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
Borders and Barnes and Noble have more and bigger bricks and mortar stores than ever despite the internet threat. New small local banks are opening everyday to cater to the market void left by the BIG BOYS!
