The point of my reply was that a LDS in Colorado does not have the benefit of divers coming thru their door for fills that drive customers to LDS in areas where local diving is good. There’s limited reason for nitrox, helium or oxygen clean tanks in Colorado. O2/HE are available; it just takes a lot of effort to get this type of fill locally.
DEMA states that there are about 1.4m annual dives in CA. That’s a lot of trips to the LDS that proportional do not occur in Colorado and this makes the local LDS biz all the more difficult.
While you, “can’t take it with you”, you can spend it other than at a LDS. Diving competes with many leisure activities in Colorado – think skiing – and skiing is an expensive undertaking. I suspect that divers in Florida might spend some of their money fishing and that this consumer behavior is the norm across the country.
A customer thru the LDS door is an opportunity to cement relationships and sell more gear and services. I would venture that many shops in CO most often see their customers prior to destination trips, once or twice a year. That leaves the revenue stream of instruction and outfitting new divers as the primary revenue source, setting aside travel for the moment. But what about those new certs as a selling opportunity?
Looking for the source data showing CO having the country’s highest per-capita diver percentage, the data is somewhat suspect. DEMA’s 2013 annual report has a section entitled, “Fast Facts, Recreational Scuba and Snorkeling”. Reading it the future of the industry looks grim.
DEMA’s estimate of active US divers is 2.7 to 3.5 million. The 30% variance, using the 2.7 figure as the base, indicates to me that DEMA has little grasp of the size of their member’s market. DEMA’s last minute announcement – prior to this year’s annual trade event – of a job board hints at their ineptitude. A good idea, but announced too late to be fully capitalized on.
Where does CO stand? DEMA’s annual report states that three certification agencies contribute to their year-by-year certification by state compilation. PADI is certainly a contributor to this compilation, but they are notorious for limited and self-serving disclosure of their metrics. I suspect SSI is a contributor and the third, who knows? IMO the accuracy of the cert numbers is suspect – the contributing agencies likely keep their cards breasted. In a no-growth industry the agencies are competing to be the lead cert organization at the LDS level, just like the shops are competing with each other for customers.
Using the 2010 DEMA certification data compared to 2010 census, CO indeed is the per-capita market leader in new certs by a wide margin. How we rank in active divers in little more than a wild guess – DEMA numbers on the total size of the active diver market are suspect. So, where does Colorado stand per DEMA?
| State | 2010 | Certs | Certs/Pop | VAR-CO | Cum 05-12 | %Cum |
| Colorado | 5,000,000 | 4,700 | 0.093% | 0% | 41,000 | 8% |
| Florida | 19,000,000 | 13,700 | 0.073% | 28% | 115,000 | 22% |
| VA/MD/DC | 14,000,000 | 7,900 | 0.055% | 70% | 61,000 | 12% |
| California | 37,000,000 | 18,600 | 0.050% | 87% | 162,000 | 31% |
| Texas | 25,000,000 | 11,000 | 0.044% | 114% | 89,000 | 17% |
| New York | 19,000,000 | 7,800 | 0.040% | 132% | 59,000 | 11% |
| Totals | 119,000,000 | 63,700 | | | 527,000 | 100% |
The question of where the certifications occurred is not answered by the data. PADI and the other contributing agencies certainly know if the cert was in CO or occurred elsewhere – let’s say for example a CO diver certed in Cozumel. Add in split referral certs and the picture is all the more confusing. In the end the certs in CO are spread thin and have declined markedly. CO certs were 5.7k in 2005 and 4.9k in 2012. Without regard as to whether the cert was in CO – the numbers reflect a declining market and cut-throat competition among the LDS.
So, what about the health of the industry and its future and what are the metrics?
Turning to Dive Center Business’s 2014 report, “How Stable is Diving's Retail Base?” it’s clear the industry is in deep trouble. DCB uses the number of dive stores opened vs. dive stores closed as their key metric. Some of Dive Center’s key findings in the 2014 report;
· The 58 stores that closed during 2013 represent a 4 percent failure rate, in the low range of average small-business failure rates in the United States.
· In the longer measure, during the five-year period from 2009 to 2013, 290 dive stores opened for business in the United States while 395 closed, for a net loss of 105 stores.
· The current U.S. retail base is at 94 percent of its pre-2009 level.
· During the 14 years since this survey began, 1,229 new stores opened and 1,459 closed, for a net loss of 230 stores. Dive retail is 87 percent of its 1999 retail base.
· The rocky mountain area saw 13 stores open and 19 close in the last five years.
· The north east saw 35 stores open and 55 close in the last five years.
DCB’s data leaves a huge gap – the missing metric is obviously the revenue that the shops generated. Were the shops that closed merely the weak sisters or a reflection of the industry’s health? DCB reports the shops that closed in 2013 had been open an average of almost 15 years, so likely it’s a little of both. The owners and employees undoubtedly suffered due to these closings.
Is there a proxy for the dive industry – that is a company whose business results are a fair reflection of the industry?
Among the major players – Aqua Lung. Scubapro, AUP, Mares – it appears that only Scubapro’s data is available. Scubapro is of course a division of Johnson Outdoors, a publicly traded company with the symbol JOUT. JOUT is subject to SEC rules and regulations and of course SOX. Their numbers are accurate. Air Liquide SA – 15 billion euros in sales last year – does not break out Aqua Lung numbers and in any event likely loses more gas in a year than AL’s sales contribute.
For argument’s sake let’s look at SP’s numbers for the last three years as a proxy for the industry. Numbers are in millions.
| Scubapro | Sales | Profit | %PtoS | Sales Delta | Profit Delta |
| 2013 | 85 | 5.7 | 6.7% | -3% | -11% |
| 2012 | 88 | 6.4 | 7.3% | -2% | 78% |
| 2011 | 90 | 3.6 | 4.0% | 100% | 100% |
Assuming that SP is an industry proxy, what does this show? Sales are declining and profits are trending up. I will leave it to you to speculate as to how they are improving margins on declining sales.
SP has significant leverage both in sourcing product and demanding sales in the wholesale channel. Perhaps it’s their factory in Batam, Indonesia – close to Taiwan – where their recently recalled PDCs were made. SP’s annual report states they out-source the production of BCDs, neoprene, and plastic parts (whatever they are), perhaps too Taiwan? They too – along with Nike, Adidas, Macys, Target, Walmart – have discovered SE Asia and Bangladesh as the low cost geographic center for sourcing product.
If SP’s sales are down slightly how is the rest of the industry fairing?
The LDS in Colorado and across the country are often asked to compete on the web. Unfortunately, they have neither the capital, human talent, pricing advantage, nor in-depth knowledge of social media to do so. DRIS and ScubaToys are the exception and DGE and DSS are strong nich players. Where does this leave the LDS? IMO the lower half are only fighting for the left-over scraps. Add in the effect of Hog/DR and their ilk and it’s a dogfight for survival, let alone market share. One wonders why a visit to an LDS that hasn’t seen a sale in several days in unpleasant when you are only window shopping?
IMO opinion the sweet spot for the LDS is likely the higher end of the market. I posted about consumers who buy BMWs, designer goods and have high disposable income combined with discretionary leisure time. This is the sweet spot of the market – consumers who won’t be taken advantage of, but are willing to spend where they find a high level of customer service and products than connote high value.
The highly successful LDS of the future will cement customer relationships with superior service, a stress-free shopping environment, consumer friendly warranty and return policies, on-site training facilities and a strong travel component. Where there is a local dive market they will likewise deliver superior goods and service to their divers. Make no mistake Leisure Pro – and its ilk – are formidable competitors. They undoubtedly demand and receive more favorable terms and have manufacture’s sales personnel lined up at their doors. Think not? Well then how does LP have more AL product than your LDS and offer better prices to boot? AL knows exactly where the product came from, don’t kid yourself.
In this thread many posters have talked-up their LDS, surely they won’t be the one to fail. This flies in the face of industry consolidation – someone’s LDS, just not yours – will be the next one to fail.
Colorado has many outstanding LDS. BeaverDivers is a hybrid in the market. While their web execution and social media execution is sloppy - no doubt they are successful. And a key component to their success is travel – BD’s trips are marketed at the top end of the travel market and undoubtedly generate several profitable revenue streams. A1 in Littleton, Underwater Phantaseas in Greenwood Village, and
boulderjohn’s store in Boulder are prime examples of stores than minimize price completion – cementing loyalty with superior service, high end product and large travel departments.
In your market look at your broader community – the number of LDS will surely shrink at a great loss of capital and personal tradegy. Just as your local department store – think Rich’s in Atlanta or Dayton’s in Minneapolis – has consolidated, so will the LDS/SCUBA business. The market is brutally efficient and the industry and local dive shops will be no exception.
For the doubters – let’s look at the LSS – that is the local ski shop. In years past most neighborhoods in the Denver/Boulder metro area had a local ski shop. Their challenges were close to what the dive industry LDS faces today. These shops are almost to the store front gone. Christies survived, perhaps they might be a model for a LDS that will survive and prosper in the out years? Small business ownership of multiple outlets as a model for success?
The reasons why the dive/scuba industry isn't growing are immaterial. The end game – that is the future of the industry – will result in some temporary inconvenience for the individual diver, great loss for many LDS owners, and ultimately more efficient choices for most divers. Perhaps Colorado – as it does in cert percentages – will lead the way.
