My LDS basically sells gear at MSRP. I get a 15% discount for the stuff I buy there. I have seen some of the order books from there and a large sporting goods store that sells dive gear. For the gear I was looking for at the time (regs) there was a 100% markup between dealer cost and MSRP. Even when my LDS gives me 15% off, he is still making a decent profit.
As atedeschi mentioned, buying regs locally isn't bad because you have someone you can easily work with if you have issues. BCs are good to buy locally if you are worried about fit.
Usually I do my research and figure out what I want. If my LDS can get it, I ask him for a quote. If the quote is too high, I find another place to buy. A perfect example of this is SS Bolt Snaps. Most online retailers are selling them for between $5-$10, depending on size. The cheapest ones in my LDS are $20. While I really like my LDS, I can't really afford to pay that much markup on a piece of stainless steel.
The whole "support local" is a good concept but it means something different to each person. My LDS is run by a great guy, is owned by good people, and more importantly, my LDS really pushes diving as opposed to gear buying. They put an emphasis on getting people out diving and to keep them diving. Their dive club is all about keeping people in the water. These are all aspects that I like supporting. So when it comes time to buy equipment, I can accept the fact that I pay a little more at times because I see exactly where the money goes: keeping people diving and setting up trips. That being said, I won't blindly buy local without checking around first.
While your LDS may not be able to discount equipment much, they can throw in other things like air fills or a class. When I bought my drysuit, my LDS includes the drysuit class in the cost. While their prices may not have been as low as some online places, I felt I got a good deal because of the free instruction.
The one thing I will say is that shops would always rather sell you gear they have in the shop than stuff they have to order. They own the gear in the shop. When they sell it, they turn a profit on gear they already own and they clear out expensive inventory. If they order you gear, they have to spend more money to make a profit and they don't clear their stock. You can use this to your advantage by seeing if they are more willing to negotiate if you buy what they have on hand. On the other hand, if you really want a specific product that they don't have in stock, don't let them sell you gear out of the store because they don't feel like ordering stuff. Get what you want. If they can't help you, find someone that can.
There has been a lot of debate about the markup of dive shops. Some people feel it is their right to know what the shop is buying gear for so that the buyer can determine what is a fair price. I think that's stupid. I don't know what his overhead is so I can't decide what is "fair markup." Besides, it's his business not mine.
Just like anything else, you have to feel like you are receiving value for your money. The value may come in different form but you need to feel it. If getting the gear for the lowest price is all that matters (as is the case with some) then buy online. You will save money. If you plan on diving locally, hanging out in the shop picking their brains, going on their trips, then consider buying locally. If nothing else, you can always tell the shop what you want and what prices you've been able to buy it for. Maybe they can match it, maybe they will laugh in your face, who knows. At least you give them a chance to work with you.
