Here is what I wrote in another thread of this nature:
"If in fact these prices are ridiculous (that's an individual choice...welcome to a free market instead of a command economy) the only thing more ridiculous are these threads.
It's a (mostly) free country and you have no right to somebody else's property. Do these corals just spontaneously generate, or does someone have to work to find and produce them?
If you think you can provide a product or service cheaper than someone else at a reasonable return to yourself, then start a business.
There are literally hundreds of corals and color morphs to choose from that are quite inexpensive, and all hobbies cost money. If you don't like somebody's price - don't buy the coral. Either wait for the price to drop after the frag becomes ubiquitous in a few years, or just don't buy it.
I've had a couple LFS ask me to buy into their businesses personally (I'm an investor for one of the largest fund companies in the world). When I looked at their books, I felt terrible for these people. The owners work 80-100 hours a week and make less than the nearly minimum wage employees do (on an hourly equivalent basis), while taking all of the risk. All of these eventually failed, by the way.
I would say that in most markets, an LFS is probably one of the worst businesses I have ever seen. They have relatively large start-up costs, razor-thin margins, a lot of overhead, and enormous risk - particularly on live inventory. Quite honestly they probably only survive (for the ones that do) because of the inept people in the hobby. I've had the fish in my current take for several years - I don't kill fish. Same for corals. In the last two years I have purchased salt, two-part, carbon, gfo, and replacement T5 bulbs - that's it. Stores don't survive on people like me, they survive on the person that can't keep a fish more than two months, and the person constantly upgrading/changing equipment because they are convinced their equipment is the problem rather than poor husbandry. And this isn't a knock on newbies...we've all been there. But if you've been in the hobby more than a year, you should not be having major issues. Grocery stores can survive on razor-thin margins because the inventory has velocity, i.e. the inventory constantly turns because you eat everyday. Most competent hobbyists don't buy much product.
Now you might argue you aren't talking about an LFS...ok. Well the coral farmers aren't exactly raking it in either. A guy like Jason Fox flies to Indonesia to pick these frags for God's sake. He is flying, diving, paying all these expenses before he sees a dime. Watch the youtube video of his business...it's in his basement. He looks to be living in a very modest house...and he has a second job!
If every frag was $50 and you had zero expenses, you'd need to sell 1000 a year - 20 a week to make $50k a year. Doable? Sure. Easy? No. And the hypothetical zero expense is obviously absurd.
But if you actually understood just 1% of the supply chain for this hobby, you would be amazed that anyone can keep coral and fish at all at a reasonable price.
You want to know what I think is greedy? The entitlement attitude that pervades society.
Much of the world's population has to spend hours a day getting potable drinking water, while we just let automatic switches flip on our RO/DI systems (draining away most of the water in the process) to get clean water. We pay the utility under a penny per gallon and don't have to do any work. All while we gorge ourselves on food in our energy guzzling houses that are climate controlled. And by the way, I think all that stuff is great - I'm just thankful for it and don't think I am entitled to any of it. We live better than Kings from 100 years ago. And yet we complain that certain corals aren't cheap.
Have some gratitude for the charmed life you lead. There's a lot of poor people that would love to simply have food."
And just to add to what I wrote in the other thread, you have a large part of the answer to your question in your OP. Drygoods prices have had less inflation because of the explosion of internet sales, which allow the websites to buy in scale (and thus get volume discounts from the manufacturers) and still make a (low) profit while keeping prices lower for consumers. They also have less expensive real estate costs. LFS make such a tiny profit on drygoods sales it's absurd. The gross margin (their retail price minus their product cost - this DOES NOT included overhead costs like rent, electricity, wages, etc.) is typically 5-20%. Then they have to pay employees and all the other costs I just mentioned. Do you think that sounds lucrative or greedy? Unlike drygoods, live stock is better suited to local sales - although that is changing as well. The LFS is making almost all of their money these days on livestock because they cannot make enough money on drygoods. So this is a major reason why livestock prices in stores may be rising quicker than drygoods...I'm not even sure it's true because this is all anecdotal.
I don't think this has anything at all to do with greed, but survival. Most of these LFS make so little money that nobody wants to get into the business. I live in a very wealthy and highly populated part of the country with exploding interest in the hobby and we are down to three LFS (that have reef supplies) within 50 miles, down from 8-10 just a few years ago. Common sense would dictate that a business with amazing profitability would be attracting new competition, not having businesses close. My guess is that 5 years from now, my three LFS will be down to 1 or 2.
