Major Industry Change re: Online Scuba Sales....

[OkieDiver]

When all the states finally get their act together and start charging tax on Internet sales how will that affect the online sales model, if at all. Opinions?

 

[ReefHound]

When all the states finally get their act together and start charging tax on Internet sales how will that affect the online sales model, if at all. Opinions?

It's not going to happen.

 

[OkieDiver]

Never say never. National chains with a store in any given state are already charging that state's sales tax.

 

[Leadking]

Hi Doris. I am going to assume that you either own, work for, or are very closely allied with a local dive store. What you say is both correct and incorrect. Many scuba companies have a "tiered" pricing structure. This should come as no surprise, as it is typical in the distribution of almost all consumer goods.

There is no "secret" price list maintained by the scuba companies. Almost all of them will offer additional discounts beyond the "best" price for volume purchases of a particular item or class of items. This is not a "special price" made available to on-line stores to give them a jump on the local guys. It is available to anyone who is willing to take the risk to make large purchases. You see, that is the American way. When you take risks (maybe by purchasing 100 regulators instead of 2) you get some potential rewards from the risk. The reason many local scuba stores feel that such volume purchases don't work for them is often due to the action they take after they make the purchase. If a local scuba store is selling a particular regulator for $599, and moves two a month, they will not gain much benefit from getting an extra 10% on a purchase of 100 if they continue to sell the regulator for $599 and move two a month. It would take them 50 months to move the inventory, completely wiping away the volume purchasing advantage.

On-line stores take specific actions to move larger quantities of merchandise to justify making volume purchases. In the case of my particular online store, it is much of a chicken-and-egg prospect..........I must get some volume deals in order to lower the price to the level that will move the merchandise in much larger quantites than is possible at higher prices.

Unfortunately, while I have many misgivings about how the scuba companies distribute merchandise, I could not recommend that they give the local store, buying 2 regulators, the same advantage they give to the volume buyer, purchasing 100 regulators. After all, how they choose to price their product is their business.

It might be of interest to you that I am harmed as much by these poicies as is your local store. As a smaller internet operator lacking large funding, I don't get many opportunities to take advantage of the volume purchases that would be little financial strain for larger companies like scubatoys, scuba.com, divers supply, and host of others. That being said, I have to work extra hard to be price competitive with those companies. Consumers have no mercy on me because I am small.

It is sad but true. Consumers will not have much sympathy for the local scuba store if they are uncompetitive due to low retail volumes and inability to fund volume purchases. The responsibility to solve this problem does NOT rest with the manufacturers. It is the responsibility of the very local scuba store for which you advocate. THEY must do something to change the status quo. In the end, only the local scuba store can do anything that has a substantial chance of saving the local scuba store.


Additional Industry Note: Some companies do not offer volume purchase discounts. Michael at Apollo feels that it is best for HIM if he publishes ALL of his prices, the requirements for getting the best price, and the promise to never violate that policy. He has two price levels......dealer and case price. His case prices are available to any dealer and are not a gigantic investment to get the best price. He requires no annual promises, no product booking orders.....simply buy by the case (saving him some packaging and handline cost) and he passes the savings to the local store. Local scuba stores, unable or unwilling to change themselves, should consider Apollo and companies with a similar approach. Thanks.

Phil Ellis

Phil,

I have never agreed with a price structure that allows the "the big boys" to beat the **** out of the little guys. Within our company we have a price structure that accurately reflects our cost of doing business based upon the size of the order, i.e. cost of goods, plus freight, and a reasonable profit. When I do business at the local hardware store and discuss the fact that he is paying more wholesale to his distributor than the local big box home center sells at retail, it galls me. I believe that volume deserves a discount but when it becomes such a huge number that you can start using it as a club against your competitors, it is one of two things.

1. The Manufacturer is charging too much to begin with.
2. They are telling small business they don't want their business.

I believe in open, honest, and fair competition.

Off my soapbox for now!

 

[PhilEllis]

Phil,

I have never agreed with a price structure that allows the "the big boys" to beat the **** out of the little guys. Within our company we have a price structure that accurately reflects our cost of doing business based upon the size of the order, i.e. cost of goods, plus freight, and a reasonable profit. When I do business at the local hardware store and discuss the fact that he is paying more wholesale to his distributor than the local big box home center sells at retail, it galls me. I believe that volume deserves a discount but when it becomes such a huge number that you can start using it as a club against your competitors, it is one of two things.

1. The Manufacturer is charging too much to begin with.
2. They are telling small business they don't want their business.

I believe in open, honest, and fair competition.

Off my soapbox for now!

Lee, I agree with you. You represent another company that puts it all out there for everyone to see. One day, this will be the model all over the industry. I can't wait. I was responding primarily to the notion of completely "flat" pricing. That is a concept that I have a hard time with. There would be many great things about totally flat pricing, but an equal number of bad effects. Anyway, SeaPearls is an example of a company that puts it right out for everyone to see.

Phil Ellis

 

[Thalassamania]

... SeaPearls is an example of a company that puts it right out for everyone to see.

Phil Ellis

Each of these schemes has its day. I've done a little bit of business with Sea Pearls in the past, some coated lead in custom dips so we don't lose it, some hose protectors with logos on them for university gear, etc. We were taken care of as though we were ordering two trailers full. When I need these sorts of items again, I will not even check where else they might be available. But that's custom stuff, real different from a generic box with a reguator in it that I can get from a dozen different sources.

 

[RJP]

To anyone who thinks that price is a sustainable competive advantage:

Live by the sword, die by the sword!

 

[Web Monkey]

To anyone who thinks that price is a sustainable competive advantage:

Live by the sword, die by the sword!

I mentioned that about 300 messages ago.

The stores that think they're king of The World because they have an online store and do a good volume are just chumming the water for the Really Big stores.

That's why I got out of the appliance business. Where was I going when I'd sell a couple of thousand refrigerators in a year, and a big retailer would buy more than that just to put a display model in it's stores?

Once someone with money notices that there might be money in SCUBA, it's going to get very bloody, very quickly.

Terry

 

[Thalassamania]

The stores that think they're king of The World because they have an online store and do a good volume are just chumming the water for the Really Big stores.

Terry's right, once it all goes to the web only a few outlets will stand unless the manufacturers go to a "direct sales to consumers only" model (which is possible).

 

[RJP]

Terry's right, once it all goes to the web only a few outlets will stand

You're right, it's happened in lots of other industries already.

Remember when there used to be car dealers all over the place...

And the good ol' days when there were pharmacies on every corner, even in grocery stores...

There used to be sporting goods stores everywhere...

And electronics super stores dotted the landscape...

Some of the older scuba-board folks will even recall when there used to be large buildings called "shopping malls" filled with clothing and shoe stores...

You used to be able to walk into some places and buy a magazine or a newspaper, back when magazines and newspapers were still around...

Sadly, all these places are gone now. There's nothing left but WalMart and the internet.

Uhm, wait. Remind me again...

Which industries has this happened to?