LDS Bashers

[friscuba]

What say you about the $25k cost to simply set UP that business? Costs that took me nearly 5 years to recoup? Working at a personal deficit is certainly a different model, but when you make your living trying to convince people to use your services, it's not as easy. Of course, that's just my opinion.

Perhaps the 100-400% margins are realistic in boutique retail industries. I know it seems to be in women's clothes. Oh well... this has been a fascinating look into the other side of the dive counter.

$25K is a drop in the bucket for a typical brick and mortar store. If a person were to try to start a SMALL dive store tomorrow, they'd likely be out 40-70 K before opening the doors. I realize you have to recoup your startup costs, so does the dive retailer. They have to do the same convincing. A new store likely loses money initially, that's more expense on top of their initial startup costs.

On top of that they generally have to pay for their product before they can put it on sales floor. After they are in business long enough they might be able to get to where some of their product is on terms.

There's usually a good reason behind every markup. The hope is to eventually build the business to where there is a good (not necessarily unreasonable) payoff in the end.

Aloha,

 

[MikeFerrara]

I have a suspicion that virtually no LDS owners know what it really costs to fill a tank.

I beleive if you figure the true cost of an air fill, including the cost of the energy required to compress 80 Cu Ft of air to 3000 PSI, the cost to maintain the compressor, replace filters, have the air tested, replace the compressor after it's useful life has been exceeded, remove the compressor heat from the building in the summer (Air Conditioning), replace the storage tanks as needed, pay someone to do the fills, and all the other costs, I suspect a lot of LDS owners would just turn the lights off and go home.

It would be nice if one of the engineers around here could figure out the energy requirements for the air fill.

Terry

I know exactly what it was costing me to fill a tank when I had a dive shop.

In order to be a dive shop and get dealerships you MUST offer gas fills even if there isn't any one around to buy them. All the dive sites around here have air/nitrox so no one needed to go out of the way for fills. Besides that, I couldn't afford to hire people so the store was closed on the weekend because I had to be in the water teaching and I needed the help of my "store manager" (my wife) in the water because she was the one DM who always showed up.

I also needed the compressor in order to be able to teach...and teaching is another one of those things you MUST do in order to be considered a "dive shop" and be granted dealerships by manufacturers.

The compressor was just part of what it cost me to sell equipment and teach loss leader classes.

All that said, given the amount of fills that I sold to paying customers, I would have had to charge $25/fill if I wanted a 2 year pay back on the initial capitol invenstment. Most of the running time of the compressor was filling tanks for classes that I didn't make money on. The classes are how you sell equipment so...when you buy gear you are buying classes and air fills for every one. LOL

In other words, I could not have made a sound business case for even buying the compressor on the basis of air sales.

If I had a sea shore out front it might have been different but that's what it can be like for an inland dive shop.

Even when I had the compressor at home, when I only needed air or nitrox I often baught it someplace else when it was convemient just to keep the hours off my machine. I used it for the convenience of being able to mix trimix and decompression mixes that I'd otherwise have to spend an extra day or two and travel 100 miles out of the way to get. On top of that, while shops pratically give away air, most really rape you if you want a little helium put in...that is IF they even know how.

 

[dive_lover88]

But you have forgotten one thing......16% of a $20,000 car is $3200. 100% markup on a $300 reg is $300. A GM dealership sells at least a car a day, so without doing anything else, they rake in at least $96000 a month. Most LDSs can't match a car dealership in sales, but if they sell one reg a week, they make $1200 a month. Big difference, and even though it's 100% markup, it's still hard to pay all the bills off of it.
Do I think the system is flawed? YES. But the bottomline is, if you don't live in a metropolitan area where there is enough divers to support multiple dive shops, the LDS is your diving lifeblood, and the opposite is true also. You, as a diver are their lifeblood. I lived in a rural area of Vermont back in the 90's, where my LDS had a clientele of about 30 divers. Yes, 30 divers. And yes, he advertised etc, but that's about all that were interested. The LDS was little more than a garage stall, it was only open when he wasn't working his other full time job, he filled tanks for the local volunteer fire dept to help pay off his compressor, and he had little to no stock, and ordered in almost everything we wanted to buy. But, we were loyal to each other, and it worked. Yes, we had to pay a little extra, but our other option was to drive 2 hours to the next closest dive shop, or buy online. Either of those options put him closer to closing the doors, eliminating our fill station. I gladly paid that little extra, and enjoyed diving with him til I moved to another part of the state. Many people across the country are still in that situation. We need each other. Take the time to get to know the people in your LDS. I think once you do, you'll see most aren't living like kings, and are struggling to make ends meet also.

Amen to that! I agree with you:14:

 

[PhilEllis]

$25K is a drop in the bucket for a typical brick and mortar store. If a person were to try to start a SMALL dive store tomorrow, they'd likely be out 40-70 K before opening the doors.

Actually, it would be impossible to open a scuba retail store with an initial investment of only 70K. Bare bones, it is more like 150K minimum. But, I really wanted to address another issue.

I see this internet v LDS issue from both sides, because I am both. I operate a full-service retail, service, and training center in Decatur, Alabama and I also operate a full-service scuba internet store with substantial sales. I understand the problem of the local scuba store in great detail, and unfortunately, understand why MOST of them are barely breakeven and will probably face closure in the coming few years. I will attempt to lay out a couple of reasons here.

1. THERE ARE TOO MANY LOCAL DIVE STORES IN THE US. Leisure Trends, the only third-party scuba retail tracking service in the US, estimates that there are approximately 2710 retail scuba stores in the United States. That's an average of over 54 stores per state. I understand fully that south Florida and the immediate coast of California account for a lot of them, but still, a very large number of stores on average. With a few exceptions, most states only have 8 or 10 cities with populations over 100,000. That means there are a lot of scuba stores serving markets with a population of only 10, 15, 25, maybe 50 thousand people. We all know it. We see little stores everywhere we go. In a town of 50,000 people, using the generally accepted statistics, that would be a certified diver population of 500 people. Of those, only about 10% would be active, money-spending, local divers. The local dive store in this situation is trying to make a living off of 50 active divers! NO SERIOUS BUSINESS MAN would EVER open a store in such a market without an IMPRESSIVE plan to greatly expand the market beyond the local community. Short of opening a catalog or internet store, I know of no way to expand this market.

2. EVEN IF THE STORE LOWERED IT'S PRICES, THEY CAN'T SURVIVE. There is a lot of argument that if the store was more price competitive, they would be in a far better situation than they are in now. This argument assumes that their high price is THE problem. Not even close. See point number 1. All lowering the margins would accomplish is a lower net profit. Because, their market CANNOT benefit from the higher volume normally associated with a lower price. Their market is too limited by a poor business decision made before they even opened the doors for the first day. See point number 1.

3. THEY CAN'T BECOME A VALUE-ADDED RETAIL OPERATION TO SURVIVE. The argument that they should charge more for classes, charge more for air-fills, do something different in the service department, offer more travel services.....all in an effort to transfer revenue streams away from retail sales where they are not competitive simply will not work. There isn't enough volume of service work, training, and air fills in most stores local market to make up the difference. And trust me, all increased volume at the air station would do is increase the net number of dollars lost on air fills. Outside of south Florida and coastal California, NO SCUBA STORE is making money filling cylinders. Those that think they are are either cutting MAJOR corners (not doing air testing, not properly changing fiters, running without product liability insurance), or they have no clue about their real costs. Travel is an absolutely break even proposition. No way to make any large amount of money there. Also, you have to always remember point number 1.

4. THEY CAN'T "OFFER YOU A BREAK" BECAUSE YOU ARE A LOYAL CUSTOMER. I will make this short. See point number 1.

There are only TWO solutions for the problem of the local scuba store. One is to radically increase the percentage of the population they enjoy the sport of scuba diving. I am not talking about doubling here. Having twice the number of divers wouldn't even come close to solving the problem. It would take a sea-change in the portion of the population who are actively diving to continue to support the number of dive stores we have here in the United States. The ONLY VIABLE SOLUTION is for every store, especially those in small physical markets like mine here in Decatur, to radically expand their market in order to become both more competitive and profitable. Local scuba stores in small markets (most of them in the US) WILL close if they don't expand the market massively. The only way I know to do that is the internet. But that is an entirely more difficult issue than it seems to most people. Starting a scuba internet operation requires more investment than starting a brick and mortar store. I know. I have done both. Starting my brick and mortar cost approximately $170K. Launching my internet store had a start-up cost of $190K. Another problem is that many local dive store owners don't possess the ability to launch an internet store. Even when you spend a lot of time and effort launching an internet store, the sales don't automatically come. One scubaboard user BRAGGED on this board about working for 5 years on a website and producing a total gross sales of "over $40,000 in those years. It takes that much EVERY TWO WEEKS to succeed.

We need to face it. There are too many stores. Too many of them were opened in markets that should NEVER have had a dive store in the first place. The internet will continue to carve a hole in an already bleak outlook for the local scuba store. But remember, EVEN WITHOUT THE COMPETITION OF THE INTERNET, the outlook for many of them is already bleak. The internet competition is only throwing additional straws on the pile. Finally, a half a century after the dawn of the scuba diving business as a retail pursuit, the little straws, all piling up one by one, have become too heavy for many stores. It's not a LDS vs internet argument. It is WAY deeper than that. And what I have outlined here is only ONE of the problems. There are many, many more. I may throw my 2 cents in on those later. Anyway, just my opinion. Thanks.

Phil Ellis
Dive Sports Online
www.divesports.com
(800) 601-DIVE

 

[devolution365]

PhilEllis: We need to face it. There are too many stores. Too many of them were opened in markets that should NEVER have had a dive store in the first place.

I totally agree.

I live in Aurora, IL. If you look that up on a map, you'll find I'm 40 miles from Lake michigan, 80 miles from the nearest quarry, about 800 miles from the ocean, and maybe 1800 miles from the caribbean. There are 9 dive shops within 20 miles of me!

How many divers are there around me to support that many shops? Only 2 of my friends dive, and neither of them have been in years! The market is saturated. The death of at least half of them, I believe, is inevitable (regardless of the internet).

 

[MikeFerrara]

Actually, it would be impossible to open a scuba retail store with an initial investment of only 70K. Bare bones, it is more like 150K minimum. But, I really wanted to address another issue.

Not true. I opened one and I don't even know what $150,000 looks like.

3. THEY CAN'T BECOME A VALUE-ADDED RETAIL OPERATION TO SURVIVE. The argument that they should charge more for classes, charge more for air-fills, do something different in the service department, offer more travel services.....all in an effort to transfer revenue streams away from retail sales where they are not competitive simply will not work. There isn't enough volume of service work, training, and air fills in most stores local market to make up the difference. And trust me, all increased volume at the air station would do is increase the net number of dollars lost on air fills. Outside of south Florida and coastal California, NO SCUBA STORE is making money filling cylinders. Those that think they are are either cutting MAJOR corners (not doing air testing, not properly changing fiters, running without product liability insurance), or they have no clue about their real costs. Travel is an absolutely break even proposition. No way to make any large amount of money there. Also, you have to always remember point number 1.

I'm not sure I agree with this. Any one with a lot of money can buy and sell dive equipment. Those who can buy lots of it at good prices and market it to a large market have an advantage that a local store will never have. On the other hand only a dive instructor with a face to face presence can teach diving and some people make a living doing just that.

I know of midwestern shops that certify in excess of 400 divers per year. If you charge $1000 for that OW class that I used to spend 40 hours teaching before travel that's $400,000/year just on OW classes and my brick and mortor shop never brought in any where near $400,000 in a year. Now granted, this still isn't a huge amount of money but...

Let the boys with the big bucks worry about buying regs by the truckload and marketing them. If you can teach and pump gas face to face, charge money for it or don't do it.

There are only TWO solutions for the problem of the local scuba store. One is to radically increase the percentage of the population they enjoy the sport of scuba diving. I am not talking about doubling here. Having twice the number of divers wouldn't even come close to solving the problem. It would take a sea-change in the portion of the population who are actively diving to continue to support the number of dive stores we have here in the United States. The ONLY VIABLE SOLUTION is for every store, especially those in small physical markets like mine here in Decatur, to radically expand their market in order to become both more competitive and profitable. Local scuba stores in small markets (most of them in the US) WILL close if they don't expand the market massively. The only way I know to do that is the internet. But that is an entirely more difficult issue than it seems to most people. Starting a scuba internet operation requires more investment than starting a brick and mortar store. I know. I have done both. Starting my brick and mortar cost approximately $170K. Launching my internet store had a start-up cost of $190K. Another problem is that many local dive store owners don't possess the ability to launch an internet store. Even when you spend a lot of time and effort launching an internet store, the sales don't automatically come. One scubaboard user BRAGGED on this board about working for 5 years on a website and producing a total gross sales of "over $40,000 in those years. It takes that much EVERY TWO WEEKS to succeed.

We need to face it. There are too many stores. Too many of them were opened in markets that should NEVER have had a dive store in the first place. The internet will continue to carve a hole in an already bleak outlook for the local scuba store. But remember, EVEN WITHOUT THE COMPETITION OF THE INTERNET, the outlook for many of them is already bleak. The internet competition is only throwing additional straws on the pile. Finally, a half a century after the dawn of the scuba diving business as a retail pursuit, the little straws, all piling up one by one, have become too heavy for many stores. It's not a LDS vs internet argument. It is WAY deeper than that. And what I have outlined here is only ONE of the problems. There are many, many more. I may throw my 2 cents in on those later. Anyway, just my opinion. Thanks.

Phil Ellis
Dive Sports Online
www.divesports.com
(800) 601-DIVE

All a dive shop has to offer that you can't get with the click of a mouse is what they can do with their own two hands. Unfortunately most aren't very good at it and VERY few charge for it even if they are.

When I opened my dive shop, all I wanted to do was teach. However, I also wanted to sell basic equipment to students. No sense in advertising for students, having to sell a cheap class and them send the students someplace else for a mask, snorkel and fin package that cost more than the class. The mannufacturers, however won't open you up as a dealer unless you are a full service dive center and the first thing you need to be one of those is a retail location.

In my shop that catered primarily to a local market I sold primarily training and basic gear like mask, snorkel and fins to most students. I own more regs that I use just for my own diving than I usually sold in a year. I worked 40 hours teaching a class to sell 4 or 5 sets of mask/fins. That's just plain stupid. had I charged real money for the classes I would have at least gotten a pay check for the 40 hours teaching.

The whole concept is screwed up. If you need a dive instructor go to one. If you need a good competative retailer, then go to one of those. I've never seen one who was both.

 

[rockjock3]

A dive shop is good for one thing... Air fills... and they're not even that important for that. Face it... most people do their diving in foreign countries while on vacation. hardcore local divers, techies etc... sometimes have their own compressors.. and many local quarries and dive boats offer air fills... at least they do where I'm from.

If a person is travel savvy... they quickly figure out that booking trips themselves is much cheaper then the dive shop price. For years I was duped into believing the "group" rate the shop got was better than I could do myself... NOT! Since I started booking myself, I save on average $300+ per person per trip... that's $600 and up for my wife and I.

Another option is a good dive club... one that takes any special group rate, free spot and commission and divides it between all the members traveling. Our dive club does this and typically saves $500+ per traveling member. As an example... our recent trip to Roatan was advertised by a local shop for $1795 pp. We booked the exact same itenerary and took 19 divers... at an amazing $1200 pp. That showed us that the LDS was ripping people for an amazing $595 pp or for 19 people ($11305!) WOW!

I'll agree that LDS's are convenient for routine maintenance... it's nice to go there and get my reg back in a couple of days... I don't mind paying the price for that.

Education and training are the LDS's forte'. More focus on offering quality training and expanding offerings would go a long way to help LDS's.

Retail sales are important to them... but most are losing out because they refuse to change and often have very bad attitudes about the internet. A proper attitude would be more in line with starting their own internet sales or going with the bad attitude in a nice way. In other words... charge more for repairs for items bought on the internet... charge more for air from customers that haven't bought gear from them. Make their shops more like private clubs... to come in you must buy a membership... and once you're a member, then you get access to better pricing. If people want airfills bad enough or need a quick piece of gear or need regulator service... they'll have to become a member. Costco does it. Sams Club does it. Why not the dive industry?

The industry must come up with a way to bring in more money without offering anything new. You see, diving is for all intents and purposes a closed sport. Very few people get certified... and very few of those that do actually continue to dive. The last stat I saw said the average person who gets into diving only dives for 4 years. With that kind of turnover and such a small percent of the population diving to begin with... it's already like a small club... so make it a members only... charge a fee... and may the best shops stay afloat with nothing more than membership dues... Got 500 customers at $75 a year dues... you just made $37,500 and it's all FREE MONEY.

You don't put a location on your profile but I think you might be in my area. I know what you mean.

The LDSs advertise those deals and then every 10 people they take they get a 1 free spot. Those free spots go to the owner first and then to employees as they earn more free slots. The local club divides the savings of the free spots to the club members that are going on the trip.

This is another example of how the LDS benifits (thousands of $$ at a time) indirectly from customer sales that many people don't ever think about. You get a shop owner that books 4 trips a year and gets a free ride each time then that can easily be $8000-$10000+ that that owner is making extra each year. They don't want you to know or think about that though.

 

[rockjock3]

I think the profit margin on gear is going to go down. The manufacturers just cannot allow the LDS to go out of business because of it. Along with this, any service being offered at a loss now will have to hold its own and contribute to the costs of the LDS. I guess this will include service and fills. If a dive shops boat cannot pay for itself then it will have to go. No more subsidizing. Each part of the LDS will be a cost center and have to pay for itself and make a profit.

Well, that describes just about every major company in the world. The business model of the LDS was flawed to begin with and now it has to correct itself. As with anything, the transition is very bumpy.

The problem isn't as much caused by the MFG as it is the LDS. If a regulator is sold to a dealer at $100 and the MSRP is $250 the dealer has the option to sell it for any price they want. They can sell it at $10 - $1000+ if they want and the market will support it. The problem is that most LDSs will sell it at the $250 or even $350. The LDSs are counting on the consumer being willing to accept this because they have no choice.

The new problem is not not the consumer's but the LDS's. The consumer today is much smarter than in years past and has the ability to speak louder with their spending money. No longer do you live in a town that only has one LDS and the next nearest one is 500 miles away. Now you simply log onto the internet and get everything you want. An example is that I did 90% or more of the Xmas shopping this year from the chair in my living room. I paid the same or less buying from major stores and outlets through the internet. I also saved not having to spend hours and days in the stores dealing with the possible theft of gifts, lines, frustrations, no gas money, no parking fees, and the like. I spent less than 2 hours doing all my shopping and it will all be delivered to my door (most already has).

The busines world is changing and some stores (not just LDSs) need to catch up or face extinction.

 

[Swan1172]

Here is an example of the problems I see with pricing in my LDS. Right after I got certified, I was in the market for a BCD. The cheapest new BCD that they had in stock was an AquaLung Malibu RDS that they had on sale for $450. They also had a used pool-faded Oceanic Chute 2 for $400. The prices went up from there.

Why would anyone buy a faded and used BCD when they could buy a brand new Chute 3 with a warranty from ScubaToys for less than the used one at my LDS? I understand that they are in business to make a profit, but those prices were outrageous.

 

[ZzzKing]

This thread is really gonna have to work to ever surpass the Mask on Forehead thread. My proposal is to eliminate all content and vitriol and just reduce it to:

LDSer: You are evil because you won't buy from me. Grrrrrr.
Basher: You are evil because you won't sell me what I want for what I want to pay. Grrrrr.
LDSer: You are ignorant.
Basher: You are a bad businessman.
LDSer: You are a cheapskate.
etc. ad infinitum

You get the idea. With each of these as separate posts, we can get the page count up in the hundreds in no time. Come on guys, let's give those mask guys a run for their money!