Let's see what the FTC has to say about vertical price restraints in the biz.

[Scuba]

After a quick read of the judgment in USA vs. Scuba Retailers Association Inc. and not being an expert or attorney. It appears that this is the type of case where everbody wins and nothing changes.

For example: it would appear that some manufacturers who refuse to warrant a product sold by mail or internet would be found in violation of -

IV
PROHIBITED CONDUCT

Defendant is enjoined and restrained from:

A. Taking any action to encourage, advise, recommend, or require any person to sell its product only through retail dive stores;

But it could be argued that they are simply exercising their right to determine how and which products they will warrant.

As if this vague language was'nt enough.

V
LIMITING CONDITIONS

A. Nothing in Section IV shall prohibit defendant from unilaterally declining to deal with any mail-order dealer for bonafide reasons; provided, the burden shall be on defendant to prove in any enforcement proceeding initiated by plaintiff that any such decision by defendant was made unilaterally and for bona fide reasons, and was not anti-competitive in purpose or nature.

This vauge language leaves everything to interpretation. It costs a lot of money and effort to get others to interpret things your way, either in court or politically. So the end result in a small niche industries like this is usually that the beat goes on.

Another issue with respect to business practices is the fact of minimum enforcement of existing laws. The agencies responsible for this are underfunded ( not always coincidentally or unintentioanally ). Many of the persons in charge come from business and to business they return. The advantages and implications are obvious.

As long as a manufacturer is allowed to refuse to sell to a legal retail establishment, the intent of the price fixing laws is practically unenforceable, in my opinion. Unless consumer associations join in to provide financial dis-incentive and political pressure.

 

[Genesis]

and if I have to, start petitioning Congress.

I have the technology to do this already - its not something I'd have to develop.

Putting a petition together takes time to word properly and carefully, but actually making it work takes about 15 seconds.

I'm a severe PITA when I get cranked about something like this.

 

[Tm530]

I am not a dive shop owner, and never have been. I have had the oppurtunity to work in 2 different diveshops within the last 10 years, and I currently work for a large volume computer retail company.
The restrictions that are put on the dealers are not "absolute". The clauses you refer to in their dealer agreements say that they may not advertise prices lower then set agreed suggested retail prices. This includes in store and out of store advertising. It in no way restricts or regulates what they can ACTUALLY sell the product for. For instance, they must show a certain regulator priced on display to within 10% of the suggested retail price by whomever they bought it from (10% over or under). They dealer agreements even state that they may actually sell them for less as part of an incentive "package" or other sales tool. So, a dive shop can sell you a piece of gear, individually or in a package, at any price they so choose. That is not governed in any way by anybody else but that shop. Anyone who says differently is likely uninformed. In the discount computer business, or any other large discount business, they call this "MAP" pricing. It is really a guideline for what price range you can expect your competition to be in on the same product. You can't advertise a lower price, you can't even have it priced lower on your sales floor (unless it's a manufacturer supported sale), but you CAN sell it for whatever price you want. You can sell it below cost, at cost, at a 10% margin, whatever. Your choice. You just can't ADVERTISE those prices.
There is another factor at work here. Most, if not all, of the companies dealing in dive gear in the US are merely the "importers" of said gear. They are seperate business ventures from the parent company overseas which manufactures the product. Now, many of them are wholly owned subsidiaries of the parent company, but a seperate venture. Take "Aqualung" for example. They used to be called "US Divers" here. Why? Because the dive shop that originally started bringing the stuff in from France 50 years ago was "US Divers". The just grew into the importer "US Divers" and distributed the equipment. All of these "subsidiary" distributors are also FOR PROFIT. This means they are adding a premium to the price for the task of getting it here, advertising costs, payroll, etc. That's where some of the price increase comes from. Also, freight. It's a lot cheaper to ship from Sweden to England then from Sweden to the USA. The manufacturers also are charging the distributors more per unit BECAUSE it's going to the US. We have more money to spend and spend more of it then any other country on earth. Then there's the duties, tariffs, etc. So far our economy has supported the higher pricing structure, why would the manufacturers sell for less??
Another example I would give is this: A close friend recently got into diving in a big way. He decided he wanted the Aqualung Legend LX Supreme. I sent him to a dive shop I KNEW would give him a great price because he was a buddy of mine. They offered him an excellent price. He ended up buying it online FOR LESS THEN THEIR COST on the regulator. And they are a large volume dealer! ( I went in after to find out why they lost the sale, I saw all of the pricing for both sides).
We're not the only ones being jammed, the dive shops are also.
Now, I support local LDS's fully. I am also not saying that there is no price fixing going on, there probably is. But there is more to the story. Without LDS's all of our SERVICE prices would go up substantially (air, tech support, classes). It remains to be seen how the industry will shake out the online versus instore pricing. I don't think the retail industry as a whole has figured this one out.

 

[Tm530]

I am not a dive shop owner, and never have been. I have had the oppurtunity to work in 2 different diveshops within the last 10 years, and I currently work for a large volume computer retail company.
The restrictions that are put on the dealers are not "absolute". The clauses you refer to in their dealer agreements say that they may not advertise prices lower then set agreed suggested retail prices. This includes in store and out of store advertising. It in no way restricts or regulates what they can ACTUALLY sell the product for. For instance, they must show a certain regulator priced on display to within 10% of the suggested retail price by whomever they bought it from (10% over or under). They dealer agreements even state that they may actually sell them for less as part of an incentive "package" or other sales tool. So, a dive shop can sell you a piece of gear, individually or in a package, at any price they so choose. That is not governed in any way by anybody else but that shop. Anyone who says differently is likely uninformed. In the discount computer business, or any other large discount business, they call this "MAP" pricing. It is really a guideline for what price range you can expect your competition to be in on the same product. You can't advertise a lower price, you can't even have it priced lower on your sales floor (unless it's a manufacturer supported sale), but you CAN sell it for whatever price you want. You can sell it below cost, at cost, at a 10% margin, whatever. Your choice. You just can't ADVERTISE those prices.
There is another factor at work here. Most, if not all, of the companies dealing in dive gear in the US are merely the "importers" of said gear. They are seperate business ventures from the parent company overseas which manufactures the product. Now, many of them are wholly owned subsidiaries of the parent company, but a seperate venture. Take "Aqualung" for example. They used to be called "US Divers" here. Why? Because the dive shop that originally started bringing the stuff in from France 50 years ago was "US Divers". The just grew into the importer "US Divers" and distributed the equipment. All of these "subsidiary" distributors are also FOR PROFIT. This means they are adding a premium to the price for the task of getting it here, advertising costs, payroll, etc. That's where some of the price increase comes from. Also, freight. It's a lot cheaper to ship from Sweden to England then from Sweden to the USA. The manufacturers also are charging the distributors more per unit BECAUSE it's going to the US. We have more money to spend and spend more of it then any other country on earth. Then there's the duties, tariffs, etc. So far our economy has supported the higher pricing structure, why would the manufacturers sell for less??
Another example I would give is this: A close friend recently got into diving in a big way. He decided he wanted the Aqualung Legend LX Supreme. I sent him to a dive shop I KNEW would give him a great price because he was a buddy of mine. They offered him an excellent price. He ended up buying it online FOR LESS THEN THEIR COST on the regulator. And they are a large volume dealer! ( I went in after to find out why they lost the sale, I saw all of the pricing for both sides).
We're not the only ones being jammed, the dive shops are also.
Now, I support local LDS's fully. I am also not saying that there is no price fixing going on, there probably is. But there is more to the story. Without LDS's all of our SERVICE prices would go up substantially (air, tech support, classes). It remains to be seen how the industry will shake out the online versus instore pricing. I don't think the retail industry as a whole has figured this one out.
I'll leave it at this: I've been diving almost 20 years and have NEVER paid MSRP. Cultivate a relationship with a dive shop you like and trust, stay loyal to them and they WILL stay loyal to you (unless you have the wrong shop!). When they can absolutely not match an awesome online price, buy online. If you don't make an issue out of it, neither will they.

Tom

 

[MikeFerrara]

I can't believe I'm reading this stuff. You can buy gear online for less than it costs me as a dealer and you still wine. I can sell as cheap as I want. I can also shoot myself in the head if I want. A reg cost me $300 and you want it for $250 and DiveInn will sell it for that. I don't know where they get it or how much they pay but talk about unfair trade!

The worst is when you walk in with a problem and want me to deal with it for free to make you happy with the manufacturer who put me in this spot.

I have offered this before, I will show my books to anyone who is interested.

 

[jonnythan]

MikeFerrara once bubbled...
I can't believe I'm reading this stuff. You can buy gear online for less than it costs me as a dealer and you still wine. I can sell as cheap as I want. I can also shoot myself in the head if I want. A reg cost me $300 and you want it for $250 and DiveInn will sell it for that. I don't know where they get it or how much they pay but talk about unfair trade!

The worst is when you walk in with a problem and want me to deal with it for free to make you happy with the manufacturer who put me in this spot.

I have offered this before, I will show my books to anyone who is interested.

I think you should be *allowed* to sell for whatever price you like. If a product isn't moving, you should be able to put it out at a discount to make room for higher-margin items.

It might not make financial sense for you to match DiveInn's or Leisurepro's prices, but you should have that right.

Besides, if manufacturers are no longer allowed to restrict product sales as closely, you can get your stock from wherever DiveInn gets theirs. It'll benefit both you and the consumers in the long run by taking away the incentive to go to an online store.

BTW, I would never buy from an online dealer, then expect you (or my own shop owner) to do *anything* to it without being fairly compensated by either me or the manufacturer (which probably doesn't happen).

 

[Aquamaniac]

MikeFerrara once bubbled...
I can't believe I'm reading this stuff. You can buy gear online for less than it costs me as a dealer and you still wine. I can sell as cheap as I want. I can also shoot myself in the head if I want. A reg cost me $300 and you want it for $250 and DiveInn will sell it for that. I don't know where they get it or how much they pay but talk about unfair trade!

Welcome to Corperate America Mike!!!!!

Just because DiveInn is getting better prices than you are, that does not mean its Unfair trading!!!!

I have an opposition company who is buying there RM's at 75% less than I am. Obviously their COGS are better than mine, hence there margins are better than mine and they are taking my business. Is that unfair? Hell no, it just means they are doing a better job than we are. Yes I want to know how he is doing it, and the reasons behind it. But I cant jump up and down, stamp my feet and scream "its not fair", Thats business!

I also cant call up General Electric and say, Support your local Suppliers, those damned Mexicans wont offer you any support!!!!

If they come to me and say "I bought this from Company X, but it doesnt work, can you fix it?" Im going to say hell yes, offer him an awsome service (at cost), and show him why WE are the best in the business. If I was to say, "no,go away with your mexican crap!" how can I expect return business WHEN my prices do get better.

Dive Shops are not the only people dealing with "online price wars" or Overseas pricing. Its hitting us all, HARD. The Asian market is killing us. It just means we all have to work a bit harder and reduce our costs. Thats business!!


Dave

 

[gentlegiant]

Mike,

I am on record as saying that I will continue to support my LDS's and that will not change. To me the question you should be asking of your suppliers is "why the #%*#! am I paying more for the same regulator than an online store that is not even certified as a reseller of your equipment?" Something smells fishy here and the blame is not with most DS owners, it is with the manufacturers and middlemen in the chain. Something is broken and it needs to be fixed.

I think that most DS owners deserve a break and deserve to be able to compete with online retailers without going hungry. I would love to see the DS operators being able to sell for a fair price and make a good living instead of being beaten on by both sides. It is obvious to me that there is a price constraint somewhere in the system or else the online guys would be selling the gear for higher prices. There are some DS owners who do try to gouge their customers and are still in business because they are the only shop in an area, but the majority of shop owners I have met are great people and go out of their way to try and help divers get the best deal they can.

I think that most of the people responding to this thread are not out to bash the DS owners, but are questioning why there is such a disparity in the pricing between store retail and online.

 

[Genesis]

why doesn't he just order up 1, 5 or 10 of those regs (or BCs, etc) from LP himself, mark it up 10 or 20%, and sell them?

You know, if they did that there would actually BE a reason to buy locally, PROVIDED you actually got the SERVICE that made the markup worth it.

All the whining is just that - whining. When there is this much disparity the obvious solution is to source the product from the guy who figured out how to beat you around the head and shoulders, then add value so that you can sell at a rational price.

I did this a few times when I ran my company. Had some place, usually some liquidator or mail order joint, show up with a price that was below my COST for a given item. I'd call 'em up, negotiate an even BETTER price than their printed one for some quantity of whatever it was that I was selling, and buy it from THEM!

You want one "BRAND X" regulator from LP? Here's a price.

Now call them and tell them you want TEN. I bet they sell them to you at "price - something". If you're a LDS owner, you now have a source for those items; you can even match LP's price and make a small profit, or mark 'em up 10 or 20% and still keep your customer base, PROVIDED you actually give some service and local support to go along with your (modestly) higher price.

Why don't the LDS' do this?

I'll tell you why - they want to protect a price-fixing structure, because that "allows" them to mark up things 100% or more from their cost. If that was not the case they'd do exactly that and, if the manufacturer or distributor tried to cut them off as a consequence of sourcing around their "authorized" channel they'd sue the distrib's or manufacturer's pants off (and win) for illegal restraint of trade and, if there was any collusion or threat of retaliation in a collusory scheme, racketeering.

The LDS' will all wither and die trying to "protect" a price-fixing system; customers are getting smarter, and the days of being able to get away with that kind of activity are waning fast. Among other things there are guys like me who will beat the FTC over the head about enforcing the law, and if that doesn't stop them, a simple lack of customers will as everyone pretty much figures out the game and decides not to play.

I will not support anyone who isn't looking out for my best interest at the same time they're looking out for their own. A LDS who refuses to source from the lowest cost supplier for reasons of protecting an illegal price-fixing scheme, and passes the cost of that refusal and protectionism on to me, is a LDS that won't have me for a customer for very long at all.

 

[MikeFerrara]

"why doesn't he just order up 1, 5 or 10 of those regs (or BCs, etc) from LP himself, mark it up 10 or 20%, and sell them?"

We would not have the support of the manufacturer. In order to get service parts, manuals and their blessing to do service we need to be dealers and to do that we must play by the rules.

With the low volumes we deal with a 10% markup will not keep the doors open.



If the manufacturer wants us to sell, support and endorse their products they will need to change the way they do things. As it is now, you come into the shop and see my gear, talk to me about why I use what I use, see the price then after I convinced you this is the right stuff you buy it from LP, DI or on e-bay. I just spent hours doing all the sales work for someone else. LP and DI should give me a commission or pay us by the our. The manufacturer and LP reap the benifits of my store front, advertising and reputation. I certify divers at a break even price then they buy equipment on the net. I really should get a commission for every cert I issue.

We will end up out of retail. We will teach and sell gas. Classes and gas will be profit centers. To make money on an OW calss of six it needs to be $800 (if no travel is required and I can still get free DM's). For our volumes air would need to be $25 for an al80.

But if we do this we will not be able to service equipment. To do that you must be a dealer. This should be illegal. You may not need to be a GM dealer to service a GM car but you damn sure need to be an Aqualung dealer to service one of their regs. And to be an Aqualung or a SP dealer you need to buy and sell lots of their crap. hmmm...right back were we started. As we get knocked out of retail we also get knocked out of service.

The fast, cheap and large classes are an attempt to meet the huge minimum sales requirements to keep the dealership. Some manufacturers even try to tell you what else you can sell. It is as though we work for them.

I you can locate large quantities of grey market stuff and have the capital to buy it and if you have the resources to back the product yourself, then you can sell without being a dealer. We won't and have no desire to enter that business.

Things will change. I don't really care as the shop has never paid me for any of my time. We teach so we can pay the insurance and light bill so we can teach another class. This is not a business it's charity and we are on the giving end. I will go out with enough equipment, parts and gas to last me the rest of my diving career. I lose nothing but there are divers who will miss the place.