Why Isn't There a Free Market for Scuba Equipment?

[fireflock]

Most of the shop owners I have run into (online and bricks + sticks) are fond of MAP; many wish MAP was higher.

....until they need a price drop to close one of their own sales.

They're almost all fond of MAP for the other dealers. After all, who complains to the sales reps when they see a MAP violation?

While I hope the FTC is flooded with examples and evidence, I'm not going to hold my breath.

Keep up the good fight though. Price conscious divers owe a lot to the dealers who are willing for play in the free market. Price matching doesn't mean much when all the prices are artificially the same.

Rich

 

[widget]

Lots of interesting points here, but in my opion MAP and MARP are only strong in the USA - maybe because its such a big single market??.

From my experience in Europe the UK and here, is that MAP / MARP is only tokenism, most of the Importers will set a "Suggested Retail Price" however its up to the retailer himself to decide in effect what he sells for, there is little or no enforcement.

Differant manufacturers / Importers set a differant "SRP" - for example a camera importer may only set a 30% mark up, because few retailers actually carry them in stock, so they get an order, phone and buy one in, there is no inventory hold costs so the retailer can do with less margin, its in today and tomorrow the money is in the bank.
On inventory held, Lines like masks, fins etc, the SRP may be 60 - 70% but its competitive in these lines so discounts abound - but its always at the retailers descrition.

I am totally against any form of price fixing, it rewards uncompetitive business models, and predujices good competitive business models.

I dont want to harp, but I maintain the single biggest factor collapsing this industry is the cost of equipment,(and I refer here mostly to BIG BRAND equipment) as a business who buys from the exact same suppliers as the brands, I know what these products cost and there is at least room for a 30% drop in scuba equipment prices to the end user - until gear is more affordable and more divers feel they can afford the investment in gear, this sport will continue to teeter on the brink of the grave - a diver without an investment in equipment has no reason to stay active, they will continue to remain vacation divers (maybe) or just look for other sports and drop out.

 

[fireflock]

MAP is in the news again, this time regarding toys. Also mentioned are the recent Supreme Court case and hopes for new legislation next year.

Why Some Toys Don't Get Discounted - WSJ.com

Here is a bill that has been introduced in the Senate.

http://www.govtrack.us/congress/billtext.xpd?bill=s110-2261

 

[rstofer]

I hope it becomes law. I'm not counting on it, but it's a start..

Richard

 

[NudeDiver]

I'm a big believer in maximizing freedom. In this case, some of the issues I see are:

a). Consumers are always free to buy the product or not. This is especially true for luxuries like dive equipment.

b). Retailers are always free to sign whatever agreement necessary to carry a particular brand/product, or not.

c). Manufacturers/distributors are always free to set policies/procedures they feel benefit their interests. They can also change them if needed.

So, in this case, the free market has a solution. If consumers would stop buying these products that are subject to such agreements, retailers would stop stocking these products, and manufacturers/distributors would be forced to either change their policies or discontinue the affected products. So, it's pretty clear that the market as a corrective solution, while maximizing freedom. Everyone is free to either go along, or not.

However, obviously this is not happening. Why not? It seems clear that people all along the supply chain are perfectly willing to go along with the present situation - whether or not they like it. Let's be clear here. People are willingly participating in the present scheme - and for goods that are hardly "essential items." This being the case, I don't believe a government remedy is called for - since that remedy is to restrict freedom to engage in business with willing participants as they all see fit.

On a related note - some companies could use MAP and similar things as a point of competition. By allowing whomever to set whatever price they want, they could offer themselves and their products as an attractive alternative to other options. Now, some may argue that this isn't really true, since it's not happening (for the sake of argument, let's assume it's not happening). But just because companies are NOT competing on some particular point, doesn't mean it's not viable. Many companies do not compete on price, they compete on other things. Does this mean that these companies are anti-competitive, because they are not striving to offer the lowest price to the consumer?

Whenever there is a call for the government to restrict freedom, there had better be a damned good reason for it. I don't think the possibility of lower prices on luxuries qualifies.

 

[RJP]

I hope it becomes law. I'm not counting on it, but it's a start..

Richard

Great, and next maybe there will be a law passed which regulates how much YOU can charge for whatever goods or services with which you earn YOUR living.

 

[fireflock]

Great, and next maybe there will be a law passed which regulates how much YOU can charge for whatever goods or services with which you earn YOUR living.

The law, if passed, will make the retailer the only one who decides how much to charge. The retailer can charge as much or as little as they want to. No one is going to regulate prices.

As it stands now, someone up the supply chain can regulate your prices as a retailer. Retailers don't like it, and it's not hard to see why.

 

[fireflock]

NudeDiver - You can sign up to join the majority opinion in the recent Supreme Court case. Their argument was that competition between companies is sufficient.

The opposing view is that competition between retailers (every level of the supply chain, really) is what creates an efficient market. The idea is that some retailers will compete on price, some on service, some on convenience, many due to changes in demand, and so on. It frees the retailer (or wholesaler or distributer) to run his/her business the way they want to without interference from the people who sold them the goods.

The law doesn't just apply to 'luxury items' I bet the authors don't know or really care about scuba gear. It applies to everything sold in the US.

 

[rstofer]

The best way to describe the scuba market is as an oligopoly Oligopoly - Wikipedia, the free encyclopedia It is not a free market in the usual sense that more producers can easily enter.

There are few producers and many consumers. Sure, you don't have to buy AquaLung, ScubaPro or Oceanic regulators but many of the others are priced similarly. Or, your one and only LDS only carries the high priced spread and you're not sure you can get local service on the other brands that LP carries.

So you can't make the argument that there are alternatives. The only alternative to the 3 big players in terms of regulators is something like the Edge Epic. It's a good reg at a great price compared to the others but it's market penetration is essentially zero. There are some other small players but they are operating at the margins. They may even be great regulators but who would ever know?

New bit players aren't always successful, even if low priced. Remember the Yugo?

But this recession (which will probably turn into a major depression) will seriously shake up the industry. I see the credit card industry is claiming consumers spent 25% less on their cards this year. That's a BIG change and I suspect it is just the beginning. I am already seeing some sale prices on high end gear and I'm sure there will be more. I wouldn't be surprised to see a bunch of stores closing by mid-year. The first quarter of '09 will be a good indicator. I would guess the industry gets hammered!

People are afraid of losing their jobs, they are holding onto their money and paying down debt. That's not going to leave a lot for marginal activities like diving.

In terms of my own employment: as an engineer, I have always had my salary set by competitive analysis among the employers. There are salary surveys for just about every job. I was a little lucky in that there was always work and it paid on the high end of engineering salaries. But there was always a cap.

Today, it doesn't matter what the salary surveys say; I'm retired.

Richard

 

[Coldwater_Canuck]

Great, and next maybe there will be a law passed which regulates how much YOU can charge for whatever goods or services with which you earn YOUR living.

I think you have it backwards: the law would actually allow retailers to break away from having prices shoved down their throats. The current system regulates how much local dive shops can sell their gear for. No law should tell manufacturers what price to sell their product, but retailers should have that same freedom.

I'm a big believer in maximizing freedom. In this case, some of the issues I see are:

a). Consumers are always free to buy the product or not. This is especially true for luxuries like dive equipment.

b). Retailers are always free to sign whatever agreement necessary to carry a particular brand/product, or not.

c). Manufacturers/distributors are always free to set policies/procedures they feel benefit their interests. They can also change them if needed.

So, in this case, the free market has a solution. If consumers would stop buying these products that are subject to such agreements, retailers would stop stocking these products, and manufacturers/distributors would be forced to either change their policies or discontinue the affected products. So, it's pretty clear that the market as a corrective solution, while maximizing freedom. Everyone is free to either go along, or not.

However, obviously this is not happening. Why not? It seems clear that people all along the supply chain are perfectly willing to go along with the present situation - whether or not they like it. Let's be clear here. People are willingly participating in the present scheme - and for goods that are hardly "essential items." This being the case, I don't believe a government remedy is called for - since that remedy is to restrict freedom to engage in business with willing participants as they all see fit.

On a related note - some companies could use MAP and similar things as a point of competition. By allowing whomever to set whatever price they want, they could offer themselves and their products as an attractive alternative to other options. Now, some may argue that this isn't really true, since it's not happening (for the sake of argument, let's assume it's not happening). But just because companies are NOT competing on some particular point, doesn't mean it's not viable. Many companies do not compete on price, they compete on other things. Does this mean that these companies are anti-competitive, because they are not striving to offer the lowest price to the consumer?

Whenever there is a call for the government to restrict freedom, there had better be a damned good reason for it. I don't think the possibility of lower prices on luxuries qualifies.

I get what you're saying, but the problem is that people want to dive and there is little choice but to go along with this sort of pricing. Technically it is a choice, but right now there is little choice besides not diving or supporting MAP pricing.

It's kind of like when a business teacher of mine said most felt the market should dictate a companies ethical responsibilities. But heres the problem with that sort of statement: say a product like gasoline, customers have no real way to know the difference let alone buy "green" gasoline. At the gas pump you have no way to know what company that oil was extracted by and their environmental record. If I want to support "green" gasoline, how do I do it? You really can't.

With SCUBA, how am I supposed to show as a consumer that I oppose MAP pricing? I guess I could shop with LeisurePro or something, but that hardly seems like an ideal solution since the manufacturers still get paid and the poor retailer is the one that suffers .