Can You Name Your Price for Dive Gear?

In an issue last year of the Australian dive magazine Dive Log Australasia, Oceanic Australia issued a paid full-page apology for “price fixing.” That’s not a typical ad you’d see in a U.S. dive magazine. What gives? We contacted Dive Log Australasia publisher Barry Andrewartha for the details.

“Yes, we did print the ad from Oceanic Australia, under the direction of the Australian Competition and Consumer Commission (ACCC). Under pressure from one of its dive shop dealers, Oceanic Australia had sent an e-mail to a rival dive shop asking it not to sell one of its products below a certain price. When it was brought to its attention that this was illegal, Oceanic immediately re-emailed the dive shop to advise that it could sell the product for whatever price it wanted to. The ACCC got involved and while Oceanic was never charged with an offense, it did have to place a full-page ad in Dive Log to advise the diving community about what had happened!”

Andrewartha says divers are at a disadvantage because the gear manufacturers have given dive shops too much power. “The dealers have been able to dictate to the suppliers who they can supply, and how much profit margin they want to make. If another shop is selling a product at a lower price, the dealer will give the supplier a hard time to force the other shop to raise the price or else cut off supply to that shop. This is true not only in Australia, but in the U.S. as well.

“Look at the recent vote by the dive industry whether to allow the public into the big Diving Equipment and Marketing Association (DEMA) show last November. It was OK’d by everyone but the dive shops (guess who won). They don’t want any competition. This does not happen in Asia or Europe.”

Here in the U.S., price fixing and thwarting open competition are forbidden by the Sherman Antitrust Act. Still, dealers are forced to abide by some pricing rules set by dive equipment manufacturers if they want to sell the gear. Bill Gornet, owner of Dive Las Vegas and the Internet gear retailer OnlineScuba.com, told us many manufacturers give their dealers a price sheet with “Manufacturers’ Suggested Retail Price” or MSRP. “It essentially means, ‘Here is the price we suggest, but you can charge what you need for your own profit margin.’” But major brands like Oceanic, Scubapro, Sherwood and TUSA require Minimum Advertised Pricing (MAP), meaning dealers can’t sell an item for any less than that stated price.

Dealers agree to MAP because otherwise the manufacturers and suppliers won’t honor their customers’ warranties. However, the agreement comes with many stipulations. For example, some manufacturers recently announced dealers can’t offer rebates anymore. Gornet had his OnlineScuba site deduct the rebate amount at online checkout, but that is now verboten. “Dive shops can’t even offer coupons because that puts the price below the MAP.”

Dive shops also can’t run ads for gear with sentences like “pricing not shown” or “call for pricing,” because it gives the impression that dealers will negotiate a lower price with customers in person or over the phone – which they often do, usually to the customer’s advantage. “We’re not allowed to advertise it for less but if a customer calls us, what we do on the phone is a whole different story,” says Gornet. “If a customer comes in and asks about the price, we can negotiate from there. However, we do let people know that because we’re an authorized dealer of the product, we have to follow the rules so that it comes with a full warranty.”

MAP also lets manufacturers have the ultimate say when it’s time for their gear to go on sale. The market has shrunk a bit, “so our suppliers contacted us in June and said things like, ‘These three regulators are off MAP pricing, so mark them as whatever you want.” To prevent profits from being hit too hard, manufacturers have been offering freebies or discounted rates for customers who buy more than one of their products. Like this past summer, Oceanic offered a “Bag It” special, giving away a $200 wheeled duffle bag for free to divers who buy an Oceanic BCD, regulator, octopus and dive computer. Sherwood gave away a free pair of booties for divers who bought a mask, snorkel and fins.

Even with a rocky economy, don’t expect to see dive shops offering discounts on brand-name gear – the manufacturers just won’t let them, says Gornet. “They see their equipment like Louis Vuitton sees their bags – it’s a premium product, and they want Joe Customer to see it as such and be willing to pay for it. They keep the price at a higher level and do everything they can not to deflate it.”

There is always the Internet, where operations like LeisurePro go to great lengths to get around MAP pricing - - and get away with it. They buy their price-controlled gear from abroad (gray market gear), or get it from dive shops going out of business, and even get it from a few legitimate shops that order more than they can sell and then resell it to LeisurePro. Some people even claim that some manufacturers have back-door deals with online marketers and turn their back when they ignore the MAP. Regardless, online operators dealing in gray-market gear often offer their own warranty and, as we’ve reported, either repair or replace faulty equipment without a hassle.

So who has the pricing power here? Manufacturers may want their life-support gear to be as valuable as a Louis Vuitton bag, but that’s harder to sustain these days. While dive shops may chafe at the rules they must follow to sell gear, they also flex their muscles as dealers, aiming to be the sole proprietor divers can use, as the smackdown of a DEMA conference “public day” shows. But now that you know how dive manufacturers and dealers work together with MSRPs and MAPs, you can use that knowledge to your advantage to see if the owner is flexible on price and that the warranty is intact (if that’s important to you).

One dive shop owner who requested anonymity told us that these days, everything is negotiable. “It’s challenging times for dive stores, especially when we’re facing pricing pressure from the the Internet, so I for one am more willing to make a deal on equipment than I was a few years ago.” He still has to adhere to manufacturers’ pricing policies, but if a product is price-protected, he can still give the customer a bargain through a “custom package” by discounting other products bought at the same time, or throwing in a few accessories.

Jack Kuhn, manager of Harbor Dive Shop in Sausalito, CA, says that from his perspective, the better a customer’s attitude and the bigger the purchase, the better the odds are of getting a deal. “We are more likely to give someone a discount who doesn’t ask for one - - somebody who is excited about an upcoming dive trip and to whom the price of what they need is secondary. We treat everyone who walks through our door the same but if the first thing a customer asks is how much of a discount can he get, or if she goes on her BlackBerry and asks us to match some price she just found online, we just won’t do it. It is discouraging for us to muster up the energy to provide quality service to someone with that kind of attitude, trying to educate someone who doesn’t see any value in our expertise and service.

“Is product price the bottom line here, or is it the reliable and friendly service your local dive store provides?” Kuhn asks. “Besides, where would divers be if they had nowhere to get their scuba tanks filled?”

Clearly, the Internet has given divers more options for buying gear and many dive shops have closed their doors. Those that remain have learned how to compete and are staying alive. At least for now.

- - Vanessa Richardson