The LDS and Manufacturer relationship? Long

[Scott M]

I am new to diving so I have little to offer in that respect, other than if you can afford it, "get private lessons".

I do however know a little about the manufacturer/wholesale/retail business.

My thoughts:

First off, if I was in the dive shop retail game I would be livid at the treatment they get from the manufacturers. If your in the business, you can not believe for one minute that the manufacturers are not supplying LeisurePro (or others) with their gear either directly or indirectly. It is simply impossible to move that amount of equipment without the manu. knowing about. The manu.'s have simply found a way to enter into an agreement with the LDS's and break that agreement at the same time. How hard to you suppose it would be to track an item (any item) with todays technology the smallest item could be traced back to the mine in which the ore was taken from. How hard do you figure it would be to track a dive computer for example?

Do you seriously believe that LP has no warrantee from the manu., do you think they simply eat every problem?

Some manu. would have you believe the items are "obtained" through the black market. What exactly does that mean? There stolen from the manu.? Thats a lot of stolen merchandise for a manu. to eat. I would think if this was the case it would be well worth an investigation. Do you really want to buy from a manu. that has that much merchandise leaving through the back door and not know about it or able to stop it? I would have to question the quality of the gear going out the front door if this was the case.

Some would have you believe it was "produced" on the black market? What does this mean? I find it hard to believe that any group could reproduce a dive computer or regulator (an EXACT replica no less WITH their name on it) without buying the individual components from the suppliers. And if this is happening why are the manu. not stopping this at the supplier level? As a manu. you work to engineer a product and possibly have it patented. You then select one or possibly several suppliers to produce the needed components. If you did the research, did the testing, marketed the product, bought the needed compents and assembled them. Would you not question how the exact item is being produced elsewhere, under your label? The list goes on but you get my point.

The problem is "Buying Power", LP has it and you don't! As an LDS you have very little power over a manufacturer in general because you quite simply do not have the buying power to effect decisions and make no mistake about it the manufacturers know this and use it. No one shop selling 15 regs a year is going to get any major manu. to change. Most shops I would assume are just happy to be granted the right to sell and service the products they do have.

However, there is a solution!

The industry I now work in played similar games to this in the early years. Through the foresight of many good retail dealerships there were large buying groups formed. This allowed the small retail dealer to have more buying power therefore more power in the industry as a whole. This was a tough thing to accomplish but has paid off a million times over. It took a lot of guts for competing dealerships to band together for the good of the whole but they did and it worked.

There are a lot of organizations out there that would benefit in the long run from such a group (several groups). At first they would not support it but eventually they would have to.

The best part of this, we as consumers would be able to buy at LP prices AND have LDS service and support, not to mention the LDS's profits would sky rocket keeping the industry as a whole alive.

Just my thoughts. What are yours?

 

[Genesis]

One of the problems - perhaps the largest one - is that the LDS owners are, by and large, pretty poor businesspeople.

And that's being charitable.

 

[diverbrian]

To my knowledge, LP buys "grey market" meaning that they buy their merchandise in other countries where the manufacturer-store agreements cannot be enforced because they are referred to as price fixing by the manufacturer (which is another can of worms). Then they ship it to the U.S. and sell it. There is little that the manufacturers can do about this. Or they buy them from US based dive shops that are going under and will sell of inventory for a song. They are not buying "black market" which would indicate stolen merchandise.

The warranty issues ARE probably settled through LP as how much DEFECTIVE equipment do you assume that they actually get back? Like most manufacturers now, (I work at a medical products facility) these companies literally have it to where the first item that comes off the line is very close to the last item (the latest definition of quality using Statistical Product Control). They probably make a very fraction of out of control (bad) product.

As to your "association" idea, I would have nothing against that, but it would take cooperation among shops that are rivals for customers. This can work, but it is not easy to do. Try to get our shops to talk nicely about one another for too long up here. It isn't always easy! (Although most of the time they are civil and make a point to not be the bad guy by "out and out trash talk" of one another.) However, I do believe that for the LDS to survive that is about what they will have to do. If the manufacturer doesn't like the price that the shop is selling for or the low amount of sales out of a shop they can refuse to sell to them.

Our industry is getting around this very simply. The company that I work for will gladly sell to large manufacturers that place large orders or smaller ones that need specialty raw materials. For the companies that want smaller amounts of the "off the shelf" merchandise, they deal with distributors who do sell in smaller quantities and market the material for them. But the order to the distributor is still a large one so that we don't have several product line changeovers like we had to do say seven years ago.

Maybe this would be a good form of cooperation as well. I don't know.

 

[Lead_carrier]

You have some decent points Scott. Larger shops do have more buying power so they do get better prices. Do LP's products come from black market? No, they come from gray market. The products are bought overseas and not warranted by the maunfacturers in the US. Whether they have some type of deal with the overseas manufacturer is anyones guess.

When you get your shop open and get your group together to force the manufacturers to meet your terms, by all means, let me know, I'd love to get into it. So far we can't even get the local shops to quit trying to stab each other in the back at every corner let alone try to meet on civil terms.

It is easy to sit on the outside and correct all of the LDS's problems, and yes we have plenty. Try getting into the arena and see what some of the barriers we really run into.

 

[diverbrian]

Genesis once bubbled...
One of the problems - perhaps the largest one - is that the LDS owners are, by and large, pretty poor businesspeople.

And that's being charitable.

Most of the early LDS owners had to learn business on the fly. They are divers FIRST. Our LDS started in the seventies when a school teacher decided to learn to dive. He loved diving and wanted to teach. He started teaching and realized that people were coming in with unsafe, "hand-me-down" gear. So he opened a shop so that his students would have gear available that wouldn't get them killed.

He is an excellent instructor and diver. I am sure when he started he was a poor businessman. He is a good one now. The new LDS owners just don't have time once they open to learn the business aspects against competition that has been there for ages. (Or the dinosaurs that won't change find themselves out of business for the same reason.) But having said that, I would rather buy gear from a knowledgable diver and teacher that knows about what he is selling than a business man who just sees a product number.

 

[Scott M]

Genesis - That is common in many industry's. Ours included. The group idea brough about a lot of changes in how business is done. Many dealerships were able to benefit greatly from this.


Diverbrian - "To my knowledge, LP buys "grey market" meaning that they buy their merchandise in other countries where the manufacturer-store agreements cannot be enforced because they are referred to as price fixing by the manufacturer (which is another can of worms). Then they ship it to the U.S. and sell it. There is little that the manufacturers can do about this. Or they buy them from US based dive shops that are going under and will sell of inventory for a song. They are not buying "black market" which would indicate stolen merchandise."

Agreed - Nor do they want to change this!

Lead_Carrier
The group idea is based on shops that carry the same brand of merchandise. Possibly grouping together with other shops OUT of their area. Not only do you gain valueable buying power but it is fun to meet on a regular basis with people having similar interests and gaining some knowledge to boot doesn't hurt.

For example: Try to organize as many shops as possible that carry X-Brand, most of these would not be competing shops anyway. Then as a group go to the manufacturer and make some demands at the same time offer some large purchases. You would be surprised at how well this works.

Our group of dealerships (nothing to do with the dive industry) are scattered Maine across the northeast through to Florida. The groups idea has been so successfull that we are actually building our own factory's and producing our own higher quality end product for less money.

Agreed it is not easy to accomplish but eventually it WILL be the only way to survive.

As for the Grey market items. I believe the Manufacturers have NO desrie to stop this practice at all. Why would they? There is little down side to it. So my local guy stops buying his 15 regs a year. Is that going to hurt the manu.? On the other hand make a group of LDS owners buying possible millions in products a year angry and you get results.

 

[SparkySFD]

I just posted on the same train of thought. I wanted to know where they get the gear. I agree the manufacturers probably sell them directly.

I cant agree more on buying groups. My family used to own two Flooring retail stores. For years my Dad travel to Dalton, GA to buy product. We bought into a buying group called Carpet One in the early 90's. Best thing we ever did. Biggest buying group in Flooring in the world. Great for our profits and better prices for our customers.

Works this way. Say your retail outlet buys a million dollars of product a year. But you have just 10 manufacturers you buy from. In the real world there are many more. Thats only $100,000 your talking with. Now say a buying group has just 3 dealers in each state 3x50=150. Now those 150 dealers spend the same $100,000 x 150 = $15,000,000 !!!!!!

Thats 15 MILLION dollars! Now you tell me who will get a better price on thier goods. A guy with $100,000 to spend or a guy with $15 million to spend. Scuba needs a buying group for retailers like we all need oxygen.

 

[SparkySFD]

Just to expand on my post. It would be easy to sign up dealers. I ought to just do it myself. You get a group of dealers together. Guys that are not in the same market. Guys that DO NOT compete against one another. They form a corporation. They then pool and buy together. They then look to pull in more markets, never competing against one another.

In this model you are in it together. Everyone benefits. In the case of Carpet One the dealers even band together for advertising and marketing production. I mean advertising and marketing done by top shelf companies that charge mega bucks for there excellent services. You cant imagine how much it costs to produce a commercial or slick flyers to insert in newspapers, etc., etc. The costs are enormous. Way to much for an independent store with one or even a couple of locations. But when you spread the production costs over a hundred or several hundred stores it becomes affordable and PROFITABLE.

Again good for the store, customers and the sport. Imagine a store that can better cost effectively advertise. Thats more divers being brought into our sport. More customers means better supported dive shops and lower prices for everyone.

 

[Scott M]

Sparky,

I'm a firm believer the products come from the manufacturers directly or indirectly. That much merchandise could not be moved any other way. No way no how. It's a very simplistic way to not break the Manufacturer/retailer buy/sell agreement.

The LDS losses business - calls their rep - rep throws the hands in the air and blames that darn grey market, sure wish we could stop em but we can't - so how many regs is it you needed at a significantly higher price than LP is paying?

I do not buy the we can't keep track of everything excuse. With todays inventory systems, tracking products is second nature. And like I said in earlier posts with life support equipment they darn well better know where their products are at all times. You do not just lose thousands of $ 1,200 wrist computers.

Buying groups are the little guys only solution. With out one we would have been out of business 15 years ago.

 

[SparkySFD]

Scott M

I agree with you. I gaurantee you they have a tracking system in place already. How else can they deny that you bought the reg or whatever from an "unauthorized dealer"?

I really think they need a buying group. Would be good for ALL of them. With the power of a group you dont get pushed around by the manufacturers. You are the ones doing the pushing.

You can get different products made. Things happen that would never have seen the light of day without the group.

In Carpet (its what I know but the concepts the same) you never saw anything but 5 and at the most 10 year warranties on products. But our buying group Carpet One started slapping 20 and 25 year warranties even Total Satisfaction warrranties on our goods. They did it knowing few people ever put a claim in on them but thats beside the point. The industry followed along. THEY HAD TO TO COMPETE.

They same would happen in diving. Better prices, service and manufacturer support would come down the pike.