The endless saga continues...

[Garrobo]

Here's how I look at it. You could have a shop full of $500 reg sets and sell none per week at no profit or you could be selling several sets a week at $300 at 20% and making a profit. A no-brainer.

 

[Buoyant1]

THen there's the issue of air fills. If all the LDS's go out where do we get fills?
It's really a no win deal for anyone. The LDS's rape you to stay in business so that we have a place to get air fills. So you shop online to save money but then can't get fills.
So what are we supposed to do besides spend 5 to 7K for our own compressor?

If I can't get fills anywhere in something that resembles an LDS (or at the dive site), then I'll buy my own compressor, and start my own side business out of my garage (as would other people in other places I'm sure) If there's a market for it, then there's a business in the making! No inventory (other than maybe a good inside tract on cylinders and related gear) and fill, fill fill! I get my fills, I get people to pay for fills to recoup my losses in buying the equipment, and no LDS is necessary!

Sorry, as much as I like to support my LDS (and do), I couldn't pay that sort of price differential for something like the O.P.'s new LDS. If you are in this business to "make a profit" in this day and age, you are setting up for failure, sorry!

 

[DiveMaven]

And ScubaToys is not a grey market dealer. They are authorized by the manufacturers for everything they sell.

 

[wreckless1]

Yes I am sure that is how many dive stores have managed to stay afloat. I see new divers in particular buying new gear at huge costs as they are relying solely on dive shops for advice. I did the same when I started diving and it was painful to add up how much I'd wasted :blush:

As a newly-minted sucker, I want to admit (for catharsis ;-) ) that I purchased a Halcyon BP/W on my recent trip to Florida. Granted, the shop owner was a very knowledgeable and no-nonsense guy who taught my OW class on my previous trip, and I respected the knowledgeable staff, a lot of whom are into technical diving, so I wanted to discuss my BCD options with him, but I haven't even DARED to price out the setup online... :-(

Now that I'm not such a newb I'm going to cash in those Divers Direct gift certificates I got for Christmas ;-)

BTW, what's ST? Never mind--read through the rest of the posts.

--Peter

 

[scorpiofish]

Here's how I look at it. You could have a shop full of $500 reg sets and sell none per week at no profit or you could be selling several sets a week at $300 at 20% and making a profit. A no-brainer.

Sorry, it is not a no-brainer. I own a business. I have a Masters in Finance. Your thought processes are in error. It is only a no-brainer in your scenario because you have a choice between zero and something greater than zero. If this were the choice, then no one would be in the business.

You have to start with the total market of regs sold. Then you have to determine what your share of that market would be at the alternative price points. You then compare the contribution (gross profit) from each of those scenarios. This contribution then has to be enough to cover fixed overhead (e.g. store rent). If volume of sales at the lower margin rate significantly increases unit turnover, then it is also possible that discounting will increase the cost of overhead, which has to be figured in.

Now let's introduce gaming theory. You assume if you discount your product 20% you will sell more units. This is true only if your competitors maintain retail pricing. If your competitors are willing to discount, then your price cutting yields no market share increase. All you have done is reduce your gross margin.

Any dive shop who pursues a discount strategy to compete with Scuba Toys can only succeed if they can generate the same volume of business. Scuba Toys doesn't have the same product cost. They are a volume purchaser. The price they pay to the manufacturer is lower, because they buy in bigger volume. That's their business model.

 

[wreckless1]

Sorry, it is not a no-brainer. I own a business. I have a Masters in Finance. Your thought processes are in error.

IIRC, it's the integral of some kind of pricing function curve, right? But if the manufacturers don't allow shops to place themselves somewhere along the curve where they are able to maximize profits while retaining enough customers to stay in business, it's just a distortion of market mechanisms just like monopoly and collusion is. That's why it should be illegal. It's not fair to the consumer or the shop. Like some of the posters said, you could have no customers at an outrageous price or some customers at a reasonable markup. A lot of us are willing to support local business if it isn't a complete fleecing. It must be in the manufacturer's interest to sell almost all of their items at the internet, grey-market (or authorized grey-market) places than in many more smaller shops.

That sucks for me. Especially since I value human expertise--they're ripping you off but they've dove that equipment themselves and can fit you properly, or perhaps let you rent before you buy, or whatever. And I don't mind paying a little more for that expertise. Maybe I saw them dive the same equipment on the boat and I'm interested in how I could use it? Or they could be more neutral when it comes to gear than the magazines (where everything has a "coolness factor"). But maybe they're just forced to rip me off. And alienate me for good with the "hard sell" because they're not making any money at those outrageous prices and will do anything to sell enough to meet their quotas, and thus they become sleazy. And that's not fair.

Why doesn't it suck for them to not foster LDS's? Local places could be centers of diving that also generate income for these companies if prices were more reasonable. But I guess they've factored all of this into their equations...

Maybe it's the whole mom-and-pop versus Walmart battle, but I don't think an economic situation is fair unless it's fair to all players. It's a very similar situation with bike shops, btw, and small computer system builders. And I hate it! Where's the rant thread, I want in!

 

[scjoe]

The fact is that the real money is in the new students. They are the ones buying a full set of gear, and you sell that to several people in a class in one or two nights. Experienced divers are buying air and not much else most of the time.

I suspect that what irritates most LDS owners are the customers that come in and want to see or try on gear, have their questions answered, maybe try it out in the pool, and then go order it on line. Bringing the gear back to the store it wasn't bought from for service or repair probably doesn't help either, although the smart LDS owner accepts that business without complaint. That doesn't mean they are happy though.

 

[Eric Sedletzky]

This has been said so many times by people but I keep seeing statements like the one above - to repeat if there is demand for airfills someone will provide the service! That is how markets work!

You are also neglecting the fact that *many* independent clubs own a compressor which is available to club members for free or at cost.

I've looked into buying a compressor. My old dive buddy bought one a time ago which was nothing special, it filled two tanks in about 20 minutes, 220 volt single phase, and it was $7000. It was a Nuvair (sp?). He's since moved away. At $5 a fill at a dive shop that's 1400 fills before it pays for itself not including oil changes, filters and any other sevice, so it's actually more. Dive shops provide air as a loss leader, they don't make much money on fills. So to think that a place is going to open up just to do fills is somewhat silly in the fact that in order to make money or even break even, fills would cost $10, $15? who knows.
Going to a paint ball place wouldn't be an option in my book because a lot of that air pumped is not breathable grade air since it's just for paint ball tanks. And unless you worked at a fire dept. or had a good buddy that did, getting fills that way would be next to impossible.
There was a guy up on our coast that used to set up on the weekends in a trailer and he did fills. But he never maintained his compressor and the air tasted like oil and there was always water in my tanks. He finally ran out of money and shut it down.

Maybe in Australia you guys have clubs that have compressors and everybody works together. You probably have more divers per capita in your population too. Where I live there are not that many divers that dive locally so everything dive related is more of a challenge. Nothing is cheap in Northern California.

 

[RonFrank]

Most LDS's are NOT doing fills to make money, or as a loss leader, or for any reason OTHER than the fact that it's very difficult to teach someone to dive if you have no air! For a scuba shop having a compressor is a no brainer. They are not all that expensive in the scheme of things. Maybe the cost of a Nice Truck!

Pure and simple. I'm betting most shops break even on fills, and maybe they even profit. In a large market fills CAN be a business. Fill Express seems to be doing well. I loved that place, and it was busy, very busy when I was there last summer.

 

[Brandon]

Maybe in Australia you guys have clubs that have compressors and everybody works together. You probably have more divers per capita in your population too. Where I live there are not that many divers that dive locally so everything dive related is more of a challenge. Nothing is cheap in Northern California.

It doesn't take as many divers as you may think... our dive club has about 10 people and just purchased a new 8cfm compressor this past year. Our remote location actually works to our benefit in this case; we don't have a shop and as a consequence no one can take the easy way out and grab a $3 fill. It was either pay $15 a fill (air only) from the commercial operators (only one of whom even wanted to be bothered with recreational fills) or find our own way.

Bottom line:

If the dive shops stop offering air fills or price them too painfully, people who truly want to dive will find a way. Ever read an interview where someone asked Jacques Cousteau what his favorite LDS was? Hell no, and you know why? Diving was around before the local dive shop, and it'll still be around if a few more shops close. Heck, online gear sales is really just a return to the dive industry's original method of distributing gear mail order through catalog sales. Except now it's dangerous and ruining the industry.

The dive industry and AIG must use the same marketing/public relations firm... this "too important to fail" line is getting awfully old.

-B