There are just some things that hobbyists don’t want to talk about. These include having an unwanted pest, losing a fish or coral for an unknown reason, or even worse wiping out an entire tank.
No one really likes to admit that they are having a problem. I found the same thing when I began asking around if anyone was seeing a downturn in the hobby. No one wanted to talk on the record, but when I promised anonymity folks were much more willing to tell me how things were going.
A marked slowdown
I spoke with over forty individuals in the industry ranging from manufacturers and wholesalers to collectors and home coral propagators. Sadly, all but one confirmed what I was thinking, business has slowed down markedly during the year. Even worse, the most common phrase used by these individuals was that they have seen a steep decline in business. Needless to say, this is not good news for the hobby, but what are the reasons for it and what does it mean for the long-term future of the hobby?
Signs that things have worsened for the hobby are everywhere. When looking online it is immediately apparent that there are far more sales by companies than ever before. Every weekend, and especially around any holiday there are far more sales going on than used to occur. This is typically a sign that things are slowing and that demand has lessened.
Freshwater aquarium conversion
Another sign is the continued closings of local shops or their conversion to freshwater. While the local shops have been suffering for at least the last decade, in the last year I have seen multiple shop closings while others have either reduced their saltwater sections or converted to be predominantly freshwater after the boom caused by COVID. All of these are indicators of possibly an even greater slowdown coming.
Many individuals have not been through an economic downturn, as the last one was in 2007-2008, so the large number of hobbyists who have come into the hobby since then have not experienced this. This is true not only for manufacturers, and distributors but especially for coral propagators. This leads to the question of what is causing this. Obviously, the easy answer is a slowing economy and higher inflation.
When people have extra disposable income in their pockets they spend it on their hobbies and will buy things that they otherwise would not. This might be a rare fish or an expensive coral frag. However, not most people have less disposable income owing to the higher cost of everything and for most of us when choosing between food or gas or a $200 coral frag, food and gas win out.
As a result, there is now less demand for higher priced things, like expensive corals or fish, and this is why prices for some of these items are starting to come down. In fact, at least a few coral farmers I have spoken to feel that right now there may be a glut of corals in their tanks and they are worried about what they are going to do with them. If they release them all onto the market and flood the market the prices will drop precipitously, and the market will be destroyed.
On the other hand, if they keep these corals they are starting to overgrow many of their tanks while still adding to their expenses. So right now many of the coral propagators are caught between a rock and a hard place in trying to figure out what to do.
This situation is also exacerbated by some other concerns. First, the cost of maintaining their systems and these corals has increased significantly over the past couple of years. Electricity costs as well as heating, food, salt, and even water have all increased significantly. So even for entities that are still selling close to as much as they did in the past, their margins have decreased significantly so even when they are selling as much as they used to, they are not making nearly as much.
Second, the cost of money has also increased dramatically. A fair number of individuals borrowed money to start their saltwater endeavors during a time when money was cheap, so their interest payments were low. However, now that they have to refinance or pay down this debt, they not only are making less on what they are selling, but they also are paying more in interest on the money they borrowed. This is further eroding their profits.
During COVID a fair number of hobby-related enterprises started when everyone was stuck at home, and having a reef tank to keep them entertained was a good diversion. Now that things are more back to normal, people are not trapped inside, so the demand for things to keep one entertained indoors has diminished. This has led to a further deterioration in demand.
This high demand, coupled with supply shutting down, Indonesia was closed during much of COVID and there were limited flights anywhere else, so there was little freight moving, and this all led to prices for fish and corals skyrocketing. Fortunately, this is no longer the case, as prices have stabilized, collecting stations are open and there are flights to everywhere again.
Reading all of this, one would tend to think it was all doom and gloom for the hobby. Fortunately, having been through the major economic downturns of 2007, 2001, 1999, 1993, and other minor ones, I am comfortable in saying that the hobby will survive and when we come out on the other side of this downturn the hobby will be stronger, if the past is an indicator.
So, what should we expect to see and what will all of this mean for the hobby? The first thing we will see is continued consolidation and a retraction in the number of entities involved in the hobby. We have already seen some of this with the Aperture consolidation and I expect we will see more in the near future. As in any industry during a downturn, the strong will survive and the weak will either be consumed or fail. In this regard, companies with high debt, small margins, or low sales will fail. Sadly, this will probably mean that some of the small niche companies or small coral farms will not survive.
Worse when the economy gets bad many hobbyists leave the hobby for various reasons and few get into the hobby. Some leave because it becomes too expensive to keep a tank or get new equipment or livestock. Others, like in Europe, leave because the cost of electricity gets too high, while some leave because their jobs require more time, so they just simply don’t have the time to put into the hobby.
This situation is not all bad as it can be an opportunity to acquire the tanks, equipment, and livestock from individuals leaving the hobby. Also, as demand goes down, prices typically go down as well, but it usually takes much longer for them to get near where they were before. Evidence that this is occurring comes from the seemingly constant number of sales that are now dominant online. And while it may be difficult for many shops, it can also be an opportunity for them to demonstrate their value, especially to new hobbyists.
Time to start enjoying the hobby again
From my own perspective, this difficult time will hopefully get many of us back to why we got into the hobby in the first place: for the pure enjoyment of keeping all the beautiful fish and corals alive and for the camaraderie rather than to make a profit. During times when it is easy to make money, it is enticing to do so. But when times get tougher and being profitable is more difficult the main reasons why you do something become more important.
For this reason, I am hopeful that despite the current economic climate the true reasons why we keep reef tanks will become more important and the goal of only doing this so that a profit can be made will diminish. This will only happen if the cost of starting and maintaining a tank comes down, but in past economic downturns, this is what has occurred.
There are many reasons for having a reef tank and after having many over the past forty years, I understand them all. Most of us who do this do so because we truly love this hobby and what we do and are passionate about it. For some, being able to make a profit or at least break even in the hobby has become the goal and as a result, the real reason for being in the hobby is lost.
Hopefully, even if things get tougher economically the reasons for being in the hobby other than making money will prevail. Also hopefully understanding that things might be tough right now, but that we are all in this together and will get through it might provide a little bit of hope.
The hobby is at another crossroads as there are more people in the hobby than ever, but not everyone has been through a bad economy, which will take its toll. But at the same time, it will also provide opportunities for those who make it through these tough times. At times like these, it is essential to have friends to talk with and help get us through this situation. And I really have no better friends than my reef buddies.