Comparison of the buying online vs local LDS argument

[2airishuman]

I think you're way to fixated on price. You're concerned that you can't compete on price. So compete on other factors.

It is important to realize that this is the tail end of a shift in retailing practices that has been ongoing but that really took hold in the 1970s, that first led to the disappearance of small-town clothing retailers, TV and electronics stores, hardware stores, office supply stores, and toy stores. These were undercut first by discount stores, and then by category killers, and now by online storefronts.

Highly specialized retail came next. Music stores, camera shops, bookstores, backpacking places. The low end went to the discount stores, the high end went on line. All that's left are shops that have a large service component (soft water, tires, auto glass, welding supplies, fish and pets) , and shops that are highly regulated (liquor, guns).

So it's possible to consider the lessons that retailers have learned in these other markets.

1. You, the local retailer, will lose a customer if the customer feels cheated. If your prices are substantially higher than prices for identical merchandise elsewhere, the customer will feel cheated and will not come back. (What constitutes "substantially higher" is debatable but you sure can't sell something for $189 that is available for $149 elsewhere without ticking people off)
   
2. The retail side will no longer make money by itself and historical markups of 100% or so are no longer sustainable.
   
3. The industry is shrinking and weak retailers will go out of business no matter what they do.
   
4. Local retailers cannot survive without turning up the pressure on their supply chain to get better dealer prices.
5. House brands and prestige brands (where online sales and discount retailing are better controlled) are critical to making a buck or two.

Online is the way most people shop (nothing scuba specific in that). Online shopping has been around for what.. 20 years.. maybe 30? Get on the bandwagon or get run over by it.

Most of the dollar volume in retail is still in-person shipping spread across several major concepts:

1. Grocery (Cub, Winn-dixie, Kroger, etc)
2. Discount department stores (Walmart, Target)
3. Home centers (Lowe's, Home Depot, Menards)

There's overlap as each of these tries to pick off each other's most profitable products.

Online shopping is really just another form of the nationwide specialty retailing that's been going on for years, it just reduces some of the costs and improves the shopping experience over catalog sales via mail order or phone. The volume is picking up but is not as high is is widely believed.

 

[fullytek]

@Dogbowl
There is no shortage of dive shop owners who fail to recognize what the market actually wants .

I now order most of our mechanical parts through an online service simply because I dont need a lecture on how to do my job
I've done the research and diagnostics I dont have time to try to convince a local parts guy that I actually need somthing.

Much the same can be said about dive shops and I think this is why a lot of folks gravitate towards an online shop.

 

[2airishuman]

But to answer your question directly, if I felt I received good enough information from the online shop, why would I need to go to the LDS shop? If I felt that I needed to see it in person to trust I can buy, why would I do that, then turn around go home and buy online to save a few bucks? Ultimately, I buy from the person that convinced me to buy.

Well, maybe you looked at something while you were at the LDS but the product was shelfworn and overpriced, and you didn't need it right away. Or maybe you tried some boots or a wetsuit on at the LDS and decided you really wanted 5mm and all they had were 3mm.

 

[doctormike]

First of all, that isn't how it works. Luxfer won't sell cylinders to an LDS. They sell cylinders to people who are prepared to deal in much larger volumes. I don't know the rules at Luxfer in particular but typically to get a direct account with an actual manufacturer, a dealer has to maintain annual volumes of at least $25,000 or so.

The LDS is going to buy its cylinders from a distributor who also distributes other stuff. To maintain their relationship with the distributor, they again must maintain a certain annual volume. The higher the volume, the more of a discount the LDS gets. As a typical example, an LDS running $10,000 annual volume might get at 50% discount off MSRP, and an LDS running $25,000 volume might get a 60% discount off MSRP (I'm simplifying; it varies depending on whether it's a stocking order or a fill-in order or a special order and myriad other details). If the LDS drives cylinder purchases to a retailer like DGX, then they run the risk of missing a volume target.

The waters are muddied further by exclusivity requirements (e.g. an LDS cannot qualify for a certain discount level without promising not to obtain certain products from other sources) and by line-specific volume requirements (e.g. an LDS cannot qualify for a certain discount level unless they maintain annual volume of $5000 in wetsuits and rubber goods, $10000 in regulators and BCs, and $5000 in tanks, hardware, and accessories).

It's not just badly run LDSs that are the problem. The whole distribution system contributes to it.

Right, I was just using Luxfer as a placeholder to simplify. My point was that it doesn't make sense to say that an LDS is paying more for an item than a customer would pay at an online store, because if that was the case then the LDS would just buy at the online store too. They would then mark up the product to make a profit, and justify that markup by their particular value adds that make people want to shop local.

 

[Dogbowl]

@Dogbowl
There is no shortage of dive shop owners who fail to recognize what the market actually wants .

I now order most of our mechanical parts through an online service simply because I dont need a lecture on how to do my job
I've done the research and diagnostics I dont have time to try to convince a local parts guy that I actually need somthing.

Much the same can be said about dive shops and I think this is why a lot of folks gravitate towards an online shop.

Please don’t get the wrong impression that I’m trying to teach you how to run your shop because I’m not. I am, however, an observant customer who notices what a thriving shop does vs what a non-thriving shop does. I discuss this with my husband quite a bit because I don’t understand why everyone is not doing what the thriving shop does.

Have you ever seen a lineup at a cash register of an LDS? I have and it boggles my mind.

And as I mentioned before, I bought almost all my gear at an LDS, not online. There still are local shoppers, especially in Canada where the landed cost does not incentivize us to shop online from across the border.

 

[fullytek]

Right, I was just using Luxfer as a placeholder to simplify. My point was that it doesn't make sense to say that an LDS is paying more for an item than a customer would pay at an online store, because if that was the case then the LDS would just buy at the online store too. They would then mark up the product to make a profit, and justify that markup by their particular value adds that make people want to shop local.

Again your wrong no many cases the online price is inline with lds cost. A dive shop wont order the product at all and simply gos out of business.

Online price dictates actual retail price.
If I sold you a computer today for $1000 and you went home and found it on Amazon for 749 free ship guess what? you will think I ripped you off.
Now what if i paid 849 for that computer should i sell it at a loss . Why should i reorder from that vendor.
Just cus a shop is willing to over pay donst mean the coustomer is.

 

[2airishuman]

@Dogbowl
There is no shortage of dive shop owners who fail to recognize what the market actually wants .

I now order most of our mechanical parts through an online service simply because I dont need a lecture on how to do my job
I've done the research and diagnostics I dont have time to try to convince a local parts guy that I actually need somthing.

Much the same can be said about dive shops and I think this is why a lot of folks gravitate towards an online shop.

I would like to observe that several of my LDSs were dismissive of my questions when I was starting out (before I was certified). I was trying to understand the overall costs of the activity and asking about gas fills, equipment purchases and rentals, etc. I also asked about BP/W configurations having read about them here, and solo diving.

The responses shaped my purchasing decisions to a considerable degree.

In retrospect, the two shops that were worst about this were (in one case) owned by people with a military background, and (in the other) had deep ties to local public safety groups. Some of the attitudes, that knowledge is only dispensed to people who are ready for it, may be explained by that. Doesn't make it OK.

 

[doctormike]

Again your wrong no many cases the online price is inline with lds cost. A dive shop wont order the product at all and simply gos out of business.

Online price dictates actual retail price.
If I sold you a computer today for $1000 and you went home and found it on Amazon for 749 free ship guess what? you will think I ripped you off.
Now what if i paid 849 for that computer should i sell it at a loss . Why should i reorder from that vendor.
Just cus a shop is willing to over pay donst mean the coustomer is.

I still don't get it.

You have a shop. Amazon is selling a computer for $749 with free shipping.

You buy one for $749 and sell it to me for $800. If you provide some sort of value-add to make the extra $51 worth it to me, I'll buy it from you and recognize that you are not ripping me off, despite charging more than Amazon. You make $51 in profit, which you use to run your store.

If you sell the same computer for $1000, then I will think that you ARE ripping me off, because your value add isn't worth $251, and I won't buy it from you and you will make no profit.

If your response to the second scenario is that your cost for the computer is $950 and that Amazon is selling below your cost, then I would tell you to buy your stock from Amazon and not whatever middle man is ripping you and your store off.

 

[Dogbowl]

I still don't get it.

You have a shop. Amazon is selling a computer for $749 with free shipping.

You buy one for $749 and sell it to me for $800. If you provide some sort of value-add to make the extra $51 worth it to me, I'll buy it from you and recognize that you are not ripping me off, despite charging more than Amazon. You make $51 in profit, which you use to run your store.

If you sell the same computer for $1000, then I will think that you ARE ripping me off, because your value add isn't worth $251, and I won't buy it from you and you will make no profit.

If your response to the second scenario is that your cost for the computer is $950 and that Amazon is selling below your cost, then I would tell you to buy your stock from Amazon and not whatever middle man is ripping you and your store off.

I suspect doing that might get him blacklisted in respect of that brand?

 

[fullytek]

Why would you buy it from me for 800 when you can buy it online for 750?
I know I'm fun to be around but 50 bucks is 50 bucks.