Explain the LDS gear situation?

I was hoping someone could explain in fairly simple terms (explaining acronyms) the LDS gear situation. IE, why LDS's sell for sometimes 100% markup above online dive stores. I understand some markup to cover their services (trying on gear in their pool, etc), but 100% seems extreme for gear worth hundreds of dollars.

Anyway, I've heard enough people complaining about it, but I haven't heard a nice explanation of why it happens. And I would prefer not to hear "Because they're stupid, go buy online". I have a feeling they're not all morons, there must be some reason for the large price inflation.

Hi there -
This has been a hotly debated topic - if you do a search you'll find lots of previous comments, *****ing, and otherwise.

Basically it boils down to this, IMHO: the online stores don't have the overhead. They are able to sell to a much larger crowd than the local shop, which gets its business from mostly walk-in customers. This volume selling, plus the lack of overhead, enables the online stores to sell cheaper. It's not really that the LDS has a huge markup: it's that the online stores have a very small markup, which makes the LDS look bad by comparison.

I have bought some used stuff online, but always buy new equipment from my LDS. They make it plain that they have little or no incentive to service equipment I bought online. And I absolutely agree with them on that.

And quite honestly, my LDS has given me a dang good deal. I don't see better prices online for the stuff I've gotten. And if I have a problem with it, I know who's going to help me, and do it with a smile. I've had problems with equipment, they grab it, give me a new one, and tell me "no problem". Nice.

BTW if you're horrified by a 100% markup, you ought to see what's going on in the clothing industry.

Personally, I am not complaining too awful much about markups, as long as they're not ridiculous (and no, I don't think 100% is ridiculous). People have to make a living. Anyone who owns their own business has a lot of burdens and worries to bear.

It is called fair pricing agreements between the dealer and the manufacture. To be an authorized dealer in the US the shop must to agree not to sell an item below a certain percentage of suggested retail price set by the manufacture.

It is was originally designed to prevent companies with hugh buying power from putting the little mom and pop shops out of business.

As I understand it this practice is not supported in other countries and with the world getting smaller and shipping from other countries becomming cheaper and easier to import the larger companies have found a way around it.

closest I can get to it. Hope it helps.

Hallmac

Ceberon once bubbled...
I was hoping someone could explain in fairly simple terms (explaining acronyms) the LDS gear situation. IE, why LDS's sell for sometimes 100% markup above online dive stores. I understand some markup to cover their services (trying on gear in their pool, etc), but 100% seems extreme for gear worth hundreds of dollars.

Anyway, I've heard enough people complaining about it, but I haven't heard a nice explanation of why it happens. And I would prefer not to hear "Because they're stupid, go buy online". I have a feeling they're not all morons, there must be some reason for the large price inflation.

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The same reason Wal-Mart can sell for so much less than a mom and pop store. Leisure Pro etc all sell based on volume with very little overhead. Basically, they ship a lot of product which cover's all their expenses. Most mail order companies don't have mfg warranties on their products because they obtain their equipment through less than honest means.

LDS' sell based on a very small volume. We (I work for a LDS) don't sell enough equipment to discount as much as online retailers. Most dive shops would be willing to work with you on price and throw in incentives to buy from them (free service, air, gear etc.)

The average LDS operates with relatively high overhead and low volume. A 100% markup over the wholesale cost is not uncommon, but it is also not even remotely the same as a 100% profit margin.

Leisure pro works in large volume, often with off shore (non US dealer) suppliers and essentially operates outside traditional dealer agreements. They sell a lot of stuff at a small markup with little overhead and can maintain low prices. They also sell stuff without the factory warranty.

What they cannot offer is face to face interaction, knowledge of local dive sites and conditions, dive training, or the kind of personal service you get at a good local dive shop. Also, it is not always the local dealers who set minimum prices but rather the manufacturer who maintains minimum prices. This is not profit gouging either but rather an attempt to ensure the manfacturer can keep the dealers in business and ensure widespread parts and service support for what they sell.

Yes, there are some shops who abuse things, charge a lot of money and offer little in return, but they go out of business eventually anyway. The sad part is people cite these shops as examples and ignore the quality shops that are out there.

I hear a lot about how the LDS (local dive shop) is the root of all evil and leisure pro and other on-line dealers are the salvation of working class divers etc, etc.

But one thing to consider is that Leisure Pro will NOT be selling you air or nitrox when the local dive shop is forced to close it's doors. All those "savings" on the stuff you got from leisure pro pale in comparison to the cost of maintaining a compressor, let alone buying one. Leisure pro just sells equipment. They do not maintain a local store front, they do not sell air or maintain a compressor, they do not give lessons, book travel, or provide information on local diving sites and conditions. They do not let you try the gear before you buy it, they do not rent you gear until you are sure you like the sport and want to committ to buying your own. That level of service comes at an expense to the LDS owner and he needs to cover the cost through the markup of the gear that is sold.

In my opinion Leisure pro is the dive industry equivalent of Wal-mart. When Walmart comes to town people get lots of stuff at low prices, and everyone is estatic. But then local businesses start going out of business and money that used to be made and spent locally then starts being pumped out of town to outside interests and owners. Wal-mart offers low prices but kills mainstreet businesses, jobs, and the local economy in the process.

Similarly Leisure pro offers low prices, but steals business from the LDS forcing them to work on an even smaller sales volume and making it increasingly difficult for them to sell gear at a more reasonable price.

I never buy anything at Wal-mart if I can buy it at the local hardware store and I don't mind paying a few bucks more for it. It's a small price to pay to support the local economy and the people who live in your community. Similarly, I shop at the local dive shop and do my part to ensure the shop, the compressor and the instructors will continue to be in the area to suppport existing divers and develop new ones. You can't buy any of that from Leisure pro.

DA Aquamaster once bubbled...
They also sell stuff without the factory warranty.

They do not maintain a local store front,

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No they don't, and yes they do

As has been stated, this has been debated a lot. But perhaps I can helpl explain it.
Currently I sale Real Estate, but I have done some retail sales in my day.

Many stores charge 100% mark-up or more (jewelry is usually 300%). When I was pricing merchandise, if it cost us $10.00 we charged $20 or more. Why? Well here are the cost of a store front operation;
1. Rent for enough floor space and Parking Spaces to make an attractive store in a good location where you can browse the isles. (online uses strictly warehouse) and easily park.
2. Utilities like Electricity, to sufficiently light the store to make it attractive and inviting (online can get by with less lighting) and cool it in the summer.Gas to heat the store I winter
3. Furniture, carpet, and store fixtures (online is industrial shelving on concrete flooring)
4. Liability insurance (online does not have customers in store and so have a lower risk and cost).
5. Theft and spoilage - yes, a lot of shoplifting goes on in store front operations. Then there are the losses from little Johnny, who is not properly supervised by mom and dad, tearing open the packages and or breaking the product.
6. Staff - with experience to assist you in your shopping and enough to cover the store hours. Staff cost include: (both LDS and Online will have these, but LDS may have more employees).
a. Wages
b. Workman’s Comp insurance
c. Unemployment Insurance
d. Social Security Tax (7.5% of wages for the employer)
e. Benefits (if any) like vacation, sick leave, medical etc.
7. Purchase of all the stuff you see on display. Many mfg require the stores to make minimum purchases of product to be an authorized dealer.
8. Stock – The store has to have stock on hand. A Online store can have less stock, and even wait to get your order, and then order the product from the MFG once a week. At a store front operation, you expect to walk in, buy it and walk out.
9. Obsolescence - Merchandise that goes out of style or is replaced by something more up-to-date or a technology change. Also the store front and interior fixtures must be updated every 10 years or so to keep them looking fresh and not old-fashioned. (online store can have the paint peeling off the ceiling and you don’t know or care.).
10. Cost of being an Authorized Dealer. Many Online stores are NOT authorized dealers. The products you purchase may come without a manufacturers warranty or directions in your countries language (like English for example).
11. Advertising cost.
12. Janitorial services to clean the store and windows.
13. Administrative staff to handle payroll, and accounting.

There are other cost, but you get the idea. Just because an item is sold for say $10 over the stores cost, does not mean the store has made $10.00 profit. They have to generate enough money over the cost of the product to cover all of the cost of operation and a profit.

jonnythan once bubbled...


No they don't, and yes they do

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Excuse me? Buy a Scubapro reg from Leisure pro and you get a leisure pro warranty not an SP warranty. This pretty much forces you to return it to LP for reasonable service work. LP operates outside of US dealer agreements with many if the products they sell and as such can't offer the factory warranty.

And pardon me, I stand corrected, I should have stated that LP does not maintain store fronts in every city, town and beach with a dive shop.

ZoCrowes255 once bubbled...
..... Most mail order companies don't have mfg warranties on their products because they obtain their equipment through less than honest means.

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I heard/read this statement or something like it several times. What does this mean exactly? It sounds like the big online suppliers are stealing their stock off trucks in the middle of the night or something.

I would LOVE to hear exactly where places like LP get their stock. But I suspect that they go around the "normal" manufactures agreements that tie up most of the LDS, but not "less than honest means".

Don't get me wrong, I love my LDS and buy equipment there as well as online. I just don't like broad brush statements...

Buying stock other than from the manufacturer in this country does not mean it is obtained dishonestly.