LDS Closures

[ReefHound]

Very true. I think hard before just buying at the LDS. For small stuff the difference in price sometimes makes spending 100% more vs. the online cost effective when shipping is factored in. Not true for large purchases.

If you're going to factor in shipping then you also gotta factor in sales tax and transportation costs to get to and from the LDS. That $12 line cutter may be costing you $25.

 

[cool_hardware52]

I saw a detailed analysis someone did once and it was in the ballpark of $3/fill including capital investment and labor.

It very well could be $3-4 a fill, for a system that closely matches the compressor capacity / cost to operate / cost to maintain etc. to the number of fills sold. If on the OTOH the compressor is not well matched the costs could easily be higher. Smaller volume operations might size their compressors for peak demands.

If you really think the incremental cost of filling a tank is more than $6 then explain how your previous statement (that some high volume operations can turn a profit at that price) can be true.

High volume operations provide economies of scale.

Larger compressors are more efficient.
large banks allow compressors to run more efficiently.
Air analysis is cheaper purchased in bulk.
Consumables, oil, fill whips, filters etc. are cheaper purchased in bulk.
Scheduled PM vs unplanned repairs is cheaper.
Division of labor, i.e. trained techs doing fills, clerks collecting money etc.
Mixed gases can be blended and banked in bulk, not one scuba tank at a time.

I don't sell fills. I do own a fair sized compressor and associated accessories. That gives me a pretty good idea about the costs involved.

Tobin

 

[ReefHound]

I understand economy of scale, Tobin. But you were previously suggesting that even the incremental cost was more than what shops were charging for a fill. You can't sell at a loss and make up for it in volume.

Economy of scale is precisely why dive shops can sell air at break even and still win because by doing so they are reducing the costs of their own internal fills for classes.

 

[cool_hardware52]

I understand economy of scale, Tobin. But you were previously suggesting that even the incremental cost was more than what shops were charging for a fill. You can't sell at a loss and make up for it in volume.

I've never suggested that you can, but that doesn't stop shops from trying.

Economy of scale is precisely why dive shops can sell air at break even and still win because by doing so they are reducing the costs of their own internal fills for classes.

Internal fills. Interesting concept. Fills for the classes that many are offering at below their costs already, now add "free" fills to the costs of the class.

Is there any real disagreement that we are losing LDS's because they aren't making any money? Providing the two things that cannot be purchased online, training and fills, below cost, in the hope of making up the loss in over priced gear just isn't working.

Internal vs incremental really doesn't matter, it just accounting semantics.

If the compressor is not a profit center, and training is sold at a loss, and competition for gear sales keeps margins and volumes below break even, we will have fewer dive shops, at least as we know them currently.

Tobin

 

[DA Aquamaster]

Another thing that I don't think has been discussed is loss leaders. The LDS has a compressor, so why not use fills as a way just to get divers in the door. I often buy things at our LDS not because I really went there for those things, but because I see something I want while I am there to get a fill.

If I walk into the LDS, and spend $30 on top of my air fill in impulse buys, that compressor has just generated revenue. Do bean counters attempt to tie that back to the compressor? Unlikely, but many LDS owners understand the value of getting a customer in the door.

We have a big LDS market in Denver with NO local diving! Denver is not a huge city, but we somehow support approximately 12 LDS's.

Exactly...when I used to drive to the shop to get air twice a weekend, about half the time on Saturday afternoon, I'd take the opportunity to buy something - a new pair of gloves to replace the leaky ones I noticed that morning, maybe new boots a couple weeks later, and on subsequent visits perhaps a new hood, a 3mm wet suit for the next tropical trip, a nifty new dry suit hose, a reel or something else I happened to just see. This was something the old owner understood well.

But once I got a compressor and had no reason to go to the shop, it was far easier to just buy the items I needed on line and in the end it was no more expensive even considering shipping costs. What was doubly annoying was that the new owners were not overly willing to order items that were not in stock and inevitably took weeks to order them - and when they finally arrived I got to go 50 miles out of my way at their convenience to pick them up. The UPS truck on the other hand could have the same items on my door step 3 to 5 days after I placed an on-line order. It did not take long to figure out what method I needed to use.

So in the end, the new owners of the shop did not just lose my business on air fills (where they claimed to make very little anyway) when they failed to develop reasonable diver freindly hours or offer decent customer servcie - they lost the 100% markup on every thing else I bought when I was there.

 

[RonFrank]

If you're going to factor in shipping then you also gotta factor in sales tax and transportation costs to get to and from the LDS. That $12 line cutter may be costing you $25.

Transportation is not factored in because I'm there anyway. LP can't fill my tanks!

Most of the items are marked up huge, but if they are small as $$ goes even if $1 is a 100% markup on a $1 online item, I still can't get it to my door for less than $7 shipped.

I'm cheap, but a few bucks is less than I spend for lunch almost daily, so if I really want to pinch my pennies, doing so by worrying about spending a few bucks now and then at the LDS is not my best option!

Our LDS is NOT in danger of going out of business, they do a huge training and travel business, and during their events they make big bucks. They were part of the 10 city tour in 2006 (Scuba Diving Mag), so they are nationally recognized, and I think PADI indicated in the top 5 worldwide in training.

Their model is to sell a boat load of personal items at huge markups to new divers. As Bob indicated, kinda a sleezy business model, and I'm not a big fan of that, but it works for them. Most of the divers say, Thank you sir may I have another!

 

[offroaddiver]

I thought I'd never see my favorite shop go under. Then one day to go rent tanks. The store was empty and there wasn't anyone to get ahold of. probably missed something somewhere, but didn't see the indications of a closing shop. If memory serves me. I got my EAN cert just a few months before belly up.

 

[MikeFerrara]

Good point. I ran a small volumn shop with a 3.5 cfm compressor and bank that can be had today for under $6000. Some owners think they need a $25,000 20 cfm system to fill 20 tanks a week.

There's more to it. When I owned a shop I had a 5 CFM compressor with a bank. I probably only had about $10 in the whole system...compressor, banks, manifold, hyper-filters, HP hose ect.

It would have worked if the volume of gas I pumped was spread out over the whole week. The problem was that it was too small for the peak capacity I needed because everybody wanted fills on Friday night. Of course, on friday, I also had to fill my own tanks and student tanks for the weekend. It probably sounds strange but I really didn't want anyone coming in for fillt then because I needed the capacity to get my own tanks filled. If a few epople came in for fills on friday, I'd end up in the shop until the wee hours of the morning filling tanks to teach my Saturday classes.

 

[MikeFerrara]

I understand economy of scale, Tobin. But you were previously suggesting that even the incremental cost was more than what shops were charging for a fill. You can't sell at a loss and make up for it in volume.

Economy of scale is precisely why dive shops can sell air at break even and still win because by doing so they are reducing the costs of their own internal fills for classes.

Well, no. Maybe it depends on the area but around here, all the dive sites have compressors. The only tanks a shop needs to worry about filling for teaching are the ones they use in the pool. It would have been more cost effective for me to take those tanks someplace else to get them filled...having more tanks and getting them filled ahead of time would have been more cost effective than purchasing and maintaining a fill station.

There is a fly in the ointment though. If you want your dive shop to be a retail member of an agency (PADI shop or the like), the agency requires that you be a full service shop and you MUST offer fills. It litereally is just an upfront cost of calling yourself a dive shop.

I mentioned that all the dive sites around here sell air and most sell nitrox. That combined with the fact that there just aren't very many divers near the shop that even dive those sites (the sites aren't all that local) result in LOW volume.

So you have a compressor you are required to have to call yourself a dive shop and you fill tanks for classes that are a loss leader. Where are your supposed to make money? LOL, I never sold enough air to even pay back the initial inventment.

Running a fill statrion was just part of the money I lost teaching classes to help internet sites sell equipment.

 

[DA Aquamaster]

There's more to it. When I owned a shop I had a 5 CFM compressor with a bank. I probably only had about $10 in the whole system...compressor, banks, manifold, hyper-filters, HP hose ect.

It would have worked if the volume of gas I pumped was spread out over the whole week. The problem was that it was too small for the peak capacity I needed because everybody wanted fills on Friday night. Of course, on friday, I also had to fill my own tanks and student tanks for the weekend. It probably sounds strange but I really didn't want anyone coming in for fillt then because I needed the capacity to get my own tanks filled. If a few epople came in for fills on friday, I'd end up in the shop until the wee hours of the morning filling tanks to teach my Saturday classes.

I am sure there is a good reason, but why did you wait until Friday night - the peak period for customer fills - to fill the tanks for the students/classes?.