A shop closes...

[bjf123]

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.

Agreed. I'm sure the prices charged vary around the country. In our market, the stores are all within $50 of each other ($225 - $275 plus text and snorkeling gear). No one wants to be the most expensive, because many people will choose a shop purely on price, unless the location is very inconvenient.

There's also the continual pressure from the equipment companies to place that big order, or commit to a certain volume over the next so many months, even though it will be tough to sell through that much gear in today's environment, and the cash flow might not be there to pay for the order when the bill comes due.

 

[Britt]

I have heard a few of the stories, rumors, facts, etc. about MTSS closing, and there are a lot of customers that have been affected by the closing. Im doing the best I can to make sure that a few are taken care of without having to dip into their retirement funds just in the hopes that they will keep diving, training, and expanding the diving in the area.

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.

I agree with Phil on this statement. Every shop that closes is another area that will slowly lose interest in diving. I realize that some people might disagree with me when I say that it is in our best interest to try to help anyone in that area get another shop going, but in my opinion, its better to create a little more competition that you can be friendly with than it would be to have someone start up a store that leaves the customers hanging and eventually quit diving or causes so much turmoil that other shops are effected by it.

Being in an area with several dive shops has actually made it a lot easier to learn where my niche is as well as getting the support and advice from a few of the shops I deal with directly... Thanks Phil, although I'm not sure how to take the comment you made earlier about only 2 professional dive stores left.

I can honestly say that there are times like these and events such as the closing of MTSS that make me very happy that my business model is for a small and more focused expandable dive shop. My business plan is simple... whatever works to keep people diving, even at a loss sometimes. So far, all my losses have been worth it. I will admit that off season does cause me a little concern sometimes, but the headaches are a lot lighter than some others have.

 

[The Chairman]

FWIW, this thread initially was an E-Mail to the DEMA BoD. I was asked to post this response:

Hi Pete:

Thanks for forwarding this. The Board has asked me to respond to you. You should know that even though the Board is deeply involved and concerned about these types of occurrences, most responses are generated from the DEMA office as that is where the data and records of the association reside.

We are all very sympathetic to the plight of the store owners having trouble – not only because a lot of them are personal friends but because it has a very negative impact on the industry overall. And it is more than just an issue for the store - our 2006 consumer study revealed that diver dropout was tied to store closures – divers who have no familiarity with stores other than the one that closed are far more likely to drop out and take up another activity. That’s bad for everyone. Having spoken to Rick Heydel about this situation just prior to and during the Show, I know this is particularly painful for him.

As interested as we all are in helping under these kinds of economic circumstances (my interest is both professional and personal - you may not be aware that I am a Business Analyst certified by the Small Business Administration and that my Master’s thesis involved the statistical analysis of the reasons why businesses succeed or fail), DEMA simply doesn’t have, at present, the capacity (time, personnel, etc) to do this for the entire diving industry. In addition, DEMA has in the past few years attempted to gather such data from retail stores to provide some general and regional statistics that might be helpful, but even though a financial incentive was offered by DEMA for store participation, the stores and the rest of the industry were not very interested in providing it. That effort was called the Retailer Econometric Business Index (REBI), similar to the Manufacturer’s Econometric Business Index (MEBI – a manufacturing sales census) that DEMA has conducted for more than 20 years. In any case it is clear that in order to provide such a service as you suggest, DEMA would need many additional and different resources.

I am sure we are all (painfully) aware that there are literally THOUSANDS of individual and collective reasons why stores close. With the economy as it is, you are correct that we may see more of this. Yet there are those stores that are doing well, even under these, the worst circumstances. One such store was recently highlighted on Dive Newswire: Divenewswire. I am aware that Indian Valley Scuba is exception in this economy. There’s no doubt, the circumstances are tough.

There are many business consultants out there that would jump at the chance to work with a dive business to help keep it afloat, provided they were getting paid. The Small Business Administration also has consultants that offer some assistance in key areas, and the SBA provides consulting on some topics as a free service. You may recall that we worked with a few of the SBA folks this past year who were kind enough to come to our Retailer Meetings and provide attendees with contact information as well as some straight up advice.

DEMA has some capacity to help prior to a store closing, and we are currently doing that through the office here and with the help of Dave Reidenbach on the ground attempting to help member stores – one component is the real “science” of marketing (defined as understanding one’s customers – not just promotions such as advertising). Being able to identify a target market and even being able to locate that target household is a major step in helping some of these stores, but of course is only one component of staying in business. Reaching customers through the Be A Diver program might have been helpful for this instance too, since using a pre-prepared ad campaign saves the retailer money.

We do appreciate you passing along the information.


Tom Ingram
Executive Director
Diving Equipment and Marketing Association
3750 Convoy Street, Suite 310
San Diego, CA 92111

 

[PhilEllis]

I am sure we are all (painfully) aware that there are literally THOUSANDS of individual and collective reasons why stores close. With the economy as it is, you are correct that we may see more of this. Yet there are those stores that are doing well, even under these, the worst circumstances. One such store was recently highlighted on Dive Newswire: Divenewswire. I am aware that Indian Valley Scuba is exception in this economy. There’s no doubt, the circumstances are tough.

Tom, thanks for this first public response on ScubaBoard. We certainly welcome you and hope you will sign up for an account and participate directly on future issues.

The issue is not that there are some stores that are doing well. We all know there are. The issue is that many areas of the country, which were once natural inland locations to serve scuba divers, no longer seem to support a full service professional store. The discussion here of MTSS is simply because we have always been told that if we follow industry-best practices, if we build the correct facility, in the correct location....then, we will have success. Rick seems to have been unable to make this model work for the future. I am left to conclude that had he been able to project a prosperous future for MTSS, he would not have made the decision he made.

There are many business consultants out there that would jump at the chance to work with a dive business to help keep it afloat, provided they were getting paid.

Budgeting for a business consultant is not likely high on the priority list when a dealer is now 4 days into the 10 day drop dead window for making a considerable rent payment without the funds provided by robust sales. Despite all of the long-term things that one could do to improve the future prospects of a scuba retail store, the nature of the cash flow problem for many out there is such that they are only thinking day by day. All of the "professional" individuals who would criticize the strategy of putting all of your efforts on day to day thinking have likely never had to personally engage in day to day thinking. There is an old saying about the mental clarity that comes from walking in another mans shoes.

Again, we look forward to having you participate here. You are going to find that this medium is a great way to get direct, unwashed information about the real state of our industry.

Phil Ellis
www.divesports.com

 

[PhilEllis]

Thanks Phil, although I'm not sure how to take the comment you made earlier about only 2 professional dive stores left.

I wasn't counting me.

Phil Ellis
www.divesports.com

 

[Capt. Pete]

Phil & Wookie,
Thanks for the positive and professional comments! I wanted to mention it due to the fact that conversations like this seem to be very rare on this board. Instead of all the bashing and unprofessional BS, how about we all work together to improve the industry?

Not that it is the best example but how come car dealerships can have regional committees or groups to better their sales at the local level but you can not get a group of local dive shop owners to sit in the same room? Maybe instead of bashing DEMA we should work with them and get them to push dive shop owners to work together at the local level to improve their sales.

For the last two years I have been working with the local county parks department to support a dive event at one of our local lakes. I have been to every meeting since the event has started and most of the time only one other dive operator has bothered to show up. It seems to me that if the Phoenix area dive operators banded together we would all be in a better situation. I am sure that every area could do the same instead of relying solely on DEMA.

How about it NetDoc, maybe you could start a drive via ScubaBoard to support dive shop regional groups to increase sales locally there by improving the sport nationally?

Just my thoughts

I hope that this conversation stays professional and positive.
Pete

 

[The Kraken]

Pete, it's a good question you put forth.

I took my second undergraduate degree in business/marketing and management.

I think the bed rock answer to your question is "demand". There isn't enough demand in the industry to support the number of shops that are out there.

When you look at the number of new divers per year in a MSMA and the number of shops, combined with the income that each person expects to earn, the numbers just don't add up.

Owner of the shop wants to make $50 to $60K/yr but doesn't want to work full time.

He hires a manager who wants to make $45K/yr.

Then you get into the very basics of business

Already you have say $100k/yr that you have to earn just to pay salaries. This equates to almost 10K per month in revenue just to cover salaires.

Throw in insurance, utilities . . .

I'm sure everyone can see where I"m going . . .

And on top of this, most new divers aren't the dedicated divers we see here on ScubaBoard, they're vacation divers.

I don't pretend to have the answers, but I'm sure the marketplace will, eventually, evlove to meet the demand, such as it is.

the K

 

[mdb]

The Dive market will continue to shrink for quite awhile. It is sad, but true.

Making real divers, not internet and one weekend wonders, charging instruction for what is is really worth-not the $99.00 OW special class, etc, all that could help.

I learned to dive in 1972. The class was five weeks of pool and classroom, five open water dives over two weekends, follow on courses for rescue, compass, night diving etc. A real investment in time and money. I am still diving today. Many others have the same experience.

Maybe it is time to go back to basics.

 

[PhilEllis]

MY VIEWPOINT ONLY CONCERNS THE NORTH AMERICAN SCUBA BUSINESS

Just in the United States alone........

We have well over 10 significant training agencies competing for a declining number of beginner and continuing education students each year. We have over 200 wholesale scuba equipment suppliers, all scrambling to provide goods to slightly over 1500 full-time professional scuba stores in the country. We have literally hundreds U.S. destination locations and additional hundreds of non-US destinations, all competing for a very limited number to total dive consumers. All of these people are attempting to divide a gross scuba sales total that is less than $700,000,000 per year. Worst of all, while ALL OF THE REMAINDER OF U.S. ENTERPRISE is growing each year, the scuba market AT BEST is managing a 1% annual growth in dollar volume, about 1/4 the rate of aggregate non-electronic consumer goods inflation.....this on a rather consistent eight year annual decline in number of units sold.

This is a formula for disaster. We are fiddling while Rome burns.

We have managed to build a scuba business model that is all front loaded in every respect. The front loaded cost of opening a modern scuba store far exceeds any potential return on the investment. The front loaded cost of acquiring new scuba equipment lines often demands front-end investments of $30,000 to $50,000 for inventory that can't possibly turn more than 1-2.5 times a year. Within six months of making these buys to "represent the entire line", the key items change in design, color, and promotion, and the old inventory becomes a carry-over product. The entire revenue plan for the United States scuba store is absolutely front loaded, with the average scuba student spending about 75% of their ENTIRE life-of-the-sport spending in the first 90 days in the sport. Worst of all.....within about a month of certifying the average beginner scuba diver, most scuba stores are working their brains out to get the new diver to export the majority of their remaining expendable family income on a trip to some Caribbean island (many who would be NOTHING without the promotional efforts of the aggregate North American scuba stores).....for a GROSS profit for the store of about 8%.

Have we really been this stupid?

If we continue on the excellent path we are charting, we will return to the days where diving is a cliche sport in coastal California and Southern Florida. There will be a couple of rather large online stores serving the equipment needs of most of the country, and the largest cities may still have a place to learn to scuba dive. At this pace, the day will come when it will be easier to find a sunken Spanish galleon than a scuba store in inland America.

Sorry. Rant over.

Phil Ellis
www.divesports.com

 

[DiveTheGalapagos]

I'm an absolute babe in the woods when it comes to retail scuba marketing, but I did pay attention to MTSS because of having lived in Nashville and was reminded of reading through the entire DEMA thread. One line in that thread that really stood out to me was..."We need some guerrilla tactics, not boardroom tactics to bring the industry around...." So I thought I would share some thoughts about marketing to youth.

I spent most of my adult life in the music industry. The ones who recognized the above first were the Napsters, et. al. They ended up bringing that industry to its knees. It's all but over and was struggling long before the recession. After all this reading, I can't help but draw some comparisons. I founded a music marketing company that specialized in high school marketing. One of the clients I so wanted (and never got) was Major League Baseball. Everyone in baseball complained about the 'graying of baseball', but didn't do much to change the image of it being a slow, boring sport in the minds of youth...especially relative to the hip-hop culture of basketball.

Basketball figured it out. Youth. Excitement. Music. The US, in particular, is more image minded than ever before culturally speaking. How many saw the Paris Hilton trying out scuba photos? Now how many read about Tony Brown on a Red Sea live-aboard? How many Omer Sub Ice fins sold because of Jessica Alba? (Shoot, even I want a pair because of how cool they look.)

I've been keeping a list of celebrity divers in the event I ever need to pull it out. I'm thinking of live-aboards with celebrity divers and auctioned spaces with a % of profit going to conservation, preferably local shark conservation in our Marine Reserve.

There are so many ways to grab a youth market locally. Every high school has a newspaper and whether kids hate it or not, they read it. Invite one of their reporters out to interview your store about diving. Be happy to provide you with my celebrity diver list to help grab their attention. Run a contest in local schools with the winner getting OW certification or go Tupperware...for every kid who signs up 6 (7,8,9..whatever) to get certified, you give one certification for free.

If you have a pool, sponsor an overnight pool party at the end of OW certification 'drive' (aka tupperware marketing) week. You can build the cost (beyond your time and that of a couple of other adults for supervision) into the certification cost. Music, pizza and Coca Cola will do it. Make diving sexy to teens and you might have have customers for a very long time. PS...this group has far more disposable income than college students. They pay for nothing and mom/dad fork it over to keep the peace/compensate for the time away due to work, etc. And if the other kids want it, they all want it.

Make the party an annual event. Any manufacturer who might cough up a piece of gear to help sponsor, all the better. Publish a calendar with local models (male and female) in gear. Show "Shark Water". It's cool. It's hip and it is a very good message. Along with learning to dive, have student reporters review the film for their paper. Read through all submitted and arrange an interview with Rob Stewart for the best written review. Get all those papers that participate to agree to syndicate the interview locally. Don't stop at high school...go for university students/papers, too. Get an attractive anchor couple to photograph to advertise / paper the campaign. If your town is small enough, maybe you could also get local press coverage from the daily paper or a morning show. Better to have coverage in advance for more participation. If you are close enough to the beach, organize an escorted youth only trip for diving. Bring a science teacher along and use his/her ideas for making it both educational and fun.

We used to do nationwide conference call interviews with recording artists...kids got the chance to interview someone famous for their little high school newspaper, a chance they alone couldn't make happen no matter how persistent. I have to think that there are celebrities out there willing to donate 30 minutes of their time in order to bring something like an anti-shark finning campaign/education into the spotlight...especially if they have a new CD, movie, etc coming out. Wild Aid recently posted a job looking for a celebrity liason. Possible joint national campaign? Divers and conservation are a natural fit. (And that raises a whole other array of possibilities...later.)

All record companies have local street teams, mostly fans or interns who get free CDs and are guest-listed at concerts, but they also have local radio and retail reps on payroll. Copy the model. Offer someone local incentive to work for free. Free gear rental? Free certification after x amount of time? Use one of those 2 free charter spaces for serious incentive. Come up with clever youth culture flyers (go ahead and use Jessica Alba or Kate Hudson or Paris Hilton images.). Distribute them at events like concerts, malls, movies, etc. Youth are so about perception. And to me, they're young up until at least their mid-twenties.

Pull it all together with Facebook and Twitter and Friendster. Encourage participants to post photos. Add a prize for the photo with the most comments. Or have them post what they loved about learning to dive the most and the one with the most 'likes' wins a prize. Connect with others executing similar campaigns to make it regional. Get appropriate equipment manufacturers to sponsor a national 'model' search from your students of all ages.

My former partner and I always assumed the reason we could relate so well to youth was because we probably never matured beyond their emotional level. So, I'm sorry, but "Be a Diver" says nothing to grab me. Don't know what's better because I'm writing all of this off the top of my head, but there must be something better.

I think a little excitement might appeal to demographics beyond youth. Yes, I know how amazing diving is and I find nothing in life more exciting than diving, but first, I had to know what that felt like. If I didn't already know, what is going to make me want to know? And who will I listen to? And they better feel it and mean it.

And ps...anyone letting it be known you are LGBT friendly? Another demographic with more disposable income than comfortable opportunities. And how many are embracing tech diving? That's the only growth sector in diving as far as I can tell. Training is intense and boy do they spend on gear.

Hope this doesn't intrude in the midst of all of you who know the ins and outs so much better than I do, but you can always just skip forward and not read I suppose. It was the guerrilla tactics line. We called that street marketing and it can cost next to nothing or nothing, so ROI isn't a risk in these challenging times.