Curious to hear from dive shop owners or personnel on what might be the biggest factor that causes dive shops to go out of business?
Internet?
Loss of overall sport participation?
Increasing overhead?
Loss of a particular diving attraction?
(Regional problem)
We are expecting some potentially huge changes in Northern California as far as dive shops go, and not for the better.
I’ll explain in a part 2 after this thread develops a bit.
I haven't read any of the other responses yet so here's my un-influenced opinion with respect to how it works in the Netherlands:
I think shops suffer from a couple of forces outside their control and a couple within their control.
Exogenous factors obviously include economic conditions and people's travel plans. After the Tsunami in Asia in 2004 the diving market in the Netherlands took a serious nose-dive. People weren't travelling to dive. I will get back to why this important in a minute. Other factors I've seen affect the market were the worldcom bubble of 2000 and obviously the global financial crisis of 2008. When people feel they need to "not spend" then the first thing they do not spend on are optional luxuries like hobbies and travel. Shops have to deal with the consequences of this effect but cannot control it.
The reason that dive travel in the Netherlands is important to shops is because that's where the profit is. Training is normally done at around break even unless a shop decides to throw quality to the wind. The local diving market is limited but passionate but a great many Dutch people dive on vacations. This is the driver of most of the demand for training and much of the demand for equipment and shops that combine their activities with a travel agency generally do well on the travel side but are picking up the pieces on the brick and mortar shop.
Another exogenous factor for shops here is the large amount of competition. There should be a consolidation in the market happening but it's not. There are -- quite simply -- too many shops servicing too few divers. I think shops are too cash strapped to be consolidating. The ones that are, even to a limited extent, tend to do better because they can keep costs (for example pool time or the costs of running a compressor, which are not minor) under control while still *appearing* to customers as though they are competing with one another in other ways. Egos play a role here too.
Shops also have some things well within their control that they generally do not do. Shops that have a good presence on the internet (a good, well functioning webstore with sharp prices) move a LOT more gear than brick and mortar shops. Gear is a commodity. Full stop. If you buy a vest from shop A or shop B makes no difference because it is *exactly* the same vest....
What we see is that people will come into a brick and mortar shop, try on all the gear, decide what they want, get all the advice (which is given for free) and then go home and order the gear online, even if the price difference is only 5%. People get advice for free and seem to value that advice financially at zero. For a traditional retail shop this is a big dilemma. You can't turn people away when they walk in the door but you must meet the price point of webshops even with higher overhead. It's a difficult dilemma. What I see is that the best performing shops have both. They see the shop as a "show room" but actually do most of their sales online. One particularly clever entrepreneur I know has several web shops that appear to compete with one another online but they are all linked to the same back-end.
Third, I think that one of the limiting factors in the market for individual shops is the dealer system. NOTHING about being a dealer in the diving world is good for the shop. The dealer system with respect to diving gear is good for the manufacturers and shops are being squeezed because they can't get access to gear any other way. It's a cartel, plain and simple, and all the shop can do about that is get mad. Some are better than others at negotiating but most manufacturers are completely insensitive to the shop's actual business needs and just apply a policy of "chew them up and spit them out". Even if someone offered me a really good deal on a shop then THIS would be the one reason I couldn't agree to run it. You don't have control over your own purchasing policies and therefore you don't have control over your own business model. Why ANYONE would start a dive shop in that kind of an environment -- having to fight against a cartel -- is completely beyond me.
Finally, overhead costs vary wildly depending on location. Some shops want to be "visible" but that means higher costs. Some shops work in places, like in the Netherlands, where it costs €140 per hour for a swimming pool, while others can do their training in a shallow bay. Prices of running and maintaining vehicles in the Netherlands is a LOT more than it is in ... say ... Egypt, for example. The prices of everything from utilities, to parking to the price of parts, labour or even hiring an instructor teach a course are ironically vastly higher in places where diving isn't overly popular. This means that shops in these areas play with small margins AND with small volumes, which means that they need to be as efficient as possible if they don't want to sacrifice quality. Add to that that many shop owners are passionate about diving but not overly skilled in running a business and I think the picture is complete.
R..
