The Alternatives
One thing is for certain: The “classic” model for dive retailing, where we take a loss teaching people to dive and don’t care whether we make money on air fills, service and rentals (because we’ll make it up in gear sales…right?), is unsupportable. In fact, we can pretty much guarantee you:
- An ever increasing number of your customers will buy gear on line, despite your best efforts.
- Even more new customers will “Discover Scuba” at a resort, come to you solely for classroom and pool training, get certified at yet another resort — and never be seen or heard from again, as they consider diving a vacation-only activity. (It’s a cinch these folks won’t buy much more than mask, snorkel and fins from you.)
Clearly this whole Internet fad has ruined everything. Can’t someone just turn the clock back to 1979? (Yeah, right…)
The fact is, technologically, the world is changing faster than at any time in history. These changes impact every aspect of consumer behavior and virtually guarantee that, unless your store changes with them, you are doomed to fail.
So, if you can’t look to online gear sales for your salvation, what can you do? Ironically, one of the best models for what might be the future of dive retailing may be your local hair salon.
In the context of dive retailing, the typical local hair salon shouldn’t exist. Sure, they sell high-end shampoos, conditioners and other products — but you can get shampoo and conditioner for much less at Wal-Mart and the local grocery and drug store —not to mention on line. (My god! How do they even survive?)
- The answer is that the typical hair salon doesn’t depend on product sales for survival. It is primarily a service business — something you can’t get off the shelf at the local Piggly-Wiggly or over the Internet. Their real money comes from cutting, styling, coloring, perms, tanning, etc.
- The products the salon does sell are typically ones available exclusively through professional styling salons. People buy them because they want a top-of-the-line product that carries the personal endorsement of their trusted stylist.
Does every customer who comes into the salon purchase these high-end products? Of course not. It doesn’t matter, though, because the salon’s survival doesn’t depend on product sales.
This is the trend we are seeing in dive retailing. Increasingly, successful dive stores that do not sell equipment on line are focusing on selling services, such as training, travel, rentals and service, at a profit. Merchandise sales are focusing more and more on accessory, convenience and lifestyle items — items consumers don’t want to shop around for, or want to compare side-by-side in a retail environment.
This doesn’t mean that these stores have stopped trying to sell as many BCs, regulators, dive computers and wetsuits as possible. However, they realize that it may be better to sell one such package at a decent margin than three at the lower margins it might take to compete directly with online retailers on price. More important, though, is the fact these stores have stopped depending on package sales for their survival.
Here are some specific steps you can take to help ensure your store maximizes every avenue to profit available to you.
- Create formulas to determine the real cost of everything you sell; formulas that not only account for the direct cost of goods sold, but a proportionate share of overhead as well. For example, when determining how much it costs you to certify a beginning diver, be sure to factor in a proportionate share of rent and utilities, insurance, compressor maintenance, rental equipment depreciation, staff time, etc. Don’t stop until every cent of overhead is accounted for by the sum total of all of your sales activities.
- When you find you are selling a product or service at a loss, either increase prices or reduce direct expenses so that the product or service sells at a profit. Don’t just assume that big-ticket gear sales will make up the difference, because they won’t.
- Look carefully at the brands you sell. If they are readily available on line (with a full manufacturer’s warranty), does the manufacturer vigorously enforce Minimum Advertised Prices (MAPs)? If they do not, it’s unlikely you can compete directly on price. Look for alternate suppliers that restrict sales to full-service local dive stores.
- Take time to educate your customers. Build time into every beginning scuba class to talk about the benefits of owning equipment, a timetable for making equipment purchases, the importance of full manufacturer’s warranties and regular professional service from authorized dealers. Stress that the real cost of equipment ownership includes what it takes to maintain that equipment over time (which is why full manufacturer warranties are so important). Remember: The training agencies won’t do this for you. You need to create this curriculum and make sure your instructors cover it.
- Don’t offer discounts on mask, snorkels and fins. Students will generally not drive all the way across town to save ten percent on these items (and buying personal-fit items such as these on line is just plain dumb). These may be the only equipment purchases many of your beginning students will ever make. Make as much money as you can, while you can.
- Don’t panic every time a customer purchases equipment elsewhere. Find out why you lost the sale and determine whether you can take steps to prevent similar losses in the future. (It may be better to lose one sale in ten on price rather than discount the other nine to the point where you don’t make any money.) As often as not, the cause of lost sales is your failure to educate customers. Don’t waste time blaming the “evil” online retailer; use that time to educate consumers are to why you offer the better value.
- Offer and promote a low-price guarantee. Let customers know you will match any authorized dealer on the brands you carry — within the limits of MAPs. Note that this does not mean you actually have to have the lowest prices in town. Frequently, the fact you offer a price guarantee will prevent customers from comparison shopping.
- Don’t punish customers for buying elsewhere (it is more likely your fault that they did). Turn lost sales into opportunities. Online retailers often fail to make add-on sales. This provides you with the opportunity to sell everything from equipment assembly and bench testing to regulator and gear bags, annual maintenance, tank boots, tank inspections — you get the idea, right? Even customers who purchase a BC, regulator and gauges online have demonstrated a commitment to keep diving. This opens the door for you to sell continuing education, travel and accessories — if you are smart enough to not alienate customers in the process.
- If your primary suppliers are brands that are available exclusively from full-service local dive stores, position yourself as such. No one wants to buy a Mercedes at an outlet mall. There are very few divers who do not want the best equipment possible. Your job is to show them that spending a little bit more up front can easily save them money in the long run. People generally buy big-ticket dive gear on line only when they think they are getting comparable equipment at a lower price, or that they can’t afford what they really want. Show them how to make purchases they won’t regret later.
- You may not choose to sell dive equipment on line, but don’t let that stop you from taking advantage of the eLearning programs more and more training agencies offer. Price is seldom the deciding factor in whether someone takes your beginning scuba course or a competitor’s. Convenience is. But don’t fall into the trap of using eLearning merely as a means to save time. Use some of the time you save to better educate consumers about the importance of equipment ownership, warranty coverage, annual service and saving money in the long run.
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