Once again, it is all about volume. It's easy to offer low prices when you have the whole world to draw from as a client base.
And another sale gone, another one down... another one bites the dust!
- Thread starter Genesis
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After reading more and more of your post Genisis's.. I would love to come shop at your dive store. Could you please let me know where it is located? I believe I could save a lot of money with you.
Free air and Nitrox fills for buying a computer, discounted lessons if I buy fins, free defog if I look at a mask.. HEY !!!! Why did you spit in my face.........=-)
Free air and Nitrox fills for buying a computer, discounted lessons if I buy fins, free defog if I look at a mask.. HEY !!!! Why did you spit in my face.........=-)
Speaking for myself from the perspective of running an inland dive shop the problem is the cost of overhead and the cost of the product and the volume. I am limited to a walk in market (small). These things combine to determine what I must get for an item. My problem isn't price control by the manufacturer.
As far as using other services to sweeten the pot...This works for active local divers who need gas, my library, the use of my fill station and other things I can offer. These diver choose me over LP hands down every time with no hesitation. There are very few of them though. Most divers here don't dive locally so an air/nitrox card has ZERO value to them. All these divers look at or are interested in is the cost of the item they are buying. They may not need anything else for a very long time.
Also if I make a $100 markup on a $400 sale but offer 4 hours of labor with it I lost big time. The markup didn't pay for the labor let alone give me the cash to pay the rent. Such a deal may make the sale but even if I ever see this transient customer again I will need to offer the same kind of deal to make the sale. The result is I will work very hard at making nothing at all. If we made enough of these sales to pay the rent there wouldn't be enough hours in the day to do the free service or whatever. Again these are mostly vacation divers shoping for price alone because they have little use for the other services we offer. Some of you mix markup with profit. Literally every product and service we offer is low profit so giving away one to sell another only lowers profit and in this case it is better to pass the sale entirely because it is a loss. If I lose on twice the number of sales I just lose twice as much. This is exactly what has happened with training. Training is given away to sell equipment. Now we give the training away and still don't sell the equipment. The same is true with service. Service prices are low because it has always been an incentive to buy the product. It has evolved such that everything we do is low or ZERO margin except equipment sales. If equipment prices go down volume must go way up without having to give anything else away. The only other answer is for training, service and gas to go way up such that they are no longer loss leaders.
At one time we used to send equipment out for service if it was something we weren't authorized to service. The idea was that at least we had the traffic in the store. We were unable to mark up the service it was just a pass through. Well we actually lost because it took time to do plus if there was a problem we were held responsible and sometime it took money out of our pocket to resolve the issue. We don't do even this anymore because there isn't anywhere to send the stuff. The other shops make little enough on service that they don't want to service equipment for our customers. There is no profit in it for them if it doesn't help sell their equipment.
This is not the fault of the consumer. It just is what it is. However when someone like Genesis is looking for such a deal we must opologize and let it go. I can't give ten nitrox fills and a pice of equipment for $100. I cant give four hours of labor and a piece of equipment for $100
Plain and simple, the manufacturers must do something to allow us to compete directly on price. A huge increase in the cost of training and services could help but it would need to be accross the industry and that won't happen any time soon
As far as using other services to sweeten the pot...This works for active local divers who need gas, my library, the use of my fill station and other things I can offer. These diver choose me over LP hands down every time with no hesitation. There are very few of them though. Most divers here don't dive locally so an air/nitrox card has ZERO value to them. All these divers look at or are interested in is the cost of the item they are buying. They may not need anything else for a very long time.
Also if I make a $100 markup on a $400 sale but offer 4 hours of labor with it I lost big time. The markup didn't pay for the labor let alone give me the cash to pay the rent. Such a deal may make the sale but even if I ever see this transient customer again I will need to offer the same kind of deal to make the sale. The result is I will work very hard at making nothing at all. If we made enough of these sales to pay the rent there wouldn't be enough hours in the day to do the free service or whatever. Again these are mostly vacation divers shoping for price alone because they have little use for the other services we offer. Some of you mix markup with profit. Literally every product and service we offer is low profit so giving away one to sell another only lowers profit and in this case it is better to pass the sale entirely because it is a loss. If I lose on twice the number of sales I just lose twice as much. This is exactly what has happened with training. Training is given away to sell equipment. Now we give the training away and still don't sell the equipment. The same is true with service. Service prices are low because it has always been an incentive to buy the product. It has evolved such that everything we do is low or ZERO margin except equipment sales. If equipment prices go down volume must go way up without having to give anything else away. The only other answer is for training, service and gas to go way up such that they are no longer loss leaders.
At one time we used to send equipment out for service if it was something we weren't authorized to service. The idea was that at least we had the traffic in the store. We were unable to mark up the service it was just a pass through. Well we actually lost because it took time to do plus if there was a problem we were held responsible and sometime it took money out of our pocket to resolve the issue. We don't do even this anymore because there isn't anywhere to send the stuff. The other shops make little enough on service that they don't want to service equipment for our customers. There is no profit in it for them if it doesn't help sell their equipment.
This is not the fault of the consumer. It just is what it is. However when someone like Genesis is looking for such a deal we must opologize and let it go. I can't give ten nitrox fills and a pice of equipment for $100. I cant give four hours of labor and a piece of equipment for $100
Plain and simple, the manufacturers must do something to allow us to compete directly on price. A huge increase in the cost of training and services could help but it would need to be accross the industry and that won't happen any time soon
Comes with being technically able.
I wouldn't even ask the shop to mount the transmitter on my reg, for example. I'm perfectly happy to do that myself.
During the discussion I had this am, the shop pointed out "local support" as one of the reasons to buy from them. I asked if that meant that if I had a failure under warranty they would immediately swap the unit - no hassles, no problems, no garf. The answer was no - that what they'd do would depend on what the manufacturer told them to do. In other words, exactly the same thing that SimplyScuba will do (except that they will even eat shipping both ways, and issue a call tag for UPS to come get the broken one from me!) It actually might be significantly worse, since I bet they don't have another one laying around (but SS does!)
Mike, you (like many other people in business) confuse a couple of points, but they're critical.
Let's say that you're a seller of transmitters and I want one.
Ok, I come into your shop.
Assuming (1) you can get a replacement for the one in your display case within a couple of days, and (2) you judge that I'm REALLY going to buy it SOMEWHERE (that is, I'm not just yanking your chain), then you are ALWAYS ahead of the game to sell it to me at any price that exceeds your total cost for that product.
Why?
Because you can replace it tomorrow, yet once I walk out the door and buy it elsewhere that's money that you will NEVER see from me. I don' t need two of them, you know!
Now when the product has limited availability, or demand is particularly high, then this may not be true. But that has to do with opportunity cost, and opportunity cost is something you have to weigh - the opportunity lost in watching my dollars walk out the door .vs. the opportunity that you MIGHT lose if someone else comes in 5 minutes later and is willing to pay full retail.
You know the old saying about "a bird in the hand..."
It applies here.The typical mark-up in the dive shop for hardware like this is 100%. That is, the "list" transmitter price of $535 (roughly) translates into a cost of about $275 or thereabouts. That's probably what they paid for it to be sitting there in the case.
The 10% off price is in the $480 range.
Let's say you give me a $90 Nitrox card (10 fills @ 9.00 each) with the purchase.
The cost of the O2 from the Ts that make up those 10 fills is about $8 (particularly for me, since I typically get a "cut mix" of 30% instead of 32%, so the O2 is a bit cheaper.)
The "air" you blow on top of that, on your air card, would cost me $40 for 10 fills, or $4 each, and this assumes that the air card is sold at zero margin (ha!) But heh, I'll humor 'ya and say "ok, it is."
So that card COSTS you $48 to give me.
Ok.
You get $480 for that "deal", which is about $25 more than I'd pay to order the same transmitter online, subtracting out the "value" of the Nitrox card. I still pay more, but I'll do that willingly - its not a material amount of money, I'm supporting you, and I'll be in your shop at least 10 times more (to use those fills I paid for!) Plus, I kinda like your shop and I like the people. $25 is beer money; its ok. In addition I have paid you today for something I will "eat" tomorrow, which is ALWAYS good from a business standpoint - YOURS! You have my $90 but I might not use those fills for two months or more (unlikely; I'll probably use it up within a couple of weeks, but heh, it might happen - I might break my leg tomorrow or something.)
Your COST is $275 for the transmitter, plus $48 for the card, or $323. You made $157 on that transaction, assuming that I walk out the door with it and don't ask you to spend time installing it or showing me how to use it (and, with this kind of deal, I would not expect you to do either - just hand it over the counter. I understand that time and labor costs money; I don't want either in this case.)
Exactly how does this deal not "work" for the shop owner?
The ONLY way this doesn't add is if as soon as I depart in strolls a tourist who wants to buy a Vytec with the transmitter, wants it NOW, and is willing to pay the $1300 list price for the pair.
What are the odds of that happening in the day or two it takes you to get another transmitter, assuming you don't have a second one?
In January, when there are no tourists around here.
I'd hazard a guess that you have a better shot at winning the lotto than having this happen.
Were it my shop, there would be only one word for that proposal: SOLD!
It would be even better if the buyer was a tourist, since the odds of me EVER having to "pay out" in full on that nitrox card would be, well, you figure it out
Genesis,
Everything you say is correct assuming there is a real markup on the combined services.
First of all the equipment that has a suggeste retail markup of 100% is on the best dealer level and we are not even close. Much of what we sell doesn't have even close to a 100% markup on the best dealer level. Many high dollar items have a lousy markup like drysuits. We are selling lots of stuff for 20% over cost and I'm not even looking at shipping.
A high volume gas dealer may make money on fills but all my compressor does is allow me to teach. The anual revenue on gas doesn't even pay the maintenance. I'll get a $700 dollar bill for a new seperator today in fact. All filling your tanks does is put hours on my machine that I can't afford. The only reason we have gas it because we need it to teach and to get dealerships. A fill station in this area can't be justified as a profit center it's just another part of cost of sales.
Everything you say is correct assuming there is a real markup on the combined services.
First of all the equipment that has a suggeste retail markup of 100% is on the best dealer level and we are not even close. Much of what we sell doesn't have even close to a 100% markup on the best dealer level. Many high dollar items have a lousy markup like drysuits. We are selling lots of stuff for 20% over cost and I'm not even looking at shipping.
A high volume gas dealer may make money on fills but all my compressor does is allow me to teach. The anual revenue on gas doesn't even pay the maintenance. I'll get a $700 dollar bill for a new seperator today in fact. All filling your tanks does is put hours on my machine that I can't afford. The only reason we have gas it because we need it to teach and to get dealerships. A fill station in this area can't be justified as a profit center it's just another part of cost of sales.
I have a major drysuit manufacturer's dealer price list here. Its essentially 50% of "list" price. That's a 100% mark-up, and their products are price-controlled with that nice little "maximum discount" clause.
Assuming you offer a the maximum 20% discount off the "MSRP", on a $1000 suit you would sell it for $800 but pay $500 for it. That's a $300 profit on a $500 item, or a 60% profit margin.
20% over cost eh?
Nobody would sell an air card if all selling one meant is that you lose MORE on each fill (since there is typically a volume discount)
Yet they all do around here. And what is clear to me, when the Nitrox card is $9/fill (Q10) and the air card is $4/fill (same Q10), yet the O2 in the tank costs $0.80, and that's assuming I have to send back each "T" with 40 cubes or so in it due to lack of a booster (they have one), its pretty clear that they're not losing their shirts on those Nitrox cards.
I have, several times, explained possible ways out of this box for you. You have dismissed all of them out of hand, but I bet you haven't spent $10 in your corporate counsel's office finding out if what I've been talking about would actually work.
You're missing the point Genius, I mean Genesis. I'll use your DUI example. That $300 is crucial. Let's say that LeisurePro only profits $100 per suit. They might sell 30 per month. That's three grand in their pocket and only the overhead of maintaining a website and a small "showroom". A shop like Mike's may sell a couple per year? (I'm guessing here) When you start adding up rent, elec, insurance, etc., etc., etc.. You cannot offer competitive prices and stay in business. With regard to air, you are focusing purely on the tank of oxygen required to make the Nitrox fills. You are forgetting how much air costs the shop. You have the pesky oil changes, filters (definately not cheap), and the labor required to fill your tanks, and probally allot I am forgetting about.
I mean come on, I will bend over backwards all day for a customer, but do not ask me to bend over forwards !!
I think you should really go ahead and open up a shop Genesis. Sounds like you have everything figured out. I am sure you could revolutionize the industry overnight.
I mean come on, I will bend over backwards all day for a customer, but do not ask me to bend over forwards
!!I think you should really go ahead and open up a shop Genesis. Sounds like you have everything figured out. I am sure you could revolutionize the industry overnight.
I'm not missing the point at all.
Nor am I claiming that $300 a suit is an "unreasonable" profit. It may well not be!
I do, however, get very, very unhappy when people are less than honest. Claiming that you only have a 20% mark-up when its really 60% is less than honest.
Nor is the example I posted an isolated one. I have MANY of these dealer price lists. They are quite consistent in that most if not all show dealer costs at about half of MSRP, give or take a few bucks. (This also, incidentally, explain how LP manages to do what they do!)
The issue is NOT about the AMOUNT of the profit or even the PERCENTAGE of the profit. Its about whether you can provide me, as a customer, with VALUE that exceeds what I can get, all up, from a different retailer.
If you can then you get the business.
If you can't then you lose.
And yes, I do understand the costs associated with owning and running a compressor. Filters, maintenance and power, to be precise. I accounted for that - the operating costs for a small compressor (I've worked the numbers) wind up being in the $1.50/tank (for AL80s) range, including depreciation on the unit, power, a maintenance budget and filter media. The filters are the largest single component of that expense. Depreciation and capital maintenance is almost a joke, really. As an example, Bauer's midrange units (what you'd probably find in a small or medium-size shop) have expected maintenance requirements of poppet valve replacement every 1,000 operating hours, rings at 2,000 operating hours, and crank bearings are expected to last 20,000 hours. The most common required parts, the poppet valves, are not expensive at all. 1,000 operating hours for a 10 cu/ft unit would be 600,000 cubic feet of gas, or about 7,500 aluminum 80s filled!
Larger units are less expensive to operate to a point; the largest single expense is the filters, and the small ones in the smaller units are more expensive on a per-tank-fill basis as they are consumed MUCH more quickly than the larger. The difference is as much as 50% between a 3,000 cu/ft filter stack and a 15,000 cu/ft filter stack.
Within the last two weeks I came pretty close to buying a closed-dive-shop's compressor. The deal came apart over some of the details, but we were pretty close. The unit had 2,200 hours on it, and was 8 years old. He had fileld a lot of tanks, yet the unit had, for capital maintenance, just gone through its first set of poppet valves about 500 hours previous. The guy who did the work on it said the rings and bore condition were fine and there was no reason for him to change those at that time.
There is simply no way that the shop is losing money at $4/fill unless they are neglecting the unit and through lack of PM taking large hits on unscheduled maintenance costs, then trying to "front load" the capital cost of the unit into the first couple of year's operating budget.
The IRS won't let you get away with that when it comes time to depreciate that unit.
Nor am I claiming that $300 a suit is an "unreasonable" profit. It may well not be!
I do, however, get very, very unhappy when people are less than honest. Claiming that you only have a 20% mark-up when its really 60% is less than honest.
Nor is the example I posted an isolated one. I have MANY of these dealer price lists. They are quite consistent in that most if not all show dealer costs at about half of MSRP, give or take a few bucks. (This also, incidentally, explain how LP manages to do what they do!)
The issue is NOT about the AMOUNT of the profit or even the PERCENTAGE of the profit. Its about whether you can provide me, as a customer, with VALUE that exceeds what I can get, all up, from a different retailer.
If you can then you get the business.
If you can't then you lose.
And yes, I do understand the costs associated with owning and running a compressor. Filters, maintenance and power, to be precise. I accounted for that - the operating costs for a small compressor (I've worked the numbers) wind up being in the $1.50/tank (for AL80s) range, including depreciation on the unit, power, a maintenance budget and filter media. The filters are the largest single component of that expense. Depreciation and capital maintenance is almost a joke, really. As an example, Bauer's midrange units (what you'd probably find in a small or medium-size shop) have expected maintenance requirements of poppet valve replacement every 1,000 operating hours, rings at 2,000 operating hours, and crank bearings are expected to last 20,000 hours. The most common required parts, the poppet valves, are not expensive at all. 1,000 operating hours for a 10 cu/ft unit would be 600,000 cubic feet of gas, or about 7,500 aluminum 80s filled!
Larger units are less expensive to operate to a point; the largest single expense is the filters, and the small ones in the smaller units are more expensive on a per-tank-fill basis as they are consumed MUCH more quickly than the larger. The difference is as much as 50% between a 3,000 cu/ft filter stack and a 15,000 cu/ft filter stack.
Within the last two weeks I came pretty close to buying a closed-dive-shop's compressor. The deal came apart over some of the details, but we were pretty close. The unit had 2,200 hours on it, and was 8 years old. He had fileld a lot of tanks, yet the unit had, for capital maintenance, just gone through its first set of poppet valves about 500 hours previous. The guy who did the work on it said the rings and bore condition were fine and there was no reason for him to change those at that time.
There is simply no way that the shop is losing money at $4/fill unless they are neglecting the unit and through lack of PM taking large hits on unscheduled maintenance costs, then trying to "front load" the capital cost of the unit into the first couple of year's operating budget.
The IRS won't let you get away with that when it comes time to depreciate that unit.
ScubaDon
Contributor
Isn't it funny how much you can miss out on by not logging in for a couple of days!!
Just have to throw in my .02 on one of my favorite subjects. I have actually been told by the owner of an LDS that "you are more than welcome to come hang out as long as you are buying".
Joking or not I don't think that is a very appropriate comment to make to a customer you know is ready to lay down a couple of grand to buy equipment and who knows what continuing business.
Needless to say that because of that and several other comments and a some very poor experiences with our training we did not purchase through them but took our business, and dollars, elsewhere. All equipment purchased with full manufacturers warranty, saved over $700!
I'll throw my $4.00 his way now and then to buy fills................NAH won't even give him that business :upset:
Stepping off soap box and waiting for the flames.
Just have to throw in my .02 on one of my favorite subjects. I have actually been told by the owner of an LDS that "you are more than welcome to come hang out as long as you are buying".
Joking or not I don't think that is a very appropriate comment to make to a customer you know is ready to lay down a couple of grand to buy equipment and who knows what continuing business.
Needless to say that because of that and several other comments and a some very poor experiences with our training we did not purchase through them but took our business, and dollars, elsewhere. All equipment purchased with full manufacturers warranty, saved over $700!
I'll throw my $4.00 his way now and then to buy fills................NAH won't even give him that business :upset:
Stepping off soap box and waiting for the flames.
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