being cleaned/maintained. No empty tanks. If you have empty floor space in the store, put yellow tape on the floor and put a sign there saying "more cool stuff coming soon." It shows you have a plan and are actively managing the store instead of just too lazy to figure out what to do with the retail space you are paying for every month.

(7) FAQs. If you find people asking the same questions over and over, make signs! This can be something as basic as whether or not you have a bathroom, or can be something like a list of services: "YES we custom build systems. YES we custom order tanks. YES we offer maintenance service. YES we will take care of your tank while you are on vacation." This shows professionalism and will also create an awareness and generate additional interest from consumers.

(8) Service. Be polite but not overly aggressive. Do NOT ask "how big is your tank" or "how long have you been in the hobby". If you are initiating conversation, always relate it to what the consumer is doing at the time. If the consumer is looking at tanks, say "we can custom order tanks if you don't see one that works perfectly for you". Or if the consumer is looking at lighting fixtures, say "I'd be happy to tell you more about that LED fixture if you like." If the person is just looking say "My name is X, I will be over here working give me a call if I can help you."

(9) Inventory. Know what you want to specialize in, and then specialize in it. Don't try to be all things to all people and then fail at them all. If you want to do planted freshwater, make sure you have at least 10 tanks of plants... or don't bother. If you are going to do large saltwater fish... have at least 2 x 180 gallon tanks of large fish... or don't bother.

(10) Competition. Know who your competition is... and don't be them. You are smart. Why is it that in your market there might be 10 stores... but there is 1 store that "rules them all". What is it about that store that sets it apart? Don't be like the other 9 mom and pop / hobbyist stores that are sad carbon copies of each other.

(11) Online. Have a presence. Worst case, have a simple one page web site with your location, contact info, hours of operation, and description of your store and what you offer. People spend WAY TOO MUCH TIME trying to make their web sites pretty and not enough time trying to make them helpful.

(12) Employees. Last but most important - hire great people. Train them. Tell them EXACTLY what is expected of them. Have a dress code - even if it is jeans and a black t-shirt. Never EVER sit when someone is in your store. You should be working, working, working. If there is nothing to be done it just means you haven't looked hard enough. Worst case, clean.

More stuff when I think of it....
 
(2) Do not kill yourself by being open 80 hours per week... but BE THERE when you say you are open!
Be open until 7pm and at least one day on weekends.


(6) Store space. Use your space wisely.
Inverts on a separate system from the fish.

(8) Service. Be polite but not overly aggressive. Do NOT ask "how big is your tank" or "how long have you been in the hobby".
Please DO ask questions with regard to whatever I'm looking at. If I'm looking at a fish that will be large, ask what sized tank I have so that I don't buy a fish that will outgrow my tank. It would really **** me off if you knowingly sold me a fish that'll outgrow my tank. It would also **** me off if you sold me a fish that would eat my other fish. If I really want that fish, suggest a tank you sell (it should be in stock in your store) that the fish will fit in. Ask me if there is something in particular I'm looking for (fish, skimmer, etc.) and offer to special order it for me.

(9) Inventory. Know what you want to specialize in, and then specialize in it.
Carry a wide variety of brands. Most LFS I've been in only carry the cheap stuff or only carry one model of skimmer or light. When talking to the owner of the closest LFS to me, he will tell me he prefers X brand heater, but does not have them in stock (or carry them). If I want cheap price and cheap quality equipment, I can easily go to Petco for that. Have what works well. Goes with all equipment; skimmers, test kits, etc. If you want my money, have something I want to spend it on. I've never seen a refractometer in a LFS, but should have at least once.

(11) Online. Have a presence.
Posts pictures of your store, inside and out, so I can get a feel for what kind of place it is and will recognize it when I drive by looking for it. Show some livestock photos.

(12) Employees. Last but most important - hire great people. Train them.
Train them to go ask someone more knowledgeable if they don't have the correct answer. Nothing turns me off at a LFS more than a new employee trying to BS me when he doesn't know the answer.

(13) Have a good sized tank of whatever your store specializes in, be it planted freshwater or reef. Show the people walking in the door what they are capable of having in their homes with the right amount of time, knowledge and money spent. Make it your crown jewel, so to speak. Keep it perfect, like some of the TOTMs here at RC. Use it as a showcase of your products, livestock and expertise. Make me want to replicate it.
 
Know how to compute a break even point and have a business plan that incorporates that understanding. Under no circumstances finance this endeavor using your credit cards.
 
Cleanliness is important for me too. I also don't care about location and I've driven pretty far to go to the LFS that I prefer.

I don't expect every employee to have a PhD in marine biology but I do hope that they are able to explain some basic things and not b.s. me when they don't know what they are talking about.
 
I'll add to this. The margins on dry products in this business are very poor. As in, if you think you're going to sell skimmers, powerheads, etc. and get rich, you're going to end up poor.

Aside from all the other good advice, a store owner should really focus on livestock and servicing tanks. Especially incorporating a grow out display tank. One of my LFS's has a beautiful 300 gallon cube reef and they aquaculture and sell a ton of frags from that display. The best part about this is it serves two purposes. As mentioned most customers want to see your talent at work and you make money off it with very little cost because you would have the display anyway. As far as servicing tanks, most stores will tell you that's their bread and butter.

One final point someone said in a different thread, and I'm paraphrasing, "Don't turn a fun hobby into a job, because it will no longer be a fun hobby." I think this is definitely true as many store owners I've talked to don't keep tank at home anymore. Just something to think about.
 
Good thread. There are several stores in my area and ALL of them violate 2 or 3 of these. Some, all of them.

Unfortunately, it seems the more successful stores tend to focus on the high margin, high turnover items, and the neglect in the other areas is all too obvious.
 
I agree with everything except (1), we had a great store here in SA, and although word got out it wasn't enough. Another store had the same thing so they moved to a better location and today is thriving. Location is important, at least here in San Antonio
 
Sorry to be such a downer, but the demands of running a profitable business usually mean most the rules hobbyists would like to establish won't ever see the light of day.

1. Retail livestock prices haven't risen much since I was selling them in 1995. I imagine wholesale prices have risen greatly. Considering that plus overhead, shipping, loss, and all the other costs of selling them, it has to be almost impossible to profit from this portion of the business. And... While great to provide extra cash to support a hobbyist's habit, fragging can't be a viable profit center when the overhead of running the frag tank is considered.

2. Someone here already said it... An LFS can't profit selling big ticket hardware i.e. skimmers, power heads, reactors, lights, controllers, and etc. The internet has the price point on that. Internet sites and big box stores sell these items cheaper at retail than the LFS can buy them from their distributer. Tanks, stands and the like fall into this category. Unfortunately, you have to tie up capital & floor space with these dust collectors just so people will shop at your place.

3. This explains the need of LFSs to sell products that most hobbyists know are unnecessary. That's where the profit is. Expensive bottles of this, glitzy packages of that, highly marketed but worthless food products, miracle filter media, & etc. are where retail profits are realized.

4. Servicing tanks can be profitable, but everyone does it. The market in most places is flooded with "professional" aquarium maintenance technicians. Absent brick & mortar overhead, the internet allows them to compete even for dry goods and livestock sales.

I'm afraid the LFS business model is going away... at least those capable of serving hobby level customers. There's just not enough profit in it.
 
Sorry to be such a downer, but the demands of running a profitable business usually mean most the rules hobbyists would like to establish won't ever see the light of day.

1. Retail livestock prices haven't risen much since I was selling them in 1995. I imagine wholesale prices have risen greatly. Considering that plus overhead, shipping, loss, and all the other costs of selling them, it has to be almost impossible to profit from this portion of the business. And... While great to provide extra cash to support a hobbyist's habit, fragging can't be a viable profit center when the overhead of running the frag tank is considered.

2. Someone here already said it... An LFS can't profit selling big ticket hardware i.e. skimmers, power heads, reactors, lights, controllers, and etc. The internet has the price point on that. Internet sites and big box stores sell these items cheaper at retail than the LFS can buy them from their distributer. Tanks, stands and the like fall into this category. Unfortunately, you have to tie up capital & floor space with these dust collectors just so people will shop at your place.

3. This explains the need of LFSs to sell products that most hobbyists know are unnecessary. That's where the profit is. Expensive bottles of this, glitzy packages of that, highly marketed but worthless food products, miracle filter media, & etc. are where retail profits are realized.

4. Servicing tanks can be profitable, but everyone does it. The market in most places is flooded with "professional" aquarium maintenance technicians. Absent brick & mortar overhead, the internet allows them to compete even for dry goods and livestock sales.

I'm afraid the LFS business model is going away... at least those capable of serving hobby level customers. There's just not enough profit in it.

What he said. Service is profitable, a brick and mortar store without a significant service business is a loser.
 
As someone who has run a shop (albeit not my own but one I helped build) and someone who is definitely a hobbyist at heart, I would really really caution anyone who wanted to make it a career. TBH the day to day was good and its always nice to talk to like minded people but there is a massive downside and that is partly some customers who just don't care and treat the animals in their care as replaceable decorations, but mainly the loses you will see. Whilst corals are generally bombproof and hard to kill if you do it right, fish on the other hand seem to create ways to kill themselves. This means that you will get a very quick education on disease whether you want it or not (and you can't know and prepare for a lot of it until you see it) but you will see dead fish no matter how good your husbandry is. Picking out a dead neon may not seem like much but when its an Achilles or equally stunning creature you will really begin to take it in. Its worse when you get so used to pulling out the deads that it hardly registers or when you have had a fish for months and someone kills it straight after buying it. There was a thread by an English fishkeeping mag that showed fishshop employees were more likely to commit suicide than most occupations and I can kinda see why.
I definitely don't miss not working there as its not like owning a tank, not that i'd ever call that relaxing. Saying that, take out the fish and do corals only with maybe a few inverts and I would be tempted to put my toes back in the water.
 
While I'm sure I know the least of anyone involved in this discussion about the business (and maybe the hobby too), I think two things are critical to LFS success: 1) service accounts; and 2) new hobbyists. Service accounts are critical because there is no competition from on-line sellers. New hobbyists will generally pay at least somewhat of a premium for the 'knowledge' (some real and some imagined) of the people at the store and have empty tanks to fill (often several times as they repeatedly kill their livestock). Experienced hobbyists, on the other hand, have mostly full tanks and are not killing their stuff making room for new stuff. They also know every LFS within at least a hundred miles and every on-line retailer so their few purchases are spread out.

While we, as experienced hobbyists maintaining our own tanks, would like to think we're critical to our LFS's success, we may be the least critical demographic to their success.

At the core of it, I don't think many will make a lot of money running a LFS so the only reason to get in the business may be a love of the hobby but, it may be difficult to preserve that love while owning/operating a store. Don't get me wrong, I've seen some great LFS but I shudder to think of the hourly wages of the owners and employees alike.


Matt
 
Newbies were once the life's blood of LFSs. While this is still somewhat true, the relationship doesn't last as long. Now there are forums like RC and vendors like BRS that can meet the needs of people who have just a little knowledge quite handily.

I've put a pencil to every brick & mortar business model I can think of and can't find the right combination for my area (Midwest, ~500,000 people).
 
1) I don't know what wholesale prices were in 1995, but they are still ~1/3 of what I see retail prices at for most things. I have noticed that there is a large risk/price tradeoff. The local place that drives in stock in small quantities has high prices. The overseas place that ships in livestock has substantially lower prices, but you need to order enough to make the shipping worth it and that is a LOT of unboxing the day the order arrives. All that said, the livestock still isn't making much given losses, holding cost, etc.

2) Frag tanks can absolutely be profitable but not if they are taking up prime retail space. It's also all in what you're growing. If you're growing gsp, xenia, trash paly's, frogspawn, etc you'll never break even. If your frag tanks are ugly left-overs run in an effecient way and you're growing high dollar stuff you can actually move it then you can do ok. Honestly I think this is easier as a hobbyist or internet retailer because you can sell frags to a pile of different stores, or lots of localities rather than flood your customer base. Of course you need to be able to identify and grow the expensive stuff while it's still expensive.

3) Another vote that the LFS can't sell big ticket items to a new guy. I do see a lot of experienced guys that stock up on store credit from frag sales then get the big ticket items though. I also see a lot of people on accounts that pay retail to the shop when they set up or upgrade.

4) The LFS around me makes money on a couple places:
a) New setups for higher end stuff. Someone wants a 120 gallon all in one tank, something you can't buy at XMart, they buy it there. I'm pretty sure this only works in a big city.
b) Small dry goods and water. That $20 jar of calcium supplement adds up. The LFS near me sells somewhere at least $1500 in water every week, and pays maybe $300 to make it all. Most of this is to service accounts (see item c).
c) Service accounts. One or two isn't going to do it, but when you can charge $50/hour for someone you are paying less than $10/hour it turns in to something. Multiply this by 5 or 6 techs and it keeps things going. Even better when you are selling stuff at full retail to the people on the accounts. The last couple managers of small LFS I've talked to have said they only keep a store front because it lets them get service accounts. In this regard having a sign visible from the freeway is pretty valuable for places that don't actually have particularly good service. Obviously this doesn't help a startup.
 
4) The LFS around me makes money on a couple places:
a) New setups for higher end stuff. Someone wants a 120 gallon all in one tank, something you can't buy at XMart, they buy it there. I'm pretty sure this only works in a big city.
b) Small dry goods and water. That $20 jar of calcium supplement adds up. The LFS near me sells somewhere at least $1500 in water every week, and pays maybe $300 to make it all. Most of this is to service accounts (see item c).
c) Service accounts. One or two isn't going to do it, but when you can charge $50/hour for someone you are paying less than $10/hour it turns in to something. Multiply this by 5 or 6 techs and it keeps things going. Even better when you are selling stuff at full retail to the people on the accounts. The last couple managers of small LFS I've talked to have said they only keep a store front because it lets them get service accounts. In this regard having a sign visible from the freeway is pretty valuable for places that don't actually have particularly good service. Obviously this doesn't help a startup.

Service makes money (although techs make slightly more than $10 per hour and there are costs other than labor such as automobile expense, insurance, etc.) but the rest is not profitable or at best marginally so especially if compared to opportunity cost. Do the math to find break even point and you will see immediately that this is the case.
 
Location location location. Most cities near beaches have the greatest population of hobbyists. I know here in CT there is a great number of clubs, hobbyists, stores etc. for a small state. If I were opening a store I would look at location before anything. Even if it meant moving or commuting daily.
 
Service makes money (although techs make slightly more than $10 per hour and there are costs other than labor such as automobile expense, insurance, etc.) but the rest is not profitable or at best marginally so especially if compared to opportunity cost. Do the math to find break even point and you will see immediately that this is the case.

Might be area dependent, I was very surprised to find out how little lot of the techs around me were getting paid. It might be one of the reasons that LFS has fairly high employee turnover, but it doesn't seem to cost them enough accounts to fix the issue.
 
I used to manage a lfs , the best time to stock up on dry goods / tanks and fish was after tax time and the fall . A lot of people still look forward to starting up and re stocking around those times of the year
 
I tried to spread my support of LFS around and drove to 2 different new stores I had never visited last week. Won't be returning to either - both had dead fish in more than 1 rank, algae running rampant, frag tanks that were in pathetic shape. So the closest LFS will keep my business - it follows all the points the OP made. Beautiful, clean display tanks, healthy stock, and great customer service. When my tank (that my husband had bought there) sprang a leak after 3 years they boarded my clown pair, shrimp, inverts and corals for 5 weeks while we set up and cycled a new tank that they ordered for us at cost. That kind of service and store keeps customers coming back.
 
I live in the sticks so any new purchase is a drive.A new lfs opened in the next town over tanks did look good with nothing dead and very light load in each display owner was quick to let me know he was not at full stock do to cycles not being complete. He did not want to kill things just to have inventory and was willing to order what ever I wanted him will visit this store again. Was glad to hear he would not kill stock just to have it.
 
1)

4) The LFS around me makes money on a couple places:
a) New setups for higher end stuff. Someone wants a 120 gallon all in one tank, something you can't buy at XMart, they buy it there. I'm pretty sure this only works in a big city.

This makes a lot of sense. I live in the middle of the Midwest and am in the process of getting a new tank setup. Planning on a Red Sea Reefer, and cn't buy direct, very few sources online (mostly ebay) with very high shipping fees. Closest two shops that have them in stock are 4 and 5 hours away, respectively. Maybe I'm in a dead zone, but unfortunately my two LFS cannot or will not work to get the tank for me.
 
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