Shop owners -- What value am I to you?

[AlaskaDiver]

A very good question indeed. I am not a shop owner. Formerly while living in Alaska I have seen 3 stores 'compete' to some extent for customers. Only the shops who provide genuine service to all of their customers are the ones who will maintain a long term relationship with their clients. Long term relationship means long term spending and long term loyalty.

Long term spending isn't the several thousand dollar purchase all at once as an OW student makes, but rather divers cyclically become interested in trying new products & services (i.e. boat trips etc) within the store, attaining a greater level of dive training and ultimately purchasing a greater variety of products. This makes the seasoned diver who remains with a dive shop invaluable especially to the newbie who may have been certified elsewhere and wants to get back into diving. Essentially, enthusiasm for diving shown by long term interest in the sport is contagious to newer divers and those who may have had sporadic interest.

The dive shops in Alaska approached this issue in 3 distinct manners. LDS A is the all purpose sports center offering discounted OW classes and makes a bundle on students, but does not have long term interest of the students in mind. They have particular people who teach for their shop who are excellent at maintaining the business. LDS B has a variety of classes but really assists students to think more long term in their purchases. Diving is an investment and if you start out right, you will have an excellent time. This shop does not capture all the "I want to try it cheap" crowd, but maintains the more technical crowd. Divers entering the store see dive equipment and divers of all levels. LDS C has constant sales going on, hustles customers when they come into the store to try to upsell them. They compare the raw dollar value of their product packages to the other LDSs and attempt to get the customer a better 'deal'. Not surprisingly, they do not have a large customer base beyond AOW. It should be no surprise that I chose to take classes initially with LDS A, made a few purchases with LDS C, but really stuck long term with LDS B. LDS B took an interest in me long term. Some months I only went in for fills, others I purchased boat packages, courses and additional technical equipment and tanks.

Bottom line is that although a great deal of new divers will balk at prices and focus in on 'package deals', the most successful LDSs are those who can provide a wide range of quality services, classes and quality equipment for their customers. Long term commitment to the customer will be the most financially rewarding to both the LDS and the customer.

 

[PhilEllis]

Very go0d questions. One I struggle with all of the time.

I am going to skip past the "every customer is valuable" and "treat everyone the same" discussion. I am going the skip the word of mouth benefit you get from a dedicated customer. I will skip the obvious benefit of your store looking very appealing because of the presence of avid divers. I agree with these sentiments completely and operate by them every day.

There is no doubt about it, repeat business (no matter what you are selling) my much less expensive for a shop owner than new business. Most stores have no clue how much they "spend" to obtain a new customer. Customer acquisition costs are gigantic. That is exactly why SO many merchants talk so much about "word of mouth" advertising....it is one of the few kinds that cost relatively little.

As an online and a brick and mortar merchant, I am very well aware of what it costs to gain each new customer. Believe me, that cost can easily approach $50-$75 per new customer. Having spent that money, it is much cheaper to continue to sell to the existing customers (that you have already "paid" to get) than to sell to a brand new customer. Now, there is no doubt that new students create a little different opportunity in our sport....they are the ones that are likely to spend a lot of money in a very short period of time. But the issue still must be evaluated on a "cost of acquisition" basis.

Repeat customers represent approximately 40% of my entire sales revenue. Now, what business could NOT pay very close attention to a market segment that represents 40% of your revenue? Especially, when the net profit of the sale, after cost of goods and acquisition costs, is about 4% higher for return customers than new customers.

Summary. They are all important. Almost every post in the thread points out valid reasons why all customers should be valued. Oh, sorry about taking such a "nit" position on this question. Just thought I might provide another way to look at customer worth from a business perspective.

Phil Ellis
Discount Scuba Gear at DiveSports.com - Buy Scuba Diving Equipment & Snorkeling Equipment

 

[D_B]

One thing that bothers me about my LDS lately is that almost all the service staff has changed since I've been there, you develop a repore with people and thats gone .. they have a pretty good selection, although price is kinda high, they will try to price match, and have very good prices on their training classes, but people are what make a difference

As always, a good post TSandM

 

[TSandM]

Repeat customers represent approximately 40% of my entire sales revenue. Now, what business could NOT pay very close attention to a market segment that represents 40% of your revenue? Especially, when the net profit of the sale, after cost of goods and acquisition costs, is about 4% higher for return customers than new customers.

Thank you for a very good post, Phil. Having been married to the owner of a mail order company for 20 years, I should have thought of acquisition costs.

I'm quite surprised at the 40% figure. That's much higher than I would have expected. Maybe I'm worth something after all! (She says, beginning to count the drysuits and the scooter and . . . )

 

[RonFrank]

Summary. They are all important. Almost every post in the thread points out valid reasons why all customers should be valued.
Phil Ellis
Discount Scuba Gear at DiveSports.com - Buy Scuba Diving Equipment & Snorkeling Equipment

Thank you.

In a lot of discussions folks constantly say that there is no profit in Travel, or Training, or small retail. However based on the model our very successful LDS uses, I've long believed that every aspect that an LDS can use (training, travel, retail, equipment service and repair, etc.) is profitable, and they can all add up to a solid profit margin as well as customer retention, and a better overall customer experience.

You response confirms this.

 

[amascuba]

My line of thinking is that travel is where the real money would be. Most liveaboards are going to give a pretty significant discount if you fill their boat and there will be some discounting on bulk purchases of airline tickets. That's all money that the LDS can pocket as profit. Travel is also something that can bring repeat business with large sums of money. Much more so than gear purchases from existing customers.

 

[RonFrank]

My line of thinking is that travel is where the real money would be. Most liveaboards are going to give a pretty significant discount if you fill their boat and there will be some discounting on bulk purchases of airline tickets. That's all money that the LDS can pocket as profit. Travel is also something that can bring repeat business with large sums of money. Much more so than gear purchases from existing customers.

I agree with this.

There is another factor involved as well, and that is cash flow, and float.

Our LDS has two Galapagos trips scheduled in the next 6 months $5200~$5500 a spot. A deposit of $2000 is due on sign up, and the rest is due 2.5 months in advance. If they book 10 spots they have $54,0000 to play with and I bet the margin is at least 20%.

This LDS has other other exotic trips that cost as much or more as well booked in the next nine months. That is some serious cash flow to work with, and this just from one segment of their business and only group dive travel. They do a lot more than this in their travel agency as well as the full service dive shop.

 

[bubba105]

My LDS, if you want to call it that, is by appointment only. Kind of a weird situation. Owned by the "Gurus", they run classes regularly, through word of mouth, but, no one is in the shop except if you call them ahead of time. They give their cell numbers out. They've got other full time jobs, fireman & retired fireman, so the shop's main purpose is storage of equipment, tanks & the compressor. They stock a lot of equipment for purchase, it's just they couldn't be bothered sitting in the shop all day. My carpentry skills gets me a discount on all purchases, I built the shop (value #1).

They also run trips, usually 4 a year, with between 30 & 40 divers. We have a core group of firemen who love to dive & laugh, not necessarily in that order, most times simultaniously. The bride & I usually make all 4 (value #2). We went to Palau last year with 38 divers. Sam's loved us. They keep the price of the trip down & a lot of resorts give every 11th diver free. The Gurus get to go free & make a couple of dollars to pay the rent on the shop.

They go to the quarry for check out dives & they have me come along to entertain the newbies while individual skills are being performed (value #3). I'm known as "the freezing guy". I still hate cold water.

These guys just plain love to dive & they'd probably, if they're not already, operate in the red.

 

[PhilEllis]

I agree with this.

There is another factor involved as well, and that is cash flow, and float.

Our LDS has two Galapagos trips scheduled in the next 6 months $5200~$5500 a spot. A deposit of $2000 is due on sign up, and the rest is due 2.5 months in advance. If they book 10 spots they have $54,0000 to play with and I bet the margin is at least 20%.

This LDS has other other exotic trips that cost as much or more as well booked in the next nine months. That is some serious cash flow to work with, and this just from one segment of their business and only group dive travel. They do a lot more than this in their travel agency as well as the full service dive shop.

While I think that travel might be a considerable profit center for SOME stores, it is break even, AT BEST, for the average scuba store. I am going to take a guess that your local scuba store is A-1 (one could be one of several in your big area). They have a gigantic travel business. It doesn't have a gross profit of 20%, but it has a very high volume. Travel is probably pretty easy to sell in Denver, but it is difficult in most places.

From the store owners perspective, gear sales is what carries they day. Other things contribute, but other aspects outside of gear sales also have pretty big downsides if all does not go well.

Phil Ellis
Discount Scuba Gear at DiveSports.com - Buy Scuba Diving Equipment & Snorkeling Equipment

 

[scubadiver888]

I actually asked this question of the owner of my LDS yesterday.

We often talk here about diver retention in the sport, as though it were something desirable. But, from the point of view of a shop owner, how much good is a continuing diver? Once you've gotten past the point of the OW class and maybe AOW and a couple of specialties, bought all your gear, and settled down to active diving, you don't buy much. It's a little here and a little there, and some fills. I doubt it adds much to the bottom line of the average shop; in fact, they may spend MORE tending to their continuing divers than they regain from purchases.

So I wondered, since there are a fair number of shop owners that post here, what your view of your active diving customers is? What good are we?

I am not a dive shop owner but after reading this thread it strikes me this is similar to most retail stores with a big ticket item. Specifically, computers.

I used to work in a computer store. Most the sales staff were intently focused on making the big ticket sales. The head sales guy used to gloat over how he sold more computer systems than all the other staff combined. I used to sell printer ribbons, books, software, etc. People would come into the store and I'd give them the same attention and help the head sales guy did to new customers.

The head sales guy was promoted to assistant manager. As part of his duties he would cash out and take the money to the bank. He was totally shocked to find out I out sold him. I would go months without selling a computer but I would still bring in thousands of dollars a week.

Bottom line, you'd be amazed how much the little items add up. Everyone would tell their friends about me. Most the stores treated them like dirt because they weren't buying a big system.

I currently shop at a store that is 4 times further than I need to travel (Happy Diver's Den or HDD). They treat me well and take the time to talk to me regardless of what I'm buying. I will have all my equipment serviced by them. I buy all my scuba books, nicknacks and accessories from them. Some day I'll buy a new BCD (maybe a BP/W), a back up reg, a new wetsuit. You know I'm going to buy it from HDD. I'm going to upgrade my training. You know I'm going to ask HDD for the training. Someday I'll want to instruct. I'd happily volunteer my time as an assistant for HDD.