Biggest thing killing dive shops?

[Umuntu]

Actually, folks should be damn glad there are a bunch of vacation divers out there. I suspect that's what keeps the equipment manufacturers in business. If the industry depended on just the "John Wayne Divers", they would soon be out of business.

For some diving companies it's the military and commercial diving which really pays the bills.

The same (or slightly modified) equipment is sold at a premium with long term service kits and spare parts supply contracts, which are valuable in themselves.

Recreational divers have little exposure to that part of the diving paradigm.

 

[dmaziuk]

Account Suspended

 

[gcarter]

An article I read in Forbes about E-Commerce vs. brick & mortar stores claims that studies of E-commerce's impact on brick & mortar point to a declining middle class as being the biggest threat to loss. Only the top 20% of the population have seen their income grow in the USA according to the Census Bureau. The remaining 80% of workers have seen their incomes lag or just keep pace with inflation. The top earners tend to spend less on retail or consumer packaged goods in general. The CPG industry figured that the national median household earns $55,000 annually and spends 8 cents of every dollar on consumer goods. Whereas, a household earning $180,000 will spend only 5 cents of every dollar on consumer goods - a 38% decrease. Following this is a structural shift away from apparel and consumer staples toward electronics and durables. Tech products and cars are seeing the lion's share of purchasing power. The "lost" brick-and-mortar sales that some feel are shifting to online sales are actually going away or shifting to other sectors.

If the above is true, I would assume the top 20% of earners interested in diving might be more inclined to travel to warm water destinations for entry level training and would make their initial purchases in resort areas. Local diving might be less appealing. The dive industry itself promotes dive travel over local diving. Resorts are almost exclusively PADI. DEMA and other entities that say they are trying to increase awareness of the sport with consumers seem to only promote beautiful reefs as an allure. I'm sure such marketing is intentional. The last time we had a true diving hero nearly everyone wanted to be was Lloyd Bridges in Sea Hunt nearly 60 years ago! A declining customer base for brick & mortar stores means that dive shop owners are fighting over every dollar like a pack of wolves. This creates an unpleasant shopping and service atmosphere for customers. I don't enjoy visiting most dive centers as a customer.

I have never owned a shop. As an instructor I used to do quite well in my niche market of freediving and tech/cave diving. Now, I'm on the verge of quitting due to a decline of income. My biggest problem is that the fewer divers who become tech students are opting for sidemount and rebreather training over backmount doubles. If I was a GUE instructor, it would be easier for me to get like-minded students, but then I'd have to give up my solo diving practices. But, I think GUE and UTD may be losing their appeal. What I'm noticing is that beyond entry-level, divers seem to choose a niche path due to agency, equipment, and activity choices. It's more complicated and costly for shop owners to cater to a variety of niche divers compared to the generalist practitioners of the past. Dive shop owners in places such as cave country in northern Florida enjoy an endless stream of niche practitioners and it is easier to meet their needs. It's also far more difficult for me to affiliate with shops and offer niche classes since every Tom, Dick & Sheryl is now a tech or freediving instructor.

Back in June of 1959, skin diver Robert Pamperin was killed by a probable great white shark off La Jolla in San Diego just when The Dive Locker opened with $5,000 seed money. No one went diving that summer. But, the shop survived its lackluster grand opening and many legends worked there and passed through its doors over the years. Today, it isn't the fear of sharks scaring away customers in California. The type of person that took up diving in the early days wouldn't be afraid of the shop owners, their own spouses, or life off the couch.

Looking at it another way"

"The CPG industry figured that the national median household earns $55,000 annually and spends 8 cents of every dollar on consumer goods for a total of $4,400. Whereas, a household earning $180,000 will spend only 5 cents of every dollar on consumer goods for a total of $9,000 - a 38% decrease a 104.5% increase.

 

[drrich2]

That national median would be that point where 50% of the households earn less, and 50% earn more. There are many people in poverty and not the demographic buying scuba equipment and dive tourist trips.

The question is, what is the median income in the demographic you sell to, or wish to sell to? That may vary regionally. In southwestern KY, if I want to dive in the ocean, I need plane tickets, a hotel, likely a rental vehicle...but a young guy right out of high school in Fort Lauderdale, FL, or parts of coastal California, willing to shore dive wouldn't need any of that.

I get that the national median income is a useful metric for getting a rough sense of the buying power of the populace relative to different points over time. I'm just saying specific amounts from it probably aren't all that accurate.

Here's an idea for a poll that would be interesting. I'm not doing it. If someone does, I think it should be just a poll, strictly anonymous, because it's a touchy substance, and even then I don't know how off-putting it'd be to forum members. Imagine a Scuba Board poll asking people to rate their annual gross household income according to a list of ranges:

1.) < 50,000.
2.) 51-75,000.
3.) 76-100,000.
4.) 101-125,000.
5.) 126-175,000.
6.) 176-250,000.
7.) > 250,000.

I wonder where the %'s would fall? Even then, it'd vary by region. You can be an ocean diver cheaper in some coastal areas.

Richard.

 

[MaxBottomtime]

I'd barely make your list, but I bought all my gear, boat and fill cards a long time ago so my diving expenses are not as bad as some.

 

[gcarter]

Dan Humble of Dive Tech in Mallorytown, Ontario should run classes for owners on how to do business. Only Dive Tech, Abucs Scuba in Brockville, ON; Cave Country Dive Shop in High Springs, FL; Amigos Dive Center in Ft. White, FL and Cave Adventurers in Marianna, FL have been 100% feel good experiences. Your mileage may vary.

Dan @ DiveTech knows how to sell. My first time in there, I had been noodling on a Petrel 2 for about 6 months. He made offers we could not refuse, and my son and I each walked out with one. I am afraid every time I walk into his shop

 

[JamesBon92007]

That national median would be that point where 50% of the households earn less, and 50% earn more. There are many people in poverty and not the demographic buying scuba equipment and dive tourist trips.

The question is, what is the median income in the demographic you sell to, or wish to sell to? That may vary regionally. In southwestern KY, if I want to dive in the ocean, I need plane tickets, a hotel, likely a rental vehicle...but a young guy right out of high school in Fort Lauderdale, FL, or parts of coastal California, willing to shore dive wouldn't need any of that.

I get that the national median income is a useful metric for getting a rough sense of the buying power of the populace relative to different points over time. I'm just saying specific amounts from it probably aren't all that accurate.

Here's an idea for a poll that would be interesting. I'm not doing it. If someone does, I think it should be just a poll, strictly anonymous, because it's a touchy substance, and even then I don't know how off-putting it'd be to forum members. Imagine a Scuba Board poll asking people to rate their annual gross household income according to a list of ranges:

1.) < 50,000.
2.) 51-75,000.
3.) 76-100,000.
4.) 101-125,000.
5.) 126-175,000.
6.) 176-250,000.
7.) > 250,000.

I wonder where the %'s would fall? Even then, it'd vary by region. You can be an ocean diver cheaper in some coastal areas.

Richard.

I'm afraid that the medium income doesn't really work, at least not in my case. I'm way below the poverty level and within the last year I went to Cozumel, Isla Mujeres, Catalina Island, and twice to Puerto Vallarta. A lot of it is because my girlfriend had about a half a million air miles and part of it is priorities. It takes me 3 months to save up enough for a 10-day trip. I stay in a cheap place, take the bus from Cancun, and get the package deal on dives. I love to dive so I just don't waste my money on other stuff. I do not skimp on the restaurants in San Miguel--that's a big part of the attraction of Cozumel

You might want to add a couple more categories below $50K

 

[gcarter]

The SCUBA industry in the USA? On the decline. There will be fewer shops, fewer manufacturers, lower employment, and greater consolidation.

Too many shops, too many manufacturers, too many boats, and not enough consumer spending.

And just like department stores, hardware stores, and grocery stores - dive shops are being rolled up and closed up. Just like your local shopping mall and main street.

The bigger issue is the size of the US dive market - smaller than Europe. The action is in Asia, perhaps the only growth market for the industry. I suspect that is where the marketing dollars are flowing.

Lots of thoughts and opinions above, but a shortage of facts. And industry numbers are hard to come by.

Scubapro as a proxy for the industry? The diving segment results for the past 4 years. It would be interesting to see SP's breakout by country/region.

SP Sales (m)

2017, 77
2016, 69
2015, 72
2014, 80​

SP Profits (m)

2017, 1.8
2016, <9.4>
2015, 0.9
2014, 3.6​

SP lost about 3m on sales of almost 300m in the past 4 years. Over 6m in the last three years. Down deep you want the best?

Perhaps JOUT is shopping SP? Would SP insiders be interested in a private buyout?

Worse, SP wrote off the majority of their Seabear acquisition. Innovations in the indsutry? Here's one that went south. There must be an interesting story behind this - major industry player, unable to innovate in-house, gets taken by a small startup?

Excerpts from JOUT 10-k reports.

• During the year ended September 30, 2016, the Company acquired the outstanding common stock of SeaBear GmbH (2016,10-k)
• Operating expenses for the Diving business increased by $8,916 year over year due primarily to a goodwill impairment charge of $6,197 recognized in the current year. Additionally, the acquisition of Seabear contributed approximately $1,200 of incremental expense in the current year. (2016,10-k)
• Operating profit for the Diving business declined $10,318 from fiscal 2015 due to the goodwill impairment charge, sales declines and incremental R&D costs from the Seabear acquisition. (2017-10-k)
  
• The purchase of short-term investments in 2017 used cash of $46,607 while the purchases of the Seabear and Northport businesses in fiscal 2016 used cash of $9,152. Additionally, the acquisition of Seabear contributed approximately $1,200 of incremental expense in 2016. Goodwill, of $2,219, which represents the excess of the purchase price over the net tangible and intangible assets acquired, is not deductible for tax purposes. (2017-10-k)
  
• During the quarter ended July 1, 2016, the Company re-evaluated its projections for its Diving reporting unit as a result of deteriorating business conditions. As a result, the Company performed an impairment test on the goodwill of the Diving reporting unit, including the goodwill acquired in the SeaBear acquisition, and determined an impairment charge was required. (2017-10-k)

If SP is a valid industry proxy, would you make an investment in a retail dive shop?

And an example of a dive shop for sale. Asking $150k for a biz with sales of $250K. The owner is ~70 and wants to sell - no kidding. Brutal - more likely a candidate for liquidation than a sale. It is hard to imagine a situation where this business has any market value.

Dive Center for Sale - Dive Center in Central Virginia for Sale
Dive Connections/Scuba Diving/Charlottesville, Virginia/PADI Dive Shop​

The numbers above are distorted by a failed bit of M&A activity. Based on this bit of data and stripping out SeaBear, it does not look like there is necessarily an issue with their business.

 

[drrich2]

I'd barely make your list, but I bought all my gear, boat and fill cards a long time ago so my diving expenses are not as bad as some.

That's a good point. Once an avid diver has his main gear set, just what is he 'good for' to the LDS? If he dives locally (or fills tanks before a long drive), what are his ongoing expenses?

1.) Air fills - not a big money maker.
2.) Tank viz. & hydro. - I doubt a big money maker. Some.
3.) Reg. servicing - how often do most of you get your reg.s serviced? Some money.
4.) Dive trips - but after your 1st 3 or 4, how many of you travel with a LDS shop group?
5.) I don't think defog & other minor attempts are a big money maker.
6.) Maybe a new dive computer every several years. How many buy at LDS vs. online?
7.) Courses, which some shops encourage strongly. But after AOW & Nitrox, maybe Rescue...what other courses do most rec. divers need?

If the scuba industry makes the large majority of its money on new divers, and much less on seasoned divers, how sustainable is that? And can it be changed?

Richard.

 

[drrich2]

You might want to add a couple more categories below $50K

True, but income is such a sensitive issue with some folks, even in an anonymous poll I wanted to be tactful. You're right, there are people who make a lot less. Probably some high school students or college folks supported by parents, or maybe a relative or friend pays their way sometimes. Or, as you say, they make it a priority.

Richard.