Let's see what the FTC has to say about vertical price restraints in the biz.

[Scuba]

It's just a matter of time.

The small local scuba gear business is now a larger worldwide business. Manufacturers and LDS's can yearn for days of old, or join the club. Some will follow the new road to profits sooner than others.

Bigger market = more competition = more winners than loosers

 

[MikeFerrara]

The small retailer doesn't have the options that you may think. I have a web page. I could do sales on it. The price would not go down but rather up. Now I would have the on-line stuff I would have to pay to have maintained. We don't have the capital to make the buys to get the prices or to do the advertising required to get anyone on our site. The small retailer will go away. You will no longer be able to go sign up for a class down the street at least not at todays prices.

I agree that sales should not subsidize training or other services. OK so I started, again doing some calculations on what it costs me to conduct an OW class. In the calculations

I did not include the following:

40 hrs pay for me (nothing)
travel expenses (nothing)
No pay or expenses for assistants
No parishable supplies
No equipment for me or assistants
No pay for instore staff

I did include:

pool
books
student equipment
OW equipment
air
insurance (a portion)
rent an utilities (a portion)

It costs me almost $600 per student and that is without profit for the store an without paying me or anyone else. These numbers are real. We now sell the class for $300.

As a experienced instructor with lots of qualification (that benefit the student), how much should I get paid for 40 hours work? It doesn't matter because I will never sell a class for a price that even lets me break even. To even be close to a worthwhle profit center this class needs to be over $1000

Yes the classes could be way bigger or way shorter which is what some shops do but the divers comming out of the classes can't dive, while, mine can.

 

[jonnythan]

MikeFerrara once bubbled...
I did include:

pool
books
student equipment
OW equipment
air
insurance (a portion)
rent an utilities (a portion)

It costs me almost $600 per student and that is without profit for the store an without paying me or anyone else. These numbers are real.

Just out of curiosity, could you break down that $600?

 

[Aquamaniac]

MikeFerrara once bubbled...


It costs me almost $600 per student and that is without profit for the store an without paying me or anyone else. These numbers are real. We now sell the class for $300.

Average class size of about 6? (a guess)
So your losing $1800 per class!!!!

Well well, I guess Im glad Im not a dive store owner, no wonder your pissed.

Kinda makes me wonder why your here posting, rather than out looking for food!!!!

Dave

 

[SM Diver]

It costs me almost $600 per student and that is without profit for the store an without paying me or anyone else. These numbers are real. We now sell the class for $300.

I know instructors don't make a lot. It's for that reason that I have given a gratuity, up to $100 to the instructor, depending on the class and how much interest the instructor showed in me. Is that uncommon? It seems appreciated.

 

[MikeFerrara]

Aquamaniac,
I'm not out looking for food because I work a full time job. The money I lose on a class is subsidised by other sales. As other sales and/or markup falls the lose is felt much more. The entire store is a break even proposition except my wife and I work several hundred hours a year for free.

jonnythan,
I'll break that down. I don't have my note with me so give me a little while to redo it.

 

[Genesis]

Defending operating a break-even "business", which comes awfully close to being denied tax-favored status (you must make money three of five years to qualify, or be able to prove you were really trying to and not just trying to dodge taxes), as justification for 100%+ mark-ups and violations of anti-trust law.

I'm amazed.

Mike, have you ever heard of tax-free municipal bonds? You might want to look at them. A nice, solid return of 6-7% with no federal income tax on the interest thrown off. Available through both open and closed-end mutual funds, as well as individually. Many of them are also insured - no risk of principal loss.

If you're TRULY running a "break-even" business then you're a fool when you can sit on your arse and get that kind of return.

To attempt to justify the practices of the industry in this fashion boggles the mind. One of several things must be true:

1. You like doing this enough that your time and effort has a NEGATIVE net cost (that is, you'd PAY someone to do what you do in that shop because you like it so much.)

2. You're not being honest about the shop being "break-even"; in fact, it is profitable.

3. You're using it as a tax dodge, in which case if the way you're doing it is legal you ARE turning a profit (its just a hidden one that you bury in the tax consequences.)

I'm sure I can come up with a few others if I think on it for a while, but this much is clear - the "cry me a river for my margins" claim is invalid on its face.

Never mind that I'm quite sure that Leisure Pro isn't "operating at break-even." That would be illogical.

I don't believe you for one New York minute Mike, and no amount of protesting would change my mind. Audited financials might, but after ENRON we all know how much we can trust even those!

 

[edward_teach]

Genesis what exactly are you hoping for with your letter/petition? I mean aside from giving the FTC a good laugh.

you say that dive shops have too high of a mark-up, so mike tells you why there is a need for this mark-up, then you accuse him of being a tax cheat?

you say that you USED TO run you own business and that you sold you inventory at or slightly above cost? I'll bet I know why you USED TO own a business.

I think you are just being childish, you didn't get the price that you wanted so you feel that you gotta get the gov. involved. Can't you find a better way to waste tax money?

 

[Aquamaniac]

MikeFerrara once bubbled...
Aquamaniac,
I'm not out looking for food because I work a full time job. The money I lose on a class is subsidised by other sales. As other sales and/or markup falls the lose is felt much more. The entire store is a break even proposition except my wife and I work several hundred hours a year for free.

jonnythan,
I'll break that down. I don't have my note with me so give me a little while to redo it.

Ohhhh. Well, that kind of makes sense.

More like a hobby business.

 

[TCDiver1]

Genesis once bubbled...


To attempt to justify the practices of the industry in this fashion boggles the mind. One of several things must be true:

1. You like doing this enough that your time and effort has a NEGATIVE net cost (that is, you'd PAY someone to do what you do in that shop because you like it so much.)


Never mind that I'm quite sure that Leisure Pro isn't "operating at break-even." That would be illogical.

It boggles my mind for a person who claims to have been in business all the years you have Genesis, that you do not understand the term "labor of love." It's pretty clear to me that Mike loves what he does and is willing to pay some price to affect what he considers to be true change in the industry by teaching OW students. Teaching OW students is much easier to do if you own the LDS. Crystal clear logic as far as i'm concerned.

Your a conundrum to me because you have deemed that scuba equipment mark ups are too high, but obviously think Mike is stupid for doing anything at a loss. How is he suppose to make money if you get your way and his margins on equipment go down? Oh & i understand you probably think he is streaching the truth and is probably rolling in the dough. You could be right, i don't know and i don't care. That is his business. It is my business to decide if i patronise a LDS or an online retailer. I've done both over the years but lean towards patronising the LDS for numerous reasons.

Where is the logic in trying to compare Leisure Pro to a small LDS?
The small LDS is low volume high margin. Leisure Pro is high volume low margin. Pretty basic, logical, business 101 stuff to me. In most retail businesses, margins must go up when volumes are low, to pay the fixed overhead costs. Would you disagree that Leisure Pro's overhead cost per dollar volume sold is much, much, MUCH, lower than a small LDS?

With that said, i am curious about you Genesis. Curious about what business you owned and operated all those years. Mike is dumping info on his business in here. How about you?
Pm me if you don't think it belongs on this thread. Thanks!