A shop closes...

[The Chairman]

We have had a lot of discussions recently about where DEMA should or should not be headed. While these are important aspects to consider, it&#8217;s important to note that there is a very real human and retail fallout to the sour economy. I would like to refer you to MTSS (Nashville/Franklin, TN) has closed, which is a thread about a particularly successful store that has just had to close its doors. The most notable quote is from Phil Ellis (a retailer) who states: &#8220;When a store that is "everything a store should be" can't make it in a PERFECT market with very limited competition, it makes you wonder who could survive in this business. Oh well.&#8221; While it&#8217;s hard to assess the impact of only one facility, the ripple effect of multiple stores closing should not be hard to imagine. Of course, it has a major impact on the shop&#8217;s staff but it&#8217;s not restrained to just them. The manufacturers whose lines they carried, the resorts & liveaboards they patronized as well as the agency(ies) they taught for, will all be negatively impacted by their demise. Multiply this by several shops nation wide and it&#8217;s easy to see that this could really hurt the industry.<o></o>
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While I am sure that we all have our ideas of what caused this demise (because of the internet, because they didn&#8217;t embrace the internet, etc, etc) I think it&#8217;s important that we adequately analyze these failed shops so that other shops can avoid the same fate. Sort of like an economic accident analysis. Is this already being done by DEMA or someone else? If so, where are the results? Are there any conclusions that we can draw from them? If it&#8217;s not being done, how feasible would it be for DEMA or someone else to take this on? I am certain that there are a number of &#8220;at risk&#8221; shops that are currently evaluating whether they should stay or go. What are we doing to encourage and enable them to stay in business? <o></o>

 

[PhilEllis]

Pete, I am afraid that most companies that work the "supply" side of the scuba industry simply view store closings as the "thinning of the herd". Of course, this term is typically used in a pejorative sense. What they often don't consider is that the proprietor may have just lost his life's savings and his means of support for his family. Even being a poor business man, with improper funding does not deserve such consideration. The "thinning of the herd" means that someone dies.

The MTSS closing hits home uniquely for me and makes me think hard about this business. Everyone should investigate this business closely and realize that this was a well-funded shop, a very successful shop, in a perfect market. While he kept his reasons to himself, it is clear that Rick Hydiel would have kept this operation open if it had a chance for profit and prosperity.

Phil Ellis
www.divesports.com

 

[PhilEllis]

I take a look at a geographic area that extends east to west from Memphis TN to Chattanooga, TN; north to south from Nashville TN to Birmingham, AL. I am right in the middle of that area in Decatur, Alabama. When I opened in 1999, there were about 40 dive stores in this geography. Now, there are probably less than 15 total. If you exclude the four major cities listed and only look at the geography from their borders, there are 2 professional dive stores left.

This is NOT because I or another is providing such better service as to make it impossible for the others to continue. It is that diving is slowly dying in this geography. There simply is not enough business to keep the stores viable.

Phil Ellis
www.divesports.com

 

[The Chairman]

Well Phil,

There have been several store closings here in the Orlando area as well.

1. Florida Technical Scuba- Altamonte Springs
2. Florida Technical Scuba- Apopka
3. Diversity Divers
4. Divers Direct
5. Scuba Quest- Altamonte
6. Dive Store on West Colonial in Winter Garden
7. Hal Watt's old store
8. The Store on the corner of Red Bug Rd and ???
9. The Store on 436 just north of Red Bug Rd.
10. The store on 17-92 in Cassleberry.
11. Gander Mountain's Scuba Section

I can only think of one store opening: Dayo Scuba

We currently have:
Dayo Scuba (next door to ScubaBoard)
ScubaQuest- OBT (Orlando)
WetNFla (Lake Mary)
Seminole Scuba (Lake Mary)
ScubaWorld (West 50)
Castaway Scuba (Wester 50)
The Dive Station (College Park)
Fun 2 Dive (sanford)

 

[Wookie]

We don't know that they "Failed", we know that they closed their door. Let me tell you something. If I didn't have a $20,000 dollar nut to make every month, I would seriously look at shutting this boat down and waiting for better times. Is it responsible of me to keep a business running on savings that I made in other careers and better times that should have been my retirement? I don't think so. There are 200 liveaboards on the market worldwide, and the ones that are selling are way way below market, unless you happen to find a visionary buyer. Aggressor fleet has had the Ocean Diver on the market since way before 2005, at a very reasonable cost for the vessel and no-one wants to touch it. If MTSS was able to get out clean, move stock and equipment into storage somewhere, and wait for a brighter future, well, they are way smarter than those of us sitting here burning through savings, loans, investors cash, or whatever it is you use to make up day to day losses inthis business

SCUBA made a very bad mistake many years ago. After 30 years of continuous growth, SCUBA decided to stop actively pursuing growth and rest on it's laurels. Dive shops waited for folks to walk in their doors instead of reaching out to them. Boats failed to get better every year, and offer more services. The industry stopped evolving and sat back and watched itself die. We failed to add value to our offerings, because people had always bought in the past. We allowed training to deteriorate to the point where we get sued for poor training, and spend our valuable time protecting ourselves against lawsuits instead of making our offerings more palatable to the diving consumer. I've noticed in the past year people starting to move off the fat-assed dead center a little bit. We offer diving to the limits of your certification. Chris Richardson offers a repair technician class to the folks who buy his regulators. Interesting that we are both TDI/SDI affiliated. I believe in many of the things Bret Gilliam spouts, mainly thinking outside the SCUBA box we have painted ourselves in over time. I hate to be limited to the requirements of my insurance company, but they have to pay for my mistakes, so I do listen closely.

I don't know what the future of this industry is. We took a standard 34 passenger US based liveaboard, built on the California model, and made at least $50k of improvements (both safety related and creature comforts) every year since I owned it. While dropping the number of passengers, we increased price to make up for it. While I don't think out improvements and upgrades were a mistake, divers want the cheapest price that they can get. They don't seem to care about quality and service, they only are interested in price. Look at the threads from the diver in Chicago who thinks dive shops are for trying on gear, then buying online. That's like a diver coming to me, packing his scrubber can and filling his O2, dil and bailouts, then diving with someone else. We somehow need to convince the diving public that professional service is worth a little more than a price break.

I'm afraid many of us (myself included) are in a battle to be the last man standing. I see it as a losers fight, and I'll just bet that the owner of MTSS did too. He chose to get out while the getting was good, or better than it will be the first of the year. Look at the South Florida boats already stacked right now, including CEX, and Nekton Pilot. Those boats made their owners a lot of money over the years. You think John and Clay see something the rest of us aren't looking at?

OBTW. My broker called today to tell me to get the hell out of the market by years end. He has never told me that before, as he knows I am in for the long haul. Just sayin'.

 

[Wookie]

I've thought about this a little more. I know 2 kinds of sucessful shops. The first one is the old-style PADI (not agency specific, just the shop I happen to be thinking of) full retail, teaches a crapload of OW classes, makes all students buy basic gear, even if they can borrow Uncle Ralph's, runs 4 trips to Cozumel every year, and pisses off their divers by the time they get to divemaster, and allows 90% of their students to "get away" after the OW course and that first dive trip. The second shop is that botique shop where all of the pissed off divemasters from shop #1 go. Problem is, by the time they get to shop #2, they own their own gear, they have been to Cozumel, so the owners of shop #2 have a much harder time making a living. They do it, though, by personalized service.

Shop #1 is destroying the industry. They aren't engaging divers after selling them that first set of gear/instruction/trip. They don't care about con-ed, con-ed doesn't sell gear. They don't care about travel, travel doesn't sell gear. They care mightily about the internet, the internet sells gear. They would rather kill the golden goose than let others have an egg every now and then.

I don't like shop #1. They send me divers who are not ready for the rigors of open ocean diving. Jumping off a boat 6 feet up in the air scares them. They run out of gas and panic. Not that they weren't properly trained, but they weren't trained for this boat. They are not Divers, diving is a past time for them. I like shop #2. They cater to their divers, and they know who they are. They prep them to come diving with me, and know we'll take good care of them. If they are competent, we'll show them dive sites that are awesome. If they are ill prepared, we'll work with them. They are taught that this is a tipping industry, they are taught to respect the boat and crew. They are Divers. When I learned to dive, my instructor (ex-marine, professional industrial trainer, independent PADI instructor) made me a diver. Most now just learn to dive.

 

[cerich]

MTSS shook me.

Not because they were a EDGE dealer but because it confirmed what I have known and said for quite a few years. namely the model is horrible and is not capable of meeting our consumer expectations.

MTSS was a 7 figure store, beautifully done with a pool, 5 star facility with the best brands, competent staff, active travel schedule, top notch lines of equipment that offered industry best margins and UN-FREAKING INCREDIBLE demographics for the dive industry.

They did FAIL (I know that for fact)

They did EVERYTHING in the fashion that any dive industry participant would have considered as the 'shining example" of how to run a dive shop. they incorporated every business plan "suggestion" from DEMA business seminars, Industry business magazines and their vendors. They won AWARDS and accoulades from in and outside the dive industry.

It FAILED

So we have a choice in the industry, we can hold on and look to our traditional dive industry "best practices" or we can start to function so far out of the box we couldn't even draw one. If you want FAILURE look no further than what has gotten us here and repeat it.

the problem we face is not the industry changing, that is going to happen , the question is how we manage the change, if not careful(and we are not being careful) we will reach critical mass before the adjustents are complete. that means DIVE INDUSTRY WIDE FAILURE

Don't look to industry experts for solutions, I see Tom Ingram of DEMA still touting newspapers as a good place to run ads and pretending the Internet is only "blogs" that "could" help you get the word out (whole extent of acknowledgement0 and PADI choosing "Believe" as a plan for going forward, the whole gist seeming to be a "Field of Dreams" effort, except...this is real life not a movie and our families are supported by this "lifestyle", they have confused the "industry" with the 20 somethings divemastering on a boat in Thailand and Cayman....

 

[The Chairman]

If you thin the herd enough, you end with extinction.

Talking with two individuals, there were extenuating circumstances affecting the closing of this store. It was sold to an employee, and then it seems to have imploded.

It is my opinion that most of the people who start/buy a dive shop are not Class A business people. They are Scuba hobbyists wanting to live the dream. In fact, the push for people to become instructors consists of selling them the idea that they will be "living the dream". For many, the dream becomes a nightmare as they get blindsided by things they never fully considered.

Here are some options for the future: More training centers, where classes are not a loss leader. Manufacturers bypassing the traditional network and selling online. Resorts? Not sure. Liveaboards? Not sure. Fuel is a big issue with both.

 

[PhilEllis]

If you thin the herd enough, you end with extinction.

Talking with two individuals, there were extenuating circumstances affecting the closing of this store. It was sold to an employee, and then it seems to have imploded.

I think that is clearly what happened. However, the responsible principal owner is still a scuba store operator. I am absolutely convinced that the individual who was actually operating the store for the past three years is immaterial. There was sufficient and skilled business acumen. Had the business been viable, I can assure you that the building owner would have simply continued the operation of the business. After all, he clearly has a very strong motive to do that. He does now own a "purpose built" building, sitting on a very expensive piece of property. Not operating the business would necessarily mean that his investment in the building will immediately diminish in value in numbers that are measured in millions of dollars.

The bottom line. In the perfect scuba market, using the industry best practices business model, with a vibrant training program and a most extensive travel program, owned by an individual with economic resources......there is a scuba store closure. Hundreds of people became new divers each year as a result of this store. Cumulatively, we are talking about a large community of new divers. Without a store in the community, the future people that would have been new divers will simply take up hang gliding. And MTSS, PADI, AquaLung, TUSA, and even the online stores that participate on this board and sold at retail to those new divers will lose.

Oh, this "thinning of the herd" business is simply bunk. ONLY people who have no vested or financial interest in the part of the herd being "thinned" view this as a good idea. Each "thinning" that occurs in the scuba industry represents a pretty gigantic loss of "wealth" and they are seldom replaced by a new operator.

Phil Ellis
www.divesports.com

 

[PhilEllis]

Here are some options for the future: More training centers, where classes are not a loss leader.

Pete, I can promise you that the existing shops would increase the price of beginner open water training prices if it didn't so heavily impact market penetration and reduce the number of students. Open water prices are what they are because our consumers feel that is the price they are willing to pay.

EVERY large company in the scuba diving supply chain has been promoting the concept that we need a large volume of new students each year to fuel the equipment sales necessary to keep this industry floating. They are correct. We happen to have a sales model in this industry that is heavily front loaded. There is not much that can change that. For years and years, equipment sales provided the only significant cash flow to keep a professional dive store going. New students are essential to that cash flow, because they create the largest sales tickets in a modern store. I am not say this is the way it SHOULD be, I am simply saying this is the way it is.

Added Note: There will always be limited examples where this is not the case. There will also be an ample supply of independent instructors that will say they charge higher prices and provide a higher quality class. Unfortunately, all of the evidence says that this approach does not create the numbers necessary to create the sales to fuel the expenses of a modern store.

Phil Ellis
www.divesports.com