Why Isn't There a Free Market for Scuba Equipment?

[Fairfax22032]

Over the past few weeks I have spent a good bit of time trying to become educated on the nuances of different pieces of scuba equipment with a focus on regulators and BCs. One thing that I have learned is that there is something for everyone out there at prices ranging from reasonably inexpensive to "it costs how much?" which means, to me at least, that you should be able to find some that meets your needs and your budget.

At the same time, however, I am struck by the fact that the price is the price is the price at every LDS for a specific item which makes me wonder whether manufacturers really want new divers to really get into the sport or for experienced divers to trade up. I can understand how Apple is able to keep iPod prices consistent between Wal-Mart, Target, Circuit City and Costco, but there are dozens of scuba vendors selling nearly identical products (at least to me), so why don't we see price competition at the retail level?

Is there a reason why Seaquest (not singling them out...just top of mind) dealers in a metro area are not allowed to compete based on things like customer care, staff knowledge, post-sale service and support, and training programs while letting them set the selling price for a Titan LX or Legend which provides a reasonable profit? I guess that this might drive some LDS out of business, but is that necessarily a bad thing? Good shops will do more volume at lower markups...isn't that what free markets are all about? Wouldn't you expect a manufacturer to reward and encourage this type of business practice?

I have spent the past 15 winters as a ski instructor, ski patroller and manufacturer's rep and see first hand how price fixing, collusion, poor marketing and short-sighted management decisions have led to a steep decline in the sport. I have really enjoyed my experience diving so far and look forward to jumping in with both feet, but see many of the same traits in the scuba industry.

 

[k ellis]

Hmmmm good question. Sorry I am not one on the market issue so I really dont have any comment. But on the other hand I am glad you are enjoying the scuba scene

 

[selo]

I think with "free market" you mean "low prices". This is incorrect. There is a free market in scuba equipment. You will not pay any price above your "reservation price". The seller will not sell below his. Simple.
I would like to get a Ferrari xxx but I cannot afford it.
If you mean that the same good is sold at different prices at different LDSs or over the internet, then it is proof that there are free markets. Sellers are willing to take different profits.
Some manufacturers have exclusive aggrements with resellers to apply the same pricing model. Have you purchased a Viking refrigerator or a Wolf range? I do not like it but then there are many other brands, some that actually manufacture for Viking and Wolf.
Scuba diving is not a cheap sport. That all I am saying.

 

[Keith & Sharon]

Copied from the Aqua Lung web site below explains grey market and the issues this manufacturer believes it causes and their solution. I know they regulate the authorized dealer prices and the best authorized price I have found is a 10% reduction from list price at a LDS. This is just one manufacturer and their explaination based mainly on safety due to the life and death risk of unathorized or improperly maintained gear. Right or wrong, this is their reason and they don't want Wal-mart selling their gear at lower prices bought in bulk by an untrained sales person, that is, if you can ever find one(ok, the last part is my opinion - couldn't help it).

Hope this helps.
Keith
.............
Aqua Lung does not sell or provide products to Leisure Pro. We do not plan to sell, nor have we authorized any of our global authorized distributors, dealers or other customers to sell Aqua Lung products to Leisure Pro. We consider any Aqua Lung, Sea Quest, Apeks or Suunto products sold through Leisure Pro to be “Gray Market” goods.

Gray Market goods are distributed in the United States without Aqua Lung's authorization, and may place the consumer at risk. We do not support or provide warranty services for products purchased through Leisure Pro since we cannot determine if the product is new, damaged or used. You should be warned that consumers who have bought Aqua Lung products from Leisure Pro in the past have found out after their purchase that certain rights to warranties and other value added support benefits could not be obtained.

Utilizing our global serial number tracking system, we have documented evidence of products being obtained by Leisure Pro through unauthorized gray market channels. In these cases we have taken severe actions to cut off the source of gray market products. We will continue to take aggressive measures to prevent our products from being sold through gray market channels.

We are committed to protecting our brand image. We take great pride in our products and in the enjoyment our customers receive using our products. To support these ideals we sell only through a network of authorized distributors, independent specialty stores and retail partners. These are the organizations that provide the infrastructure so you can enjoy diving -- training, air fills, travel and equipment service. They employ professionals who receive up-to-date training on our products so they can instruct you in their safe and proper use as well as proper care and maintenance. Buying from an unauthorized source can put you and those who make the dive business possible, at risk.

Purchasing equipment from an Authorized Aqua Lung dealer assures you of receiving the highest quality equipment and customer service available in the industry today! The benefits to you are:


· 30 Day Satisfaction Guarantee

· $100 Future Technology Upgrade on selected products

· Limited Lifetime Warranty on all Regulators and Buoyancy Compensators

· “Free Parts for Life” on all Aqua Lung and Apeks regulators

· 5 Year Limited Warranty on Suunto dive computers

· 3 Year “Free Battery Replacement” with Suunto computers

· Professional assistance in determining the right equipment for your needs

· Professional setup and instruction in the use of your Aqua Lung purchases

· Service and repair by Aqua Lung trained technicians

 

[offthewall1]

Here is the truth...

The scuba universe is controlled by an illegal practice known as MAP (minimum advertised price) and in some cases the even more illegal practice known as MARP (minimum allowed retail price) pricing. The simplist way to put this - is these are forms of price fixing. Price fixing is outlawed by the 1890 Sherman Anti-trust Act.

MAP (or minimum advertised price) requires that all dealers advertise items for the same price under the threat that if they don't, they will lose their dealerships. While MAP does allow dealers to sell for less than the advertised price, there isn't much motivation to do so because it is presented to these "bad" businessmen as mafioso style protection by the manufacturers. If everyone holds at their inflated prices, then in theory, divers will shop with the shop closest to them and everyone will be happy - happy that is except for the consumer, who is unwittingly being price gouged as the shop makes insanely high margins.

The term "grey market goods" in the Scuba industry is pure BS. There is no such thing except that the term is used to dupe you into paying more for your gear than you need too. There are many shops across the nation who are beginning to fight this illegal practice, including ours. We are in the process of educating the consumer and the Federal Trade Commission and our States Attorney General. We ask you to do the same.

Grey market goods are not "grey market" at all - and businesses such as Leisurepro are receiving shipments direct from many major manufacturers. Almost all gear available on Ebay, Amazon and other internet sites comes from authorized dealers who are operating for your benefit - in some way around MAP and MARP pricing. The term grey market goods is used to infer everything from "it's not real scubapro - similar to a fake Gucchi Bag" to "you don't get a warranty because you didn't buy it from an authorized dealer." The fact is noone is producing fake scuba gear - there isn't a big enough market for it and in almost every case you can register your product with a warranty as long as it comes with a warranty card.

If it doesn't come with a warranty card, it is either not new and has already been registered - or you've been duped by the manufacturer in cohoots with the seller. In other words, this would be evidence the manufacturer dumped the product to the internet seller and either didn't provide them with the warranty cards - or has some agreement in place that the internet seller is not allowed to provide the buyer with the warranty card and must provide nothing more than their in-house warranty. This agreement is good for the manufacturer as it allows them to sell the end buyer parts when they don't have to honor the warranty and is good for the internet retailer because they can buy goods at pennies on the dollar compared to the inept LDS owners who don't know their being screwed in both ends.

Good business people know how to operate at lower margins to keep their stores operational in a down economy. For those that don't know it - the Scuba manufacturers and the industry as a whole are in big financial trouble. Manufacturers have been heavily laden with inventory and so they dump it into what they call the "grey market." They get their money one way or the other, but local dive shops are getting left behind and the mafia style protection being theoritically afforded them through MAP and MARP is eroding away.

In a MAP and MARP world, the consumer pays inflated prices - leading to less sales and less interest in the sport - which leads to even less sales and a shrinking of the industry. That is what has been going on for some time.

In our proposed world of the abolition of MAP and MARP, prices come down and the consumer wins. When the consumer wins the retailer wins with more sales and a growing interest in a sport which becomes affordable for a family of four. This means more sales for the local retailer - both of equipment and training and ultimately to increased sales for the manufacturers.

My suggestion is to bombard your States Attorney Generals office with complaints and to visit the Federal Trade Commissions website and use an official complaint form to lodge a complaint.

The answer is this - once MAP and MARP pricing are driven from the industry, then pricing can become competitive in a free market and the industry can grow and flourish.

 

[offthewall1]

Copied from the Aqua Lung web site below explains grey market and the issues this manufacturer believes it causes and their solution. I know they regulate the authorized dealer prices and the best authorized price I have found is a 10% reduction from list price at a LDS. This is just one manufacturer and their explaination based mainly on safety due to the life and death risk of unathorized or improperly maintained gear. Right or wrong, this is their reason and they don't want Wal-mart selling their gear at lower prices bought in bulk by an untrained sales person, that is, if you can ever find one(ok, the last part is my opinion - couldn't help it).

Hope this helps.
Keith
.............
Aqua Lung does not sell or provide products to Leisure Pro. We do not plan to sell, nor have we authorized any of our global authorized distributors, dealers or other customers to sell Aqua Lung products to Leisure Pro. We consider any Aqua Lung, Sea Quest, Apeks or Suunto products sold through Leisure Pro to be “Gray Market” goods.

Gray Market goods are distributed in the United States without Aqua Lung's authorization, and may place the consumer at risk. We do not support or provide warranty services for products purchased through Leisure Pro since we cannot determine if the product is new, damaged or used. You should be warned that consumers who have bought Aqua Lung products from Leisure Pro in the past have found out after their purchase that certain rights to warranties and other value added support benefits could not be obtained.

Utilizing our global serial number tracking system, we have documented evidence of products being obtained by Leisure Pro through unauthorized gray market channels. In these cases we have taken severe actions to cut off the source of gray market products. We will continue to take aggressive measures to prevent our products from being sold through gray market channels.

We are committed to protecting our brand image. We take great pride in our products and in the enjoyment our customers receive using our products. To support these ideals we sell only through a network of authorized distributors, independent specialty stores and retail partners. These are the organizations that provide the infrastructure so you can enjoy diving -- training, air fills, travel and equipment service. They employ professionals who receive up-to-date training on our products so they can instruct you in their safe and proper use as well as proper care and maintenance. Buying from an unauthorized source can put you and those who make the dive business possible, at risk.

Purchasing equipment from an Authorized Aqua Lung dealer assures you of receiving the highest quality equipment and customer service available in the industry today! The benefits to you are:


· 30 Day Satisfaction Guarantee

· $100 Future Technology Upgrade on selected products

· Limited Lifetime Warranty on all Regulators and Buoyancy Compensators

· “Free Parts for Life” on all Aqua Lung and Apeks regulators

· 5 Year Limited Warranty on Suunto dive computers

· 3 Year “Free Battery Replacement” with Suunto computers

· Professional assistance in determining the right equipment for your needs

· Professional setup and instruction in the use of your Aqua Lung purchases

· Service and repair by Aqua Lung trained technicians

It is my opinion that Apeks / Aqualung has been a major player in the downsizing of the Scuba Industry. In making their retailers artifically inflate prices through the use of MAP and MARP - by disallowing the shipping of their products to consumers and through spreading fear among their retailers by threatening to pull their dealerships if they don't comply with these types of rules.

I have to laugh... A 30 day satisfaction guarantee. For the price I'd have to pay for an Aqualung product I'd expect at least a year. A $100 technology upgrade... if the product is worth that kind of money I shouldn't have to upgrade it. A limited lifetime warranty? Why is it limited? 3 Year free battery replacement? I should be able to change my own batteries not go though the headache of bringing it in. Professional assistance, determination of needs and set-up - that is offered FREE of charge by any good Scuba Center. I'm paying $900 for a $500 computer for that? $3000 for a set of gear that should cost $2000 for that? That's an extra four thousand dollars for a family of four. How is this helping the sport?

Here are some numbers to prove a point. Not specific to Apeks/Aqualung products... but just being used in general terms.

LDS buys BCD from MFG for $200. - Sells to consumer for $600. This is a 300% mark-up. Retailers should be able to more than adequately keep their doors open and make a decent living with a 50% mark-up. This BCD should cost the consumer $300.00. The mafia style protection from the manufacturers cost the unknowing consumer $300 and puts it in the retailers pocket. It is no wonder why bad businessmen like this style of protection - it requires them to do little work for big profit.

Before I opened a dive shop - back when I was just a consumer, I had no problem paying an extra 20% to throw business to my local dive shop. If it was $50 at Leisurepro, I'd pay $60 for it at the LDS... but not $150.

As a consumer you have to make choices based on your perceived value... but do not allow yourself to be gouged unless you just like it that way. Come up with a percent you're willing to overpay at your LDS and stick to it... Happy Diving!

 

[Fairfax22032]

I think with "free market" you mean "low prices".

What I should should have said is "price competition among LDS". I know that you can find gear online for less, but I would really like to purchase locally whenever possible. Just because a store offers a lower price on a complex product is not an automatic reason for me to shop there.

If you mean that the same good is sold at different prices at different LDSs or over the internet, then it is proof that there are free markets. Sellers are willing to take different profits.

I realize that my experience is limited, but after visiting at least four dive shops (admittedly not a statistically valid sample size) the price for an AL Titan LX regulator and Seaquest Balance BC are essentially identical. This pattern was repeated for gear from Oceanic, Scubapro and Aeris.

Have you purchased a Viking refrigerator or a Wolf range? I do not like it but then there are many other brands, some that actually manufacture for Viking and Wolf.
Scuba diving is not a cheap sport. That all I am saying.

I own a Sub-Zero, so yes, I know that these products are pricey. However, like the Ferrari, Rolex and Breitling watches and Coach purses they are LUXURY goods with limited retail channels which helps to establish their position at the top of the market and people buys these goods not necessarily because of their superior quality, but because they imply status or otherwise demonstrate wealth and power. I was not aware that divers "dress to impress" - I figured that they want something that meets their needs and provides the best combination of price and performance.

I am not suggesting that Sports Authority or Walmart should be allowed to sell scuba equipment - I want trained and knowledgeable sales assistance from someone who is enthusiastic about the sport. But I don't understand how allowing price competition is going to destroy the retail scuba industry.

 

[PhilEllis]

Here is the truth...

The scuba universe is controlled by an illegal practice known as MAP (minimum advertised price) and in some cases the even more illegal practice known as MARP (minimum allowed retail price) pricing. The simplist way to put this - is these are forms of price fixing. Price fixing is outlawed by the 1890 Sherman Anti-trust Act.

Ken, while I agree with much that you have written.....it is quite unfortunate that both MAP policies and MARP policies are in fact, legal. Since the passage of the Sherman Anti-Trust act, the Supreme Court has slowly eliminated most of the "per se" violations to the act, replacing them with the "rule of reason" standard for evaluating pricing actions. This was finally driven home with the ruling on Leegin v PSKS in the last court session, which basically eliminated vertical price controls as a per se violation.

Now, I personally disagree with the reasoning of the court, but they were simply following through, in keeping with a pattern established by previous court decisions, of eliminating the list of conditions that are considered per se a violation. Oh well.

Phil Ellis

 

[Doc]

Let me play the devils advocate....

This system was put in place by manufacturers and distributors who felt pressure from LDS to protect them from Joe's LDS on the other side of town. As the industry grew, manufacturers mad this protectionism a little easier as more of the makers sprang up. When you threw down for your order of $$2500, you had your territory, and if Joe wanted the same stuff- well, he had to go to a different manufacturer. Territories and profit margins for the dealers could be protected.

Loyalty to the manufacturer, protection for the LDS. He could afford to hire knowledgeable guys and so on. Thus, the "Pro Shop" formula was expanded from Gold, Ski and Cameras.

No retailer wants to give anything away- they would rather be in the position where they could demand full retail price and that's the way it would be.

At the same time, the manufacturer could really care less, as long as he got his wholesale price point. But... if loyalty decreased or his dive shops felt the need to go to other sources to protect their mark up- the manufacturer would feel the pain.

It's more a case of "who will blink first".

Up to today, if you blink, they will take away your dealership.

I am not suggesting that Sports Authority or Walmart should be allowed to sell scuba equipment - I want trained and knowledgeable sales assistance from someone who is enthusiastic about the sport. But I don't understand how allowing price competition is going to destroy the retail scuba industry.

Here's a flash for you: Such similar stores already are selling SCUBA gear. Heard of Gander Mountain, have you? Not the first national or regional chain to have this product line. As these local chains grow tired of giving floor space to dive sales, they clearance it out. The "for rent" signs still hang in the closed LDS they left in their wake. Happy now?

I'm not here to argue good or bad- but it already has destroyed the retail SCUBA industry. The economy and consumer savvy, added to the internet- this will destroy the classic system of SCUBA Pro Shops. The strong shall survive.

But everyone, you, the LDS and the manufacturers know one thing: Where you going to buy the air?

Not saying right or wrong- just understand the reason... and dive gear is not the only such industry.

Years ago Sea and Sea had a warehouse full of dive computers that they had dropped from their product line two years earlier. I represented a major buyer of Sea and Sea Camera Gear (we had the dealership). S&S would not talk to me, they would not quote a price, they would not chat... until I became a qualified S&S Dive Gear Dealer... even though they no longer had such a line and I was sitting there with cash in hand.

Don't try to figure it out.

 

[offthewall1]

Ken, while I agree with much that you have written.....it is quite unfortunate that both MAP policies and MARP policies are in fact, legal. Since the passage of the Sherman Anti-Trust act, the Supreme Court has slowly eliminated most of the "per se" violations to the act, replacing them with the "rule of reason" standard for evaluating pricing actions. This was finally driven home with the ruling on Leegin v PSKS in the last court session, which basically eliminated vertical price controls as a per se violation.

Now, I personally disagree with the reasoning of the court, but they were simply following through, in keeping with a pattern established by previous court decisions, of eliminating the list of conditions that are considered per se a violation. Oh well.

Phil Ellis

Phil,

There is certainly some truth to what you have written but equally there are cases which show the ability to influence and change entire industries - such as the settlement by the Recording industry which settled out of court for more than $141 million in cash and products when the states of New York, Florida and 28 others filed suit. I am suggesting that a similar action - especially now while the manufacturers are being effected by the economy could force the same type of retreat and settlement. The suit eradicated MAP pricing from the recording industry and lowered the prices of CD's by more than $5.00 a piece.

Yes, it caused many "mall" music retailers to close their doors and pushed people to buying music online and in stores like Target and Walmart for instant gratification... but the only similar impact it will have on the dive industry is to cause a reduction in the number of dive shops... but a higher quality dive shop will remain which offers lower prices and hand selected Instructors and other dive leaders who offer superior training. These two things (lower prices and higher quality) will drive more people into the sport.

The manufacturers fear that less stores mean less sales. This model has failed and continues to fail. The internet is not going away and in fact the number of internet scuba retailers is growing. I believe that if a state currently has 20 dive shops in it... a reduction to 10 is in order. These ten selling at lower prices would produce quality students who bring more people and money into the sport, thus helping the consumer, retailer and manufacturer.

If you want to bring industry pricing down to the levels they should be at - then stand up and do what is necessary to make it happen. Write to the manufacturers expressing your displeasure... begin boycotting products which have strict MAP and MARP policies - because believe me - their products are no better than those that don't have those policies or who do don't strictly enforce them. Apply pressure whether it works or not for the FTC and Attorney Generals to at least look at it. Government poking around in this industry is the last thing the manufacturers want. Alone it may be enough to open up the markets.