Future of DiveShops?

[Rhone Man]

I actually plan to open a small dive shop when I retire from my real job (I even reserved myself a website!). I am planning to offer a fairly limited service - gas fills, some training, and taking some people out to the more rarely dived sites where I live. I am not planning on doing gear sales, although I might do rentals and/or servicing. And I am planning not to do any basic level training or DSDs. I am expecting the main specialty of my dive shop will be old b*st*rds sitting around shooting old diving stories.

Will I make any money? Of course not. But I figure this will be a good way to indulge my passion and make new friends when my wife forces me out of the house each morning.

Maybe one day all LDSs will be along the lines of the future dive shop in my imagination. Or maybe not.

 

[CptTightPants21]

Right. That's exactly why you don't see Coke or Nike or Apple ads anymore. Since everyone knows what those things are... no need to continue marketing those things.

Wait, what!?!

---------- Post added November 15th, 2014 at 11:58 PM ----------



It's funny... you never hear anyone say "If I had a dive shop I would run it like a real business."

At a minimum I'd like to see people who are customers of dive shops at least say something like "If I had a dive shop... I would recognize that the tenets of micro and macro economics would actually apply to my dive shop just the same as if I were running a pharmacy or a car dealership or a grocery store."

I do recognize the tenets of micro and macro economics and maybe it won't be as "cheap" as I would like it, but it wouldn't be price gauging that I see today with LDS. When I was buying a few items, I went to my guy and said LP has it for X, I will pay all cash, can you get it close. He said no, I went with LP...as simple as that. Being able to demo gear is another big advantage the shops have, if you let people demo the gear they want and then offer a competitive price, people will make purchases, as simple as that. And this model does work as has been proven by several shops----Diver's Supply is extremely similar to what I describe. I am going to be looking for a drysuit during the off season, I am going to contact DiveRightinScuba because they have proven themselves to be an excellent authority on drysuits and are willing to negotiate price--I may not get one from them, but they have a fair shot at my business. Even if I don't get the drysuit, there are other items that I would like to buy. I can get these items anywhere, but being a shop that has a reputation for treating their customers right generates loyalty---even from someone who has never dealt with them.

 

[RJP]

I see your point but it's not really the same.
Way more people drink sodas, use Apple products, and wear sneakers than dive./QUOTE]

Hmm. Why don't you think that through for a little bit...



Let's see how different industries go about trying to drive demand:

Soft drinks - Advertise
Computers - Advertise
Sneakers - Advertise
Diving - Pining for the good ol' days

Besides, diving is an activity not a specific product.
To make a fair comparison you would need to put up a Scubapro add on one of those bill boards. Then people driving buy would go Huh???

And and this is the mindset that will ensure that the industry keeps one foot in the grave and one on a banana peel. Scuba diving IS a "product" and needs to be treated as one. And, no, I'm not saying billboards is the way to go. Nor that scubapro which is a brand, not a product) should advertise. But rather I'm saying that scuba diving has an awareness/interest/image problem... which is what marketing and advertising are really good at solving.

 

[redacted]

I'm scratching my head over 2000% markups and how anyone could possibly make a profit on $5 air fills. They can't, it's as simple as that. If you have a real store, a real compressor and fill panel (and another compressor as a backup--they do break and require maintenance) I don't think I could build a model showing a profit at $10 a fill. No, I know I can't. However, we pile up all the filthy money we make on $1 o-rings every night and roll around in it. Debauchery 'R Us, and all that.

This thing can be done and it can be successful--and have customers and a staff that enjoy being in the store. Obviously, it's not for everyone and if price is your only concern--not that there's anything wrong with that if that's all that matters to you--brick and mortar or, in our case, tilt-up concrete stores might not be your cup of meat. So be it.

There's a lot more than just air fills and o-rings (and lights and b/c's and bp/w's and thermal protection and business licenses and power bills and trip sales and fish ID books and classes and classrooms and first stages and, well, you probably get my drift) involved in a successful dive shop. In fact, it's almost like real work. Almost. It's still a lot more fun than a heck of a lot of things people do.

Oh, we also create jobs (like a real business), pay lots of taxes to keep those potholes filled, donate our time and money to various charities, events and organizations kind of like all good businesses do...after we finish rolling around in all that o-ring profit, that is.

To what degree are your training programs and gear rental programs dependent on your owning a compressor? So the cost of compressors and bank system as well as associated space should be offset by rental and training program profits, not customer tank fills.

You don't own a compressor so you can fill customers tanks. Any money you make providing such fills over and above the cost of operating that compressor is in the black column. Are you really trying to claim that the cost of filters, electricity, and other maintenance for 10 minutes or less of compressor operation is over $5? Hell, unless a shop happens to be close to a popular local dive site (does Omaha have any) I'd bet the shop gives away more fills to key personnel and such than they sell to paying customers.

If you are not making a reasonable and sustainable profit from your training and rental programs, including the cost of your tank filling capability, you might want to consider other line of work.

I agree that shops don't make much profit selling o-rings. It just does not see that much demand. But when you charge $1 for a -014 that cost you 2 cents, you just risk pissing off the customer with gouging business practices. It is like the hospital that charges $5 for a band aide. What do you think would happen if you gave the customer a package of 5 or 10 o-rings for that dollar and tell him he needs them for his save-a-dive kit? You don't lose any $$$ and you have a happy customer.

 

[RJP]

I guess there is competition in those industries, not much of that going around in the local dive shops.

If a dive shop had no competition they'd be rich.

Your competition is any goods/services that people spend money (or time) on INSTEAD of spending it on the goods/services you provide.

 

[redacted]

What ever happened to Scuba Toys BTW?
I thought they were the little darling for a while. How long is the current online shop going to be the little darling before someone else comes along?
How many are there now? how do they all survive selling stuff cheap with free shipping and a free key chain or mask defog, or whatever the little freebie is that day.
I can see how it worked when there was a few, but now there are too many. I thought they needed to swallow up all the volume to be able to make it. Hmmm, I wonder what plan "B" is?

I became disappointed in Scubatoys when they went back on their promise to sell parts for any gear they sold. There are better options for me now. The growth of the bigger internet volume sellers has got to be taking it's toll on smaller LDSs which will eventually cut back on the new divers entering the market. In time that will cut into the pool of internet customers and those providers will hjave to find ways to off-set that. I still expect to see local clubs associated with and assisted by large internet shops. And, I think it will be a good thing.

---------- Post added November 16th, 2014 at 07:28 AM ----------

If a dive shop had no competition they'd be rich.

Your competition is any goods/services that people spend money (or time) on INSTEAD of spending it on the goods/services you provide.

I live in an area that had as many as 4 shops. Due to various reasons (retirement, death, highway expansion, affairs), we are down to 1. Yet, I don't believe his business has grown. He is in a odd location (on a floating dock on a local lake that is just not a very popular dive destination). With the lake levels down, it is about a 3 story climb just to get tank fills. I have cut back severely on my local diving simply because of the inconvenience.

 

[RJP]

What do you think would happen if you gave the customer a package of 5 or 10 o-rings for that dollar and tell him he needs them for his save-a-dive kit? You don't lose any $$$ and you have a happy customer.

Since you'd be giving that customer 5-10 fewer reasons to come into your store over the next 10 years, I'd say you'd have the potential to lose plenty of $$$ beyond the .014 allocation cost of each 0-ring.

But beyond that, there's the wonderfully naive notion that a customer should expect to be charged the same for an item as what the business paid to acquire the item. By definition the selling cost of an item needs to be set higher - often much higher - than a retailer's acquisition cost. (There's that pesky "economics" thing again.) In your world you seem to think that the retailer should only charge .014 for an o-ring that cost them .014. (Actually you seem to believe that they should charge $1.00 for $1.40 worth of o-rings, but that's a different issue.) In the real world, determining the actual cost and realistic selling price for anything and everything needs to consider a lot more.

So, no, putting 80cf of compressed air may not specifically cost the retailer $5.00. But let's look at all the things that go into why it may cost YOU $5.00...

What a dive shop needs to factor into their actual cost for - and realistic selling price of - providing an air fill:

• Direct compressor use cost: total cost to power, run, maintain, inspect, service, and repair the compressor (including consumables and parts) for a year, divided by the total number of tanks filled per year = $X/tank fill
• Direct compressor amortization cost: total purchase price of compressor divided by the working life of the compressor, in tank fills = $Y/per tank fill
• Direct labor cost: total annual cost of an employee (wages + bonus + benefits + employment taxes + training + all other employment costs) multiplied by the percentage of an employees time spent on all activities associated with filling tanks over the course of a year (including compressor maintenance and repair) divided by the number of tanks filled in a year = $Z/per tank fill
• Allocated overhead: Total annual business costs for things such as rent, utilities, fees, insurance, training, memberships, etc divided by the proportion of the business comprised by tank fills per year, divided by the number of tanks filled per year = $A/per tank fill
• Allocated SG&A costs: Total selling, general, and administrative costs associated with running the business for a year (including such things as pool heating/service, accounting and legal fees, advertising costs, web development and maintenance, trash services, plowing snow from the parking lot, cleaning services, spoilage, shringkage, etc) divided by the proportion of the business comprised by tank fills per year, divided by the number of tanks filled per year = $B/per tank fill
• Indirect/Allocated labor cost: Total annual cost of all employee time (wages + bonus + benefits + employment taxes + training + all other employment costs for every employee in the organization) that are NOT BILLABLE and/or that do NOT RESULT IN A SALE, divided by the proportion of the business comprised by tank fills per year, divided by the number of tanks filled per year = $C/per tank fill
• Unallocated Inventory Carrying Costs: the total cost - net of direct acquisition cost - associated with purchasing, receiving, stocking, and distributing all items held in inventory over the course of the year, divided by the proportion of the business comprised by tank fills per year, divided by the number of tanks filled per year = $D/per tank fill
• Allocated and Unallocated debt service costs: total interest and other debt costs incurred by the business in the course of the year divided by the proportion of the business comprised by tank fills per year, divided by the number of tanks filled per year = $E/per tank fill
• Opportunity cost: the value that the time, money, and resources put towards filling a tank if they had been applied to another activity = $F/per tank fill
• Net Profit: The desired/required return in ex change for delivery of the specific goods/services, after taxes = $G/per tank fill

Now, I have no idea what the specific numbers would be for any of those variables for any given tank fill or o-ring at any given shop. But with the realization that they are all real numbers - that represent actual costs that any and every business incurs - it's not hard to imagine that $X + $Y + $Z + $A + $B + $C + $D + $E + $F + $G could reasonably cost the business more far more than $5.00 to provide YOU the tank fill.

At least for a business that is going to STAY in business.

Now, I'm just using o-rings and tank fills as an example. But the cost allocation above need to happen for every single item and service that your LDS provides. So all you people that want things for free, and that don't want to pay more than the shop's acquisition cost for an item, and want cheap airfills, and have the store open at convenient times for you, etc... and everyone in the "If I owned a dive shop" contingent who would have three of everything, in every size, in stock for people to try for free in a heated Olympic swimming pool, and have a fun hangout place, and free beer, with knowledgeable, GUE-trained, tech-diving supermodel sales people, and leprechauns staffing a unicorn petting zoo for customers' children... you really do need to consider the economic realities of running a business in the real world.

There's just something about being a retail customer for hobby/pleasure-related goods and services that cause people's brains to disengage when they have to put their hand in their wallet. Add to that an insanely presumptuous sense of entitlement by many. We see it here. You'll hear it if you talk to cyclists, or skiers, or boaters, or hunters, and probably if you talked to knitters. But I've never heard anyone ever question how much Safeway paid for the can of beans that they just forked over $1.29 to buy... or whether it "really" costs the barber $20 to cut their hair, or how much the beer in their $3 draft actually cost the owner of their favorite bar.

Would a sane person ever suggest that a local restaurant should give you them french fry - which only cost the restaurant $0.014 - for free whenever they stop by and ask for one?

 

[Eric Sedletzky]

I see your point but it's not really the same.
Way more people drink sodas, use Apple products, and wear sneakers than dive.

Hmm. Why don't you think that through for a little bit...



Let's see how different industries go about trying to drive demand:

Soft drinks - Advertise
Computers - Advertise
Sneakers - Advertise
Diving - Pining for the good ol' days




And and this is the mindset that will ensure that the industry keeps one foot in the grave and one on a banana peel. Scuba diving IS a "product" and needs to be treated as one. And, no, I'm not saying billboards is the way to go. Nor that scubapro which is a brand, not a product) should advertise. But rather I'm saying that scuba diving has an awareness/interest/image problem... which is what marketing and advertising are really good at solving.

All great points.
However, there's the reality that Apple, Coca-Cola, and Nike have huge resources to keep their image in peoples minds as they are stuck in traffic and gazing around - perhaps the most vulnerable time for people, when they are bored and looking for stimuli.
They have to keep their image in peoples minds so people don't go to Samsung, Pepsi, and Addidas.

With diving in general and advertisement, where's the money going to come from?
Who's going to step up?
Who are they competing against?
Why should people dive? - what's it going to get them?

In the Nike ad it shows a person in action, so to me the ad is selling a lifestyle as much as a product that will help you achieve that lifestyle.
And it's as simple as buying a pair of athletic shoes to get that lifestyle and get the swoop on the side of your shoe.
I would love to see more scuba advertising, but it seems to me that the industry has a disposable cash problem and is so fractured that nobody can get on the same page and work as a unit.
Just like Coke, Pepsi, and all the other soda people know that they too have an image problem when politicians and pressure groups put it on the ballot to outlaw their products in their cities, they have the combined resources to battle their opponent.
Diving's biggest enemy is themselves.

---------- Post added November 16th, 2014 at 10:22 AM ----------

Since you'd be giving that customer 5-10 fewer reasons to come into your store over the next 10 years, I'd say you'd have the potential to lose plenty of $$$ beyond the .014 allocation cost of each 0-ring.

But beyond that, there's the wonderfully naive notion that a customer should expect to be charged the same for an item as what the business paid to acquire the item. By definition the selling cost of an item needs to be set higher - often much higher - than a retailer's acquisition cost. (There's that pesky "economics" thing again.) In your world you seem to think that the retailer should only charge .014 for an o-ring that cost them .014. (Actually you seem to believe that they should charge $1.00 for $1.40 worth of o-rings, but that's a different issue.) In the real world, determining the actual cost and realistic selling price for anything and everything needs to consider a lot more.

So, no, putting 80cf of compressed air may not specifically cost the retailer $5.00. But let's look at all the things that go into why it may cost YOU $5.00...

What a dive shop needs to factor into their actual cost for - and realistic selling price of - providing an air fill:

• Direct compressor use cost: total cost to power, run, maintain, inspect, service, and repair the compressor (including consumables and parts) for a year, divided by the total number of tanks filled per year = $X/tank fill
• Direct compressor amortization cost: total purchase price of compressor divided by the working life of the compressor, in tank fills = $Y/per tank fill
• Direct labor cost: total annual cost of an employee (wages + bonus + benefits + employment taxes + training + all other employment costs) multiplied by the percentage of an employees time spent on all activities associated with filling tanks over the course of a year (including compressor maintenance and repair) divided by the number of tanks filled in a year = $Z/per tank fill
• Allocated overhead: Total annual business costs for things such as rent, utilities, fees, insurance, training, memberships, etc divided by the proportion of the business comprised by tank fills per year, divided by the number of tanks filled per year = $A/per tank fill
• Allocated SG&A costs: Total selling, general, and administrative costs associated with running the business for a year (including such things as pool heating/service, accounting and legal fees, advertising costs, web development and maintenance, trash services, plowing snow from the parking lot, cleaning services, spoilage, shringkage, etc) divided by the proportion of the business comprised by tank fills per year, divided by the number of tanks filled per year = $B/per tank fill
• Indirect/Allocated labor cost: Total annual cost of all employee time (wages + bonus + benefits + employment taxes + training + all other employment costs for every employee in the organization) that are NOT BILLABLE and/or that do NOT RESULT IN A SALE, divided by the proportion of the business comprised by tank fills per year, divided by the number of tanks filled per year = $C/per tank fill
• Unallocated Inventory Carrying Costs: the total cost - net of direct acquisition cost - associated with purchasing, receiving, stocking, and distributing all items held in inventory over the course of the year, divided by the proportion of the business comprised by tank fills per year, divided by the number of tanks filled per year = $D/per tank fill
• Allocated and Unallocated debt service costs: total interest and other debt costs incurred by the business in the course of the year divided by the proportion of the business comprised by tank fills per year, divided by the number of tanks filled per year = $E/per tank fill
• Opportunity com: the value that the time, money, and resources put towards filling a tank if they had been applied to another activity = $F/per tank fill
• Net Profit: The desired/required return in ex change for delivery of the specific goods/services, after taxes = $G/per tank fill

Now, I have no idea what the specific numbers would be for any of those variables for any given tank fill or o-ring at any given shop. But with the realization that they are all positive, real numbers - that represent actual costs that any and every business incurs - it's not hard to imagine that $X + $Y + $Z + $A + $B + $C + $D + $E + $F + $G could reasonably cost the business more far more than $5.00 to provide YOU the tank fill.

At least for a business that is going to STAY in business.

Now, I'm just using o-rings and tank fills as an example. But the cost allocation above need to happen for every single item and service that your LDS provides. So all you people that want things for free, and that don't want to pay more than the shop's acquisition cost for an item, and want cheap airfills, and have the store open at convenient times for you, etc... and everyone in the "If I owned a dive shop" contingent who would have three of everything, in every size, in stock for people to try for free in a heated Olympic swimming pool, and have a fun hangout place, and free beer, with knowledgeable, GUE-trained, tech-diving supermodel sales people, and leprechauns staffing a unicorn petting zoo for customers' children... you really do need to consider the economic realities of running a business in the real world.

There's just something about being a retail customer for hobby/pleasure-related goods and services that cause people's brains to disengage when they have to put their hand in their wallet. Add to that an insanely presumptuous sense of entitlement by many. We see it here. You'll hear it if you talk to cyclists, or skiers, or boaters, or hunters, and probably if you talked to knitters. But I've never heard anyone ever question how much Safeway paid for the can of beans that they just forked over $1.29 to buy... or whether it "really" costs the barber $20 to cut their hair, or how much the beer in their $3 draft actually cost the owner of their favorite bar.

Would a sane person ever suggest that a local restaurant should give you them french fry - which only cost the restaurant $0.014 - for free whenever they stop by and ask for one?

A wise man once told me that "Diving is a very expensive sport that attracts the cheapest SOB's on earth"

 

[redacted]

Since you'd be giving that customer 5-10 fewer reasons to come into your store over the next 10 years, I'd say you'd have the potential to lose plenty of $$$ beyond the .014 allocation cost of each 0-ring.

The buisiness paid about 2 cents for the o-ring. If you really think it is important to keep the customer dependent on you for a o-ring, give it to him for free. Cheaper than a cup of coffee.

Like most divers, I started out with an LDS. The problem is the feeling of being taken advantage of with the price. When I realized I could buy regulators for about half of MSRP from grey market dealers, I stopped buying gear from LDSs. When shops did a piss poor job servicing my gear, I learned to do it myself. When a shop stopped selling me parts, I found other sources. For me, shops have done a pretty good job of helping find better alternatives.

Will talk more about gas later. But I suspect little more than 10% of what a shop pumps goes into tanks owned by paying customers. And the other 90% is mostly necessary to even be a shop.

 

[RJP]

Eric - don't get caught up the details of what's in a Nike ad or how much money Apple has. That's not the point.

The fact of the matter is "marketing causes demand" but you seem to believe that "demand causes marketing."