Thursday, December 18, 2008

Back at Home!

Hello everyone. Sorry for not posting for so long. It has been a hectic month in Indonesia with very poor internet connections everywhere. I'm writing this from my home in Dublin, California. I've been back for a week now and didn't expect to be so busy, and now finally I'm able to catch up on my blog. So many things have changed since 7 months ago, the last time I was here. We now have a new president (coming soon with change - and I'm not talking nickels and dimes). The gas prices have dropped in half - was teetering around $4 a gallon before but now I just filled up with 87 regular for $1.69 a gallon! Wow holy cow! Now I can afford to take that trip down to southern Cal to go see my customers and visit the big wholesalers. And of course, the downturn in the economy has really taken a toll on the aquarium trade, especially in the Bay Area.

Let's take a minute and talk about why the Bay Area has been effected so severely by the worsening economy. It all started with the inflating of real estate some years ago. I remember my cousin telling me that real estate market overall, especially California, was a big bubble. He has many properties in Louisiana and saw the market go haywire. I mean you literally would buy a median house for $500,000 here and it would be valued at $600,000 in a year or less. I saw my customer's million dollar homes double in a year! What was driving these properties to skyrocket? It is simple, the "supply and demand". The banks and underwriters (people who find loans for people) were too quick to give out easy loans as the real estate market boomed. Bad credit score, no problem- the underwriters found a way. If one bank would deny, then another one would except. Even the banks knew that the property would go up in value, so they were not worried about giving out easy loans. Banks were fighting each other to give out the easy loans! It is like the fishermen in Indonesia, the guys collect every coral there is, regardless of being sellable or not. Why? The reason is that the fishermen feel if they don't get the coral, then someone else will. Because of intense competition, and even if they make no money, this kind of thinking is engraved into their heads . Just like the banks fighting each other, consumers were also battling for homes because there were not enough to go around. Who made the most money at this time? The underwriters and real estate brokers, and of course if you happened to sell your house at the time. If you were an agent and just listed a house for a client, no problem as the buyers came looking for you instead of the other way around. And of course, 10 buyers fighting for the same house, drove up the selling price. Are you getting this? Heck when I sold my house, it didn't even make it to the market. My neighbor wanted it. I'm sure he is regretting it now, and that was about 4 years ago.

So let's say a lucky guy who bought a house for $500,000 (the original selling price was $450,000) with virtually no money down, now has $100,000 in equity a year later (meaning the market value of his house is at $600,000). He borrows more money from the equity of his house to buy another house (or cars, takes a vacation, pays off credit cards, remodels the house, or even buys a new reef tank!). For the second home, he simply rents out the place (remember there is a shortage of homes) so finding a tenant is no problem. He may do this again and find out that making money in real estate is easy (like I thought too)- not! What makes things worse is people with good credit scores were able to get easier loans without income verifications - it was good enough to just state how much you made on the applications and virtually everyone looked the other way.

Well, the good old days of the real estate boom came to a halt when the market started correcting itself. Just like the Nasdaq stocks going up the roof some years ago, the bubble burst. Remember back in the days when a high tech company would go public and their stocks would skyrocket? It was all hype and as more people bought the stock, it just kept going up. Analysts were saying that it was a bubble and that it would correct itself. Of course when it did, people lost their pants off (including me, lost $85,000 in one day - crap, that was a lot of tanks I cleaned!). The companies that people were buying shares of really didn't have anything to show, only debt. It was all driven by hype and talk. Well just like the high tech stocks, the housing started to take a tumble.

Let's get back to the guy with his house. So now the $500,000 house goes all the way up to $800,000 in a few years. Of course by then, the lucky guy (not so lucky is coming) had taken more money out of his prized house. The problem is that he originally signed up for interest only loans that were good for a few years at a real low rate. So he simply made small payments and banked on the property going up in value. Real bad things started to happen. The housing started correcting itself and the value of the house came back down to earth to the original $500,000, or even less, depends on when the property was bought. So now the "lucky guy" is not so lucky. He has borrowed against the property and owes tons to the bank. He also sees his other properties sinking like the Titanic. To top if off, all the property tax he has to pay! Sound familiar? The poor investor eventually short sells his properties and looses everything. So now who looses the most in the end? The banks do! They gave out all these easy loans to everyone and their mother and the homeowners can't pay! Their homes lost all value and now the banks are forced to take over (foreclose) and sell the homes at below market - if they can sell.

This scenario has been happening all over the US recently. So now the huge financial institutions like Countrywide (US's biggest home lender) is filing chapter 7,11,or 13 or 21, 22, 23, or whatever. Then what follows is a domino effect. After Countrywide, other banks and institutions are being hit. Big banks are being bought out and others are just filing bankruptcy. The stock market responds very negatively to this. The consumers panic and starts to sell off the stocks to get cash in hand, can't trust the banks and invest firms as they are going out of business. Then triggers a global economy meltdown. When you have the top dog go down the tubes, like the US, there is panic and everyone follows. Funny thing is that as the economy worsens in the US, the dollar gets stronger overseas. I'm not a financial analyst or anything so I can't explain all the details. All I know is that I bought my house in the beginning for $300,000. I sold it for $700,000 at the peak 6 years later. I was forced to sell to continue to fund my loosing Tonga operation. I just drove by today at my old house and saw other houses for sale in the neighborhood selling for $400,000! Ha! I guess I got lucky in selling when I did, although I have nothing to show for - except my experiences from Tonga. But I never look back, one day when I get more successful, I'll march back to the pathetic island and take what is mine.

So, yah no one has any money these days in the Bay Area. Industries like the aquarium trade, takes a heavy toll because it is a luxury item. This leads to my main topic for today's post.

The Bay Area has three large wholesalers and several small guys. One big player has already folded. And sorry to say that the biggest wholesaler, Aquatic Specialties and Pets, is the next victim of the downturn of the economy. Robert Rodriguez is the owner and a dear friend of mine and I am very sad to see him go. Well, not quite. Robert has decided to forgo his lease on his monster warehouse and downsize his operation.

Here is Robert's background in the aquarium hobby. He is an electrical engineer by trade - a modern day Mac Gyver! Can fix anything you can imagine - except for the housing crisis. I first met Robert back about ten years ago at Aquaplex Products (local acrylic manufacture of fishtanks). He had just taken over a dry goods wholesaler from across the bay and was setting up shop nearby. Robert was there ordering zillions of tanks and cubes for his new fish room. I was excited about a new wholesaler in the area and needed more sources for livestock for by thriving maintenance business. I also met Bob Boone, an old timer in this industry and had just given up the option to go to the Solomon Islands for consulting, to work with Robert. They are old friends from the past and worked for another wholesaler nearby - although at different times.

To Robert's credit, he had his own retail store before. He moved onto wholesale in the South Bay. He then sold his wholesale and took a job as a general manager with Pan Ocean, a large wholesaler in the Hayward area. Robert is an incredible leader and can see the strengths and weaknesses of people right away. With his talent, he turned Pan Ocean around. He took the company from loosing sales every year to an astounding comeback in no time. All good things come to an end and after years of running Pan Ocean, it was time for him to move on. Robert subsequently bought out a company called L&N sales (all dry goods distributor) and made plans to open up the largest wholesaler in the Northern California with livestock.

Later I come to find out that Robert and Bob had originally had plans to not to sell to maintenance companies. They felt the maintenance guys were working out of garages and the brick and morter retail shops were disgruntled by them. No overheads and yet buying everything at wholesale. I can understand, the funny thing is that this policy was put into place at Pan Ocean by Robert and thus I wasn't allowed to purchase from them before. It wasn't until Robert left that I started to buy from Pan Ocean. Thanks to Ron (owner of Aquaplex) for convincing Robert to sell to me, as I ran the biggest maintenance company around. Robert didn't know it but at the time, I had a 3000 square feet warehouse I was working out of. In time I became one of ASAP's (Aquactic Specialties and Pets) best customers. Me and Robert and Bob built up a great relationship over the years. I even copied their design on the tanks and systems for my retail shop at my warehouse. Of course they came by many times out of their busy schedule to help me when I was building my place. And oh, I was the only maintenance company that was invited to his open house - how cool is that!

Some years later, Robert followed me to Tonga to see what I had set up. After that, he and I strategized to make Tonga even a better operation. I considered him a partner in my Tonga station, as he was supposed to be my main US distributor. He spent lots of money on sending supplies, including a 4 stroke Yamaha outboard for our boat. We were going to set up special promotions for him to distribute to Petco my Tonga products, including an aquaculture project that we called the Petco Project. Basically what it was, was a set of easy to take care of corals designed for Petco customers. We would design it so that the aquacultured pieces would plug into special man made rocks. Potentially it could have been a multi - million dollar project. Unfortunately, things didn't go as planned and Petco got bought out and I got screwed out of my Tonga operation.

Robert has seen me from being at the top to loosing everything. But he has always stood by my side, and I will never forget that. He has been a role model in this business and will continue to play a role in my "adventures" to come. But it is not over for Robert and Bob. They have plans to reset up the company but with focus on the specialties, and not so much on the bread and butter. In a way, Petco has really put a hurting on the business. To cater to Petco (Robert is one of few wholesalers that sell to Petco), you literally have to have every single species of freshwater fish available. Even if one store buys 10 fish, you still have to stock hundreds.

So why is Robert's business hurting so bad? First of all, Robert originally inherited huge amounts of money that the customers owed. He has tried so hard to collect but customers just don't have the money to pay (or don't want to). Pluse the fact that he caters to Petco, meaning lots of bread and butter stuff - including common saltwater fish, and Petco sales have been going down the tubes. Aquatic Specialties customer base is basically the mom and pop bread and butter shops. This is one reason why ASAP has a hard time selling my corals, just doesn't have the high end customers. My current distributors in the US are doing very well because unlike Robert, they have the high end clientele that are willing to pay the extra for the better stuff. So let's look at the big picture why especially Robert is taking the hit. Basically, people don't have the expendable cash to buy luxury items like new fish tank setups. Without the newbies getting into the hobby, the bread and butter market is dead in the water! And if you are selling primarily to these shops that depend on newbies coming into the hobby, you will go out of business because they will go out of business - am I making this clear? But for the smaller percentage of high end reefers that have tons of money invested into their tanks, they are still looking for that unique or high end coral. This explains why my corals are doing so well.

Below are some pictures of Aquatic Specialties and Pets before the tear down. The last few pictures are during the teardown. It is sad as it took Robert and Bob many months to setup, but only a few days to take apart.

Here is a picture of Robert (on the right) and Steve Robinson on the left. No picture of Bob Boone but I will post one when I do a write up on the reopening of ASAP. While Robert is shutting down to downsize, Steve on the other hand is setting up his wholesale again. I just unloaded a ton of equipment to him from my old shop. Along with Robert's extra equipment, Steve is in the process of setting up a cool little holding facility in Hayward, Ca. He is getting ready to do his Mexico fish and inverts soon. He already has clarion angelfish at some other retail shops for temporary holding. I believe he still has around 75 pieces available. If anyone is interested, you should send me an e-mail at joylucktp2000@yahoo.com.

One of many packing stations in the center of the fish room! Note the betas hanging on the right side of the picture.

Metal racks holding up glass tanks for Robert's freshwater section. Much of the equipment originally came from Fritz, when they closed down the wholesale operations over ten years ago. Robert and Bob cleaned up all of the equipment and designed the systems.

One of the filter rooms for the saltwater section. Note the multiple UV sterilizers and rapid sand filters.

All the freshwater systems run independently. So let's say one row is dedicated to cichlids where the water chemistry differs from let's say discus - get the idea?

Huge fiberglass tubs are used as sumps for this common freshwater fish section.

Outdoor pond plants are kept in the sunlight!

An outdoor fancy golfish section. This is part of the filtration system.

One of many huge acrylic flats for holding hard corals. All of these flats utilize metal halides! Note the smaller cubes at the top to hold inverts.

When I broke down some of my equipment from my old shop, I ended up giving the coral flats from the previous picture, and surge tanks! My shop, Tropical Paradise, was famous for running Carlson surges.

Here is a complete picture of the surge and tank.

The saltwater fish holding tanks utilized large cubes on the bottom with small cubes at the top. Very cool looking when full of fish!

Like I said, very cool, when full of fish! And no water on the floor - an impossible task at a wholesaler but Robert and Bob are no ordinary fish guys!

A CO2 acclimation sump. Basically what this is, is a small sub-sump that can be isolated from the main system. With some quick turns of few valves, this 150 gallon Rubbermaid sump turns into a reservoir where carbon dioxide is injected. The CO2 drops the ph down to 6.5 - 6.7 to match the ph of the packing water when a shipment of fish is unpacked. What actually stresses the newly shipped fish is not temperature, or the ammonia levels, or even oxygen. It is the ph. Not too many people know about this and actually end up killing the fish during acclimation period because they didn't include ph shock to the equation. This typically happens when a newbie fish store owner tranships fish from overseas and acclimates poorly, and the fish dies. Once the fish is introduced to the correct ph level, the CO2 is turned off and slowly the ph rises back up. In 12 hours, the ph is back to normal. Then the valves are opened and the acclimation system becomes part of the main system again - very smart design and it works!

So here is the ph before the CO2 is injected to lower the ph. Enough CO2 will be injected to match the ph of the arriving packing water.

Mixing and dosing pumps are used to add buffers and such. You will be lucky to see such things at any other wholesaler in the world!

Another view of the coral holding tanks.

This section is lit by power compacts and is used to hold anemones, inverts, small fish at the top cubes, and soft corals. The hard corals are held under halides in the acrylic flats.

Some more cubes, holding clarions from earlier this year.

Another view of one of the filter rooms.

One of many feeder goldfish holding stations. Note the output - the opening at the top acts as a venturi, helping to oxygenate the water - way cool! Another one of many Bob Boone's clever ideas.

Another view of the feeder goldfish holding tanks.

Another view of the fish room.

One of the fish crew packing.

Another shot of the outdoor fancy goldfish section.

Mounds of boxes are stacked everywhere - gives you and idea of how much fish Robert is moving. These are double decker Philippine boxes.

Like I said, you can always tell how much fish a wholesaler is moving by looking at the inventory of boxes.

Fluidized bed filters are used to keep kois happy and sound!

And here starts the sad pictures. Much of the pvc can be salvaged and reused.

Pumps and UV's on a pallet ready to be rolled into storage containers.

One of my coral flats that I gave to Robert, also ready to go into storage.

Sad to see. One row of freshwater tanks has been removed in this picture.

And here is what the beatiful fishroom looks like now.

Bye bye equipment!

4 fifty foot containers are needed to store the stuff.

A freshwater bio tower sitting on a pallet.

Giant fiberglass sumps are everywhere!

Conclusion

Ok guys, that is it. Robert and I are planning to team up again, just like the Tonga days, to bring high quality livestock into the market. I will be promoting him heavily and together we will be striving to make a difference in this hobby! Keep watching as I will do a post when Robert and Bob are ready to roll again!

Cheers,
Eddie

6 comments:

ChehalisCoral said...

That is one hell of an operation. I've got a 55 gallon I'll trade ya! lol

AquariumsLife.com said...

Amazing! I should have ask for something like that for christmass.

Vapo said...

Who's the other biggest wholesaler that already went under?

Dave said...

I was typing up Aquatic Specialties on Google to get an address.

Robert and I have been friends for years. Did he reopen a smaller location?

Eddie H. said...

Hey Dave,

Robert never opened back up. Give me your email and I will tell Robert that you are looking for him. He still lives in Santa Clara - Eddie.

Anonymous said...

It is doubtful he remembers me?

I always thought he lived in Hayward because I always saw him at Pan Ocean and then Aquatic Specialties? I use to work at Pet Club and we bought there sometimes but he was always very helpful. I am still in the hobby and his name came up when we were talking about corals at Reef Keeper in Merced. I assumed he reopened at some point after I left. Most stores are closed anyways in the bay area so it was bound to happen eventually.

Love your site...wish your store was still around. The coolest place ever to visit.

dave.riley00@gmail.com

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