The Great local dive shop vs. online debate

[MikeFerrara]

Genesis,
We've been over this a bunch of times. In a way your right but...If I sell Zeagle online I loose the dealership. You say no big deal. OK...but then I have to search for a source of parts, manuals and I must also do service without being authorized. Then the insurance drops me and I can no longer teach or pump air. It's not so simple. What we are trying to do is get the manufacturers to change some of the rules so we can be lagit and still compete.

Íf I didn't teach or pump air I wouldn't need the same kind of insurance. We are not in the same business as LP we just happen to share the retail sales of dive equipment.

As of now LP and some others are taking advantage of the fact that we provide services and create business (new divers) for them. That won't last. Yes, the model is screwed up but change is slow.

As I said we have an online store being put together now. However we will still have a rough time of it because most brands we carry don't allow us to sell online. For the products we do offer online price will still be hard to get down.

It's not just volume It's where you get the stuff. LP doesn't get Zeagle from Zeagle. They buy from who? shops going out of business? someones overstock that they are willing to sell at a loss? I don't know.

At least as of now. We will sell online. If the volumes allow the price will reflect it. Untill the insurance companies change their rules and parts and manuals become available we will be dealers for everything we sell.

 

[Rick Murchison]

Genesis once bubbled...
is alive and well.

You're not in the retail business now, are you Genesis? A lawyer maybe?
If you consider Walmart as "retail" then you're right - that type "retail," where there are no salesmen educated in the proper use of the products they sell, is doing well... for the time being. They are closer to a warehouse open to the public with some security folks (as opposed to "salesmen") and a few stock boys on the floor. Wall mart would be a great place to buy Scuba gear, don't you think?
As for Leisurepro, I'm not sure where they get their stock, but it damn sure isn't through the same avenues as the authorized dealers.
Rick

 

[nitroxbabe]

Just notice this other thread - related?

Hmmm..

Where will ya get your airfills when your LDS goes down due to lack of business? One cannot live on air fill income alone...

http://www.scubaboard.com/showthread.php?s=&threadid=18301

 

[Scuba]

Another convenience that consumers are increasingly demanding in the 21st century is a la carte menus, which Rick and Genesis commented on. This does'nt mean that bundling will become extinct, bundles should and will be items in some a la carte menus.

The problem I see now is that many businesses want to continue offering their "hidden" bundles. This is a sure way to loose customers to the competition who offers transparent choices, even if more limited, to an ever increasing number of consumers asking for them.

With respect to the manufacturers/distributors problem. We have a great misconception in this country (US) that capitalism and free enterprise is all good for everyone. We have a regulated capitalist/free enterprise system, an unregulated system can easily lead to exploitation, monopoly, stagnation, revolution and collapse, to be replaced by or supplanted by a system with different rules, not always better ones. We have avoided the worst of it here by having a political system which is fairly quick to make necessary adjustments.

What I see is one of the largely unregulated, or loosely so, remaining vestiges of that system is the freedom of the manufacturer to selectively and arbitrarily determine who they sell their products to as well as the ability to retain control over their products. This may be an aspect of freedom in an economic system, but it also restricts competetion by denying legitimate retail merchants the opportunity and freedom to compete. Less competetion means the consumer pays a higher price and has less choices.

Many retailers have willingly acquiesced to their suppliers demand as long as they're getting a share of the pie, only when they realize that the interests of the supplier is not the same as theirs do they complain foul. Better late then never. As for consumers, they have a very high tolerance to accept what comes their way. But increasingly in the future, through better education and organization, consumers will be the ones dictating the rules. And no matter what - an entrepeneur will find a way to profit. In time, they too will have to adjust or give way to the new comers.

The scuba business is a business in transition.

PS. Will you guys please stop saying how you are willing to pay a little more in order to buy local to those who want to charge you more and make you pay for hidden services you may never use.

 

[Genesis]

there are multiple ways to skin this cat.

You say the insurance companies won't "allow" you to do certain things. Sure they will - they just won't insure those risks. They can't STOP you from doing something - they're not a GOVERNMENT, you know.

There are certain insurance companies that "cater" to this market. The number is very small. Their terms are controlled by captive interests in seeing you do things their way from what I can determine, which allows them, as part of the cabal, to try to squeeze you to play the game by the "traditional" rules.

Big surprise - NOT!

So what? Structure your business so you simply don't care about those risks; they can't harm you materially.

Then insure the rest.

Don't be a "dive shop" that sells and repairs hardware. Be Company #1 that sells fills and training. Get your insurance. Play "nice-nice" with them.

Company #2 sells and repairs hardware. It is a Nevada Corporation. It has no assets other than the parts and inventory in the shop. It is judgement-proof, and has enough people on the board to prevent a "closely-held" piercing game to be played. It sources hardware from wherever, and doesn't give a good damn about whether the manufacturer likes it or not.

What's to stop you from doing this - or something like it? Nothing, other than a lack of desire to. The ability to work these kinds of problems and come up with solutions is the reason you have a corporate counsel, a tax guy and an accountant all available to you, and why you pay them occasionally for advice - to find ways to make the rules work for your situation.

You think this isn't what the rest of the industry - and other industries - do?

It sure is!

Was this not exactly what all the belly-aching about Peter Hughes diving was about? Their structure of the business so that you couldn't go after THEM PERSONALLY? Yep - that was indeed what it was about! You know what? They were SMART about it. You can be too.

I know of a LDS down here that does something like this. Their dive boat is a COMPLETELY SEPARATE company (its obvious from their waivers!) Get hurt on their boat, you can't sue the SHOP or the OWNERS. You can sue the corporation that owns the boat though. If you win, you might get the boat. Oh bummer. The corporation probably has a ship's mortgage against the vessel and essentially ZERO assets to take. At least, if it was my company that's how I'd have it structured, and for exactly this reason.

Take care of tort reform problems on your own. It can be done.

Think outside the box. I did. You can. It takes more effort, but that's ok - its supposed to. You don't think making a profit and earning a living is supposed to come without effort, do you?

Where does LP source materials from? Who cares. It doesn't matter. What matters is that they do, and they're pasting your sales. Either adapt or die - those are the options.

When I ran my company I happened to get a VERY good deal on some network router equipment. A whole lot of it. Like some 150 units, each of which, new, was worth in the neighborhood of $5,000. Some were still in their original boxes. Others had a few month's use on them in controlled environments. A few were unknowns. I bought all of them, plus a bunch more stuff, at an aggregate price that was somewhere in the neighborhood of $150 each (depending on how you wanted to do the accounting.)

And I sold 'em. The OEM warranty was 90 days. I offered them as reconditioned units, with a one year, no-nonsense we-swap-it-on-demand warranty. I rented a small warehouse, stacked them up, and ran a truck a couple of times a week between my main office and there to keep a few in stock at the office at all times. Occasionally I ended up carting a few around in the back of my car when we needed a couple RIGHT NOw for some customer.

Needless to say they went fast and furious, and at a VERY healthy profit. The others with those products for sale from the manufacturer had a HISS. A MAJOR hiss. I was threatened with lawsuits, with unfair competition complaints, and all kinds of ugly words were spoken about me - people SWORE I had either stolen them outright or were selling intentionally under cost to drive people out of business. The manufacturer was pissed too, as I essentially destroyed their marketplace for those products in my region for over six months; these were not something that every Tom, Dick and Harry needed, you see, and 150 of them was a fairly significant number for that region of the country.

So what? Did I care? Nope - I laughed all the way to the bank. To the tune of some quarter of a million bucks in profit, all told, which ended up being partially responsible for financing the expansion of the company from a little one-man show into a market leader in the region.

Authorized dealer for these devices? No, I was not. So? Did I care? Nope - I backed 'em with my own warranty, serviced them myself and thought it was UPROARIOUSLY funny that every other seller of the device in the Chicagoland area simply could NOT match the terms. They could get close to the price selling at their cost, but they couldn't TOUCH the warranty.

That was just one of the MANY "outside the box" transactions that I worked during those years.

The point is that there almost ALWAYS is a way to skin the cat for the small company. The problem is that most proprietors stick to the model they know and "trust", and its usually one that someone showed them or one they learned oh so long ago, even when the market has changed the empirically there is no reason to believe what they were doing will still work.

You can fix this Mike.

You just have to want to.

 

[redacted]

nitroxbabe once bubbled...
Where will ya get your airfills when your LDS goes down due to lack of business? One cannot live on air fill income alone...

Scubapro, PADI, SeaQuest and all the rest close their US operations due to the lack of compressed air distributers causing a catastrophic decline in recreational scuba diving.

No, somehow, I don't think so.

 

[sheck33]

I do not see why i cant buy my equipment where-ever i want??
My LDS does not sell the stuff i want (anymore). If i go to Homedepot and buy a drill there will Lowe's treat me badly for it?? No, why then do LDS's do it that way? I understand they have to make a living but where does it state i cant buy gear elsewhere!?

i do not think a LDS should be telling it's customers what to buy where or what gear to dive, period. I am about to hit the water with a suit i didnt buy from my LDS, if they tell me not to dive that suit i guess i wont be helping with the classes.

I am usually loyal to my LDS but i cant buy stuff they dont sell now can i.

 

[diver42]

Are air fills sold at a loss? How about Nitrox? I've heard this, but I'm never sure how the cost fo the compressor or membrane system is being amortized.

It seems to me that dive shops should be able to make money just like other retail stores. How is CompUSA still making money on computers with all the competition from online retailers?

I'm guessing some customers still want to buy from a storefront.

There are some things I still want to buy from a storefront. One is equipment service. Another is classroom instruction. Ok, this is about to become a rant.

Prices for equipment service are hourly, right? They're at least based on the difference between what you pay the technician and what you can charge to keep in him the store. How can that not be a money-making proposition?

Prices for classes should be the real money maker. The instructors are always saying they're not making much. Unless the agencies are taking a pretty big cut, it must be going to the shop. There's precious little inventory to be had here. How can these not make money?

Prices for dive shop-sponsored trips are based on the actual cost plus some specific markup, right? This is a little leg-work and all profit. How can this not be a money maker?

So what we're left with are the outright retail setups... buying and selling equipment. I don't mind if you structure one thing to subsidise something else. Nothing wrong with a loss-leader IMO. But you're stuck competing with the online retailers. Some are in this country, some aren't. How does that make the LDS any different than shops in any other industry?

There are competing cost structures to be sure. But there are advantages to being a storefront. No one ever drives by LeisurePro and decides to walk in. New divers don't know about mail-order shops. There's nothing like the comfort level a new diver has when he's taking his OW with the outfit from which he bought his equipment. And other industries are surviving... even with the rules imposed by manufactures. Here's a great example. There are still local car audio shops all over the place. They sell at a huge markup and then charge for installation, and they're bound by the same type of dealer agreements described here. You can get all your car security and audio needs at Crutchfield, but who will install your equipment?

Well, your local shop will install it, but you'll pay a premium for the service, above what you'd pay if you bought it from them. Some things they just won't install unless you bought it there. Dives shops can do this.

Here's another idea. Not all dive shops sell all brands. Why not grey-market the ones you're not authorized to sell?

Ok, one last thing. The LDS often tries to have it both ways, and we should all just recognize it's not going to work. I own three masks. I can get them from LP for $25/ea, probably already a 100% markup. I can get them from the LDS for $70. You do the math. Will I spend an extra $130 to get them locally? No. But at least they stock the masks. I needed a few new hoses a while ago and bought them from the LDS. I had to wait while they ordered them and then marked them up. Next hose purchase I skipped the markup and just ordered online. Why? Those things are all commodity items. A 7ft hose is a 7ft hose.

So my question is, what are the local dive shops offering for which they believe we should support them? Air fills, instruction, service, and retail equipment. So, someone tell me why it's my fault that the LDS can't compete on price. (Assume I don't waste their time asking about equipment I don't intend to buy from them, unless I guenually want to buy it from them but then get hit with sticker shock.)

 

[metridium]

diver42 wrote...
There are competing cost structures to be sure. But there are advantages to being a storefront. No one ever drives by LeisurePro and decides to walk in.

Shhhhh....don't tell raviepoo.

 

[SM Diver]

Be sure to get a price from LDS before buying at LP. I had bought a ton of stuff from LDS, and needed an Apecs ATX200. LDS sold it for $50 less than LP, at their cost, as a token of their appreciation. I'm under strict orders to not disclose the identity of the shop, so please don't PM me asking.