Handling LDS fee?

[Jim Lapenta]

The reality is the shops will buy something at cost and then double that to get their selling price. In at $100 out at $200. That's how the shop I worked at did it and from what I understand still does.

The thing was, any employee was authorised to give up to a 10% discount but encouraged to only do that of the customer was getting ready to walk out the door. I didn't like the pricing but I know big ticket items don't necessarily move so you need as much profit as you can make off of each one. Still seemed high though.

One other thing that affected price, or so I was told, was the marketing (?) Requirements of the manufacturers. ScubaPro was supposedly notorious for this. The owner told me that if they sold SP great for less than a certain price they could lose their distributorship. I don't know how true that was but that's what I was told.

I understand that a local shop might only sell one BC or regulator every couple days or a week so they need to make as much profit as they can. That makes it hard for a local shop to compete with an internet seller who has less overhead and may sell a hundred BC's a week. They can afford lower margins and the volume they purchase from the manufacturer gets them a better cost price too.

Still, some local shops really price higher than is palatable to me. Well, before I started shopping Craigslist and ebay anyway.

This is true. SP has an MSP (minimum selling price). Different than MAP (minimum advertised price), where a dealer can't advertise a price lower than a competitor, but if you walk in or make a private deal over the phone, the mfg has no say over that. Sell something with an MSP for less than that, and the customer goes to another dealer and says I got it for less than that, and here's the receipt, they can and often do complain to corporate and the dealer can lose his dealership. Same with service kits. Sell an SP service kit to a diver and they find out, they can yank the dealership. Illegal in the EU but in the US, they get away with it.

There is also the deal that if it says "SCUBA" or for diving, an item is going to be marked up 50-200% or more. Especially those little things that they try to add on. Mouthpieces for example, unless it's a moldable one or such, cost the dealer around 2 bucks for a standard one. I've seen them sold for up to $12. Bolt snaps that are sold in Tractor Supply with the good stainless springs and body for 7 bucks are sold at some shops for up to $20 each.

When I was working with the original shop I got certed through, we got a deal in from the mfg for a reg. Cost was 120 bucks for 1st stage and 2nd stage. DEMA special or something along those lines. I asked the owner to get me one. This is after spending a week after my real job, setting up the store in a new location. I expected to pay more than that. When it came in, he charged me the MAP price of 275 bucks. That was the last item I ever got from him. After that, SCUBATOYS, Tech Diving Limited, and Leisure Pro became my LDS even while I was still DMing for him.

He'd also refuse to order things I wanted that he could get because he didn't dive the way I was going. Would not get me a 7ft hose because "you don't need that." Other things like that. I tried to get him set up to carry Deep Sea Supply BPW's and wings. I even ordered two of them direct from Tobin and paid for them myself. He let me use them but never followed through. After enough of that, his attitude and way of doing business cost him somewhere in the neighborhood of $10,000 of lost gear sales just from me. Not to mention the classes and trips I might have done.

 

[Eric Sedletzky]

I don’t so much blame dive shops for marking stuff up, I more blame the manufacturers for tiered pricing and bulk deals.
The LDS is bound to MSRP minus 10% max discount otherwise they lose their dealership rights.
Online sellers (used to at least) buy grey market goods from EU and drastically discount prices on the internet, then give their own warranty on the product.
I’m not really sure how it works now, but in the past, especially during the recession I suspect there was some really sleazy stuff going on with companies dumping a lot of gear out the back door to internet sellers and still holding LDS’s to the full retail mandate.
If the companies wanted to be fair what they would do is hold everyone to the same pricing schedule with no allowable discounts, or if they allow unlimited discounts then everybody is allowed to discount.
When I was an Oxycheq dealer, I asked about what pricing schedule they enforce and they said there was none, but please don’t get into a price battle with someone.
I think it’s heavy handed and a little draconian for manufacturers to be able to mandate sales prices on products that they technically don’t own anymore. LDS’s have to buy the stuff and it’s theirs, they should be able to sell it for whatever they want if they wish to stay competitive.
But since most of them do strictly hold MSRP over dealers, then do it to all dealers!

 

[formernuke]

Don't forget local stores can do other stuff examples I've seen.

Free first service including labor.

Free air fill cards

Free drysuit class with drysuit purchase.

Etc

 

[BoundForElsewhere]

Anything like a drysuit, BCD, or fins I would def get at the LDS. Even a reg if I ever bought new regs.

 

[shurite7]

The is odd to read about a shop/operator/LDS that sells gear for extremely high prices compared to others. In most cases the manufacturers, especially the mainstream ones, set the prices meaning item X is the same price where ever one buys it, at least in the US. With that being stated, I am aware of some places sell items for less than the manufacture sets it at (they make their profit from quantity rather than by margin). I am also aware of some places, not many, jack the prices way up because their customers to pay it. All of the mainstream manufacturers have no issue with the 10% discount being offered.

When I ran a shop I didn’t have major issues competing against online companies with the exception of scuba tanks. If a customer came in and stated a BCD was cheaper online I looked it up. If it was the exact same item and sold with an online scuba store (eBay, Amazon, etc. didn’t count) I would price match so long as I didn’t loose money. When I didn’t price match. quite often the customer come back to buy it because the item was out of stock, not available, or simply not what they expected. It is important the LDS people to know their products.

I operated under the principle of value. For example, if one bought a reg from me, I would set it up, tune it, go through it with the customer beside to me and teach them the things they needed to know about it at no charge. If they brought in a reg they bought from someone else and wanted it set up. I did so for a fee with no valued information.

Scuba tanks are a good example. I couldn’t compete with online stores. They could sell tanks for less than what I could buy them for. I kept a couple of tanks in stock and offered anyone who bought a new tank from me the following: VIP dated at the day of purchase, fill, and a card for 10 additional fills for free. By doing that, the cost of buying directly through me was a bit cheaper than buying online.

As for mark up margins, an item that is sold for twice what was paid for is referred to as keystone pricing in the scuba industry. In the clothing industry (a friend of mine who sold clothing showed me the numbers) the items are marked up somewhere between 3 to 6 times as much. In the boat business the parts guys told me some of their items were marked up only 10%, while others were higher. The bottom line is, all places have to make a profit, otherwise they will go out of business. Although online stores are supposed to sell the gear for the what the manufacture sets the prices at, some don’t by getting around it via loop holes. This is what makes competing against them difficult or even impossible.

Build a relationship (not a rapport) with an LDS if you can. The LDS should build the relationship with you as well. If that isn’t happening then the difference in prices is irrelevant.

 

[hedonist222]

I understand that LDS have costs that online retailers dont and therefore need the premium.

Most places I purchase anything from, I tell them I'm willing to pay 10 to 15% over my online cost ONLY because I prefer to support local businesses.
But if their business model cannot offer me that, then I'll get it online.

In the long run, if they can't compete with online prices, for their sustainability, they're better off dropping merchandise.

People are increasingly becoming more tech-savvy and will compare local prices to online prices.

At the end of the day, their prices are high because of rent, salaries, and other governmental/regulatory reasons.
Not something I caused and not responsible for. Either they take it up with the regulatory bodies or adapt to online.

Adapt how?
Partner with an online retailer, I'll get the item from the LDS at online + 5% for example and its a win-win for both of us.

Another way I supported my local LDS recently was by taking a PADI course with them directly as opposed to one of the many freelancers.
I got some unhappy looks from the freelancers that week but they can go f(*& themselves lol
I explained to them that I opted to take the course (self reliant) from the dive center directly because I wanted to give the dive center my business.
I've been diving with them for the last two years and they've gone out of their way to discount my diving. Like they won't charge me for weights or tanks. They'll bill me as a re-fill on my own tank when I actually used theirs.
Least I could I go was give them my business for the PADI course.

One of the freelancers understood and was ok.
The other kept being a little bitch.
Which is fine - little bitch probably won't ever get my potential business.

 

[kelemvor]

As a customer, I've found my opinion on both sides of this. When I first started diving, I expected to pay the "going price" for whatever it was. Later, I came to value the services my local store provides such that I'll pay more to shop there.

You almost always pay more for shopping at an LDS. You've got to decide if the LDS provides any value in addition to the cost of the item and sort of factor that into your decision.

Your LDS is a bit short sighted. Possibly they're on the verge of bankruptcy so that's all they can do. If not, then they are fools. My LDS earned my business by providing great service - even on things I bought online (and told him that I'd done so). Over the years I've become a very loyal customer even to the point I'll willingly pay considerably more than the street price on some items. That level of customer loyalty has to be earned. Only a foolish businessman would demand it up front.

Unfortunately, a lot of folks who run dive shops aren't any good at business. They're just divers who wanted to work in the industry they love. So you end up with stuff like you've experienced.

Hopefully you live in an area where you can choose to shop at a different dive store. I'm lucky enough to have 4 dive shops within 10 miles of my house, and probably 10 shops within 20 miles. It's pretty crazy when you think about it because the local diving here really isn't that great. I've got to drive at least 2 hours for any decent diving.

 

[runsongas]

@Eric Sedletzky unlimited discounting will just consolidate to a handful of large internet retailers where small shops are going to be unable to compete at all in price (due to higher costs), MAP is supposed to at least give smaller shops a chance to price match larger ones with a bigger internet presence or internet only outfits. the view i''ve been told is smaller shops support the MAP policies of the legacy brands because they don't want to get into a price war with Leisurepro as that means a lot of them will be unable to keep the lights on.

 

[oly5050user]

The reality is the shops will buy something at cost and then double that to get their selling price. In at $100 out at $200. That's how the shop I worked at did it and from what I understand still does.

The thing was, any employee was authorised to give up to a 10% discount but encouraged to only do that if the customer was getting ready to walk out the door. I didn't like the pricing but I know big ticket items don't necessarily move so you need as much profit as you can make off of each one. Still seemed high though.

One other thing that affected price, or so I was told, was the marketing (?) Requirements of the manufacturers. ScubaPro was supposedly notorious for this. The owner told me that if they sold SP gear for less than a certain price they could lose their distributorship. I don't know how true that was but that's what I was told.

I understand that a local shop might only sell one BC or regulator every couple days or a week so they need to make as much profit as they can. That makes it hard for a local shop to compete with an internet seller who has less overhead and may sell a hundred BC's a week. They can afford lower margins and the volume they purchase from the manufacturer gets them a better cost price too.

Still, some local shops really price higher than is palatable to me. Well, before I started shopping Craigslist and ebay anyway.

What you describe “in at $100-out for $200 “is called keystone pricing. Common in retail and is how facility can keep lights on and pay employees. As to scuba pro MSRP policy, that is true, dealer can loose the ability to sell their product if they sell below a certain amount. It is written into dealer agreement contract.

 

[Eric Sedletzky]

@Eric Sedletzky unlimited discounting will just consolidate to a handful of large internet retailers where small shops are going to be unable to compete at all in price (due to higher costs), MAP is supposed to at least give smaller shops a chance to price match larger ones with a bigger internet presence or internet only outfits. the view i''ve been told is smaller shops support the MAP policies of the legacy brands because they don't want to get into a price war with Leisurepro as that means a lot of them will be unable to keep the lights on.

Well then make it MAP for everyone not just LDS’s.
Leisure pro BTW became a SP dealer and had to abide by MAP pricing. Prior to that they were buying grey market from EU and slaughtering LDS’s on price. Actually, LP is an LDS but always had catalog sales even before the internet. The only reason I bought my original BP/W from LP was because they were one of the only ones who carried the stuff when my LDS refused.
My whole argument is to level the playing field whether it’s MAP or a FFA (free for all).

BTW, diving is one of the very last retail industries that still enjoys a 100% or bigger markup on goods. This is a very shaky business model in this day and age and sets them up to be a sitting duck. If retail wants to compete in this day and age then they need to find exclusive products that can’t be supplied in large numbers to discounters. High end home decor and some local artisan Gucci products fall into this category.
Normal retail businesses have about a 10% - 40%
markup on goods. Big box and Amazon pretty much ended the gravy train for most retail.
LDS’s are kind of screwed because diving is such a micro sport. However, many have gotten into other water sports too to supplement diving equipment sales.
Also if you notice, there is a glut of retail scuba discounters now and I’ve seen how some of them have waned in popularity. They are all trying to fight for a ever thinning piece of the pie.