Comparison of the buying online vs local LDS argument

[Dogbowl]

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.

I’d buy it from you if I bought stuff from you in the past and had good service, I feel welcome in your shop, I expect to frequent your shop in the future, and you’ll help me with the computer if I ever need help. If you have trips I’d like to go on and social events, even better. There are people who value service.

I keep mentioning this because I value it. The shop I frequent? Yeah, everybody knows me by name. Makes me feel good.

 

[Marie13]

As others have pointed out, you've got DRIS locally so it's not a fair comparison. I bet you don't fully realize what that means. There's only like 4 online stores, maybe 5 that I'd shop at. DRIS is one of those, and happens to be your LDS. I bet the folks who have scuba.com as their LDS don't understand why other people shop online either. I'd shop at dris, scuba, leisurepro, and amazon for dive gear.

For a while, I used to decide local vs online based on price or availability. Remember LDS typically only stock a handful of brands. If you don't have an LDS selling brand X and you want brand X your only option might be online.

For the past couple years I've come to really appreciate all the extra stuff my LDS does for me. It's a small shop run by the owner. I've often deliberately bought stuff from him and paid considerably more than I could have paid online. When I bought my diverite Nomad XT bcd, I paid $150 more than I could have paid online. I think that was the first time I consciously made the decision to support the local shop when it was a bad financial decision.

But it's a shop that I suspect is barely hanging on. I can call him at 2am and he'll drive in to fill my tanks if needed. He will work on any piece of gear, including modifying it as I need. He'll give all kinds of free advice/training that other shops charge for. For example, when I bought my drysuit from the shop, they charged nothing extra for drysuit training. That includes the instructor going out to blue grotto and doing training/practice dives with it. In the case of the drysuit, I paid the same as I saw online for that suit so I don't think he baked training costs into the price. I'm sure he did make a big profit on a $3500 suit though.

When it came time for warranty work, I brought it to the shop. He boxed and shipped it on his dime (and it's surprisingly heavy). Customer service like that is hard to come by.

I am fully aware how spoiled and fortunate I am that DRIS is my LDS. If you guys think the customer service you get for online orders is excellent, the service the locals get, especially the regulars is second to none. There’s a reason they have a very loyal following locally. I know people who drive down from WI, MI, IN, and OH to shop there, aside from the IL folks. There’s a number of people who drive double the distance I do on a semi regular basis.

It’s not just the store itself, the dive boats are great. They just acquired a dive boat in Milwaukee. So I literally don’t need to go elsehwhere for local Great Lakes diving.

 

[doctormike]

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.

Well, if you provide 50 bucks worth of fun, it might be worth it!

OK, that doesn't sound good.

I was referring to local friendly service, last minute gas fills, opportunity to try the product without the hassle and expense of shipping it back, personal honest gear advice, supporting the local dive communities with lectures and other events, etc...

 

[stuartv]

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 think there is a fundamental disconnect here. Let's say that the MAP on the computer is $800, so the shop is selling it for $800. But, some online shop is selling it for $750. In both cases, the seller's cost could be $400.

The disconnect is that you think that the shop can mark it down to $750 to compete with the online shop and still make money. I think the real situation is that many shops are not really making very much money at all, even when they sell at MAP. In this case, it may seem like they would have a profit of $400 when selling an item for $800 that only cost them $400. But, that doesn't account for all the overhead that the brick-and-mortar store has. Insurance is a HUGE cost in the scuba industry. Rent. Staff. Equipment maintenance (e.g. compressors, etc.). I think a shop could easily put themselves out of business by consistently selling below MAP.

That said, one could respond with the thought "they should run their business better. They should be able to sell that item with a 10 - 20% margin and be profitable as a business. If the overhead of other aspects of the business (like fills or training) are resulting in higher overhead, then that extra overhead should be amortized over the business functions that require it, not spread over the ENTIRE business. Selling a dive computer does not require you to have a fill station, so don't build any of the costs associated with owning and running a fill station into the cost of the dive computer."

Unfortunately, I think the whole industry has evolved to a model where that notion is not really feasible. If, as one example, a shop made tank fills its own self-sustaining business-within-a-business, the cost of fills would be too high to sell fills at all, unless they have an effective local monopoly.

The online shop can sell the same item for $750 and make good money because their business model does not include paying for high-dollar retail space, they don't pay for high-dollar scuba liability insurance, and they are not subsidizing other parts of their business.

I think most shops do fills as a loss leader. I suspect many also offer training at somewhat of a loss. They HAVE to make up those losses elsewhere. Either that or price themselves out of the fills and training market. Or go broke.

 

[kelemvor]

I think there is a fundamental disconnect here. Let's say that the MAP on the computer is $800, so the shop is selling it for $800. But, some online shop is selling it for $750. In both cases, the seller's cost could be $400.

The disconnect is that you think that the shop can mark it down to $750 to compete with the online shop and still make money. I think the real situation is that many shops are not really making very much money at all, even when they sell at MAP. In this case, it may seem like they would have a profit of $400 when selling an item for $800 that only cost them $400. But, that doesn't account for all the overhead that the brick-and-mortar store has. Insurance is a HUGE cost in the scuba industry. Rent. Staff. Equipment maintenance (e.g. compressors, etc.). I think a shop could easily put themselves out of business by consistently selling below MAP.

That said, one could respond with the thought "they should run their business better. They should be able to sell that item with a 10 - 20% margin and be profitable as a business. If the overhead of other aspects of the business (like fills or training) are resulting in higher overhead, then that extra overhead should be amortized over the business functions that require it, not spread over the ENTIRE business. Selling a dive computer does not require you to have a fill station, so don't build any of the costs associated with owning and running a fill station into the cost of the dive computer."

Unfortunately, I think the whole industry has evolved to a model where that notion is not really feasible. If, as one example, a shop made tank fills its own self-sustaining business-within-a-business, the cost of fills would be too high to sell fills at all, unless they have an effective local monopoly.

The online shop can sell the same item for $750 and make good money because their business model does not include paying for high-dollar retail space, they don't pay for high-dollar scuba liability insurance, and they are not subsidizing other parts of their business.

I think most shops do fills as a loss leader. I suspect many also offer training at somewhat of a loss. They HAVE to make up those losses elsewhere. Either that or price themselves out of the fills and training market. Or go broke.

Almost every online scuba store also is a brick and mortar shop somewhere with loss leaders like fill stations. The only exception I can think of is Amazon. The only difference as I see it is that some shops choose to limit themselves only to customers in close physical proximity (those without online stores). Meanwhile, other shops don't limit themselves in the same way (those with online stores). The former is a bad business decision for any kind of retail store, not just scuba.

 

[stuartv]

I think there's another aspect of modern life in play here.

The prevalence of near-instant gratification that comes from free or nearly-free next day and 2nd day shipping. Amazon Prime. Dive Gear Express free shipping (on orders over $50) almost always gets to me in 2 days.

This is not just a part of scuba life. I think the ubiquity of instant gratification has influenced modern society to be ever more lazy and prone to procrastination. The result is that people put off planning and preparing like they used to HAVE to.

Years ago, if you were going to Cozumel for a dive trip, you HAD to plan well in advance. You HAD to make decisions on new gear and get it ordered well in advance. Now, you can pretty much wait until 3 days before your flight, go online and click a few links and have any gear you need just in time.

And THAT means that people now are much more likely to wait until the weekend before to "get their gear together" and also to even realize they need a new scubawidget. When they do realize, they may go to their LDS to try and get it. But, it is quite normal at most shops to be told "we don't have that in stock, but we can order it for you."

Okay, so you can order it for me. And that means, compared to just ordering it myself, I'm probably going to pay more. I'm going to have to make a second trip to the LDS, the day before my trip when I have a lot of other stuff to do. And I'm going to run the risk that you have an issue and my scubawidget doesn't actually arrive in time for my trip. Many local shops have a well-deserved reputation for being terrible to try and order anything from. They take forever to order it. They take forever to get it. They forget to order it. Etc. So, deserved or not, most people will perceive a much lower risk of blowing a deadline by ordering something online themselves versus having their LDS order it for them.

The net result is that there is more pressure than ever for shops to actually have more stuff in on-premise inventory - just when it's harder than ever, financially, to actually do that.

To me, one of the biggest value-adds an LDS can offer is convenience. Specifically, the convenience of having what I want, WHEN I want it. Most shops just don't. It's too expensive for them. They can't afford the square footage required to store all the stuff that mostly doesn't move. And they can't afford to have the cash tied up in huge quantities of inventory that would be required.

 

[Dogbowl]

Almost every online scuba store also is a brick and mortar shop somewhere with loss leaders like fill stations. The only exception I can think of is Amazon. The only difference as I see it is that some shops choose to limit themselves only to customers in close physical proximity (those without online stores). Meanwhile, other shops don't limit themselves in the same way (those with online stores). The former is a bad business decision for any kind of retail store, not just scuba.

I think another might be LeisurePro but I agree, there are few shops (that I can think of) without an actual brick and mortar full service shop.

 

[rhwestfall]

I know I'm fun to be around but 50 bucks is 50 bucks.

LOL, I might pay more to not have to deal with you.

(I'm kidding - for the record, I know this guy, and appreciate his company).....

Yeah, I get it - The killer is that a small low volume place cannot compete with a high volume entity. At the end of the day, rent/mortgage, insurance, licenses, interest carrying inventory, logistics, food on the table, etc. just kill survival potential.... There is no way to overcome that....

 

[doctormike]

The disconnect is that you think that the shop can mark it down to $750 to compete with the online shop and still make money. .

All I was saying was that any business should buy stock at the lowest possible price to maximize their profits, no matter what percentage markup they decide that the market will bear. So it didn't make sense to me to say that the cost of item X to the LDS was greater than the cost of the same item to a random customer buying online. And if it was, then the LDS should buy it online as well, since that would be the lowest cost for the item.

But perhaps there are externalities that I don't understand. I don't know much about retail.

 

[Marie13]

One of the prime reasons I have ordered online in the past is size availability at the shop. I take a small in wet gloves and neoprene booties. I’ve had stuff bite the dust and need replacing for the weekend’s diving. I just go into the shop and tell them to just bring down the bin of size small gloves and try whatever they have in my size. Sometimes they didn’t have anything that fit and I’ve gotten it on Amazon.