The Dive Industry and the Internet, Part V

As we’ve documented over the past four issues, sales of diving goods and services over the Internet, often at deep discounts, are forcing many manufacturers and retailers to change their traditional business models.

A straightforward way to compete is to offer service that’s impossible to get online and convince divers it’s worth paying for.

Tackling the Internet Head-On

“We love it when customers come in with downloaded information,” said Dave Farrar, owner of Gypsy Divers in Raleigh, N.C. He tells them to “Come look at our equipment, ask questions, try things on. Get catalogs to help you choose your perfect system.”

Farrar says that his staff informs customers how Gypsy Divers adds value to the purchase: “We assemble it, configure it to your needs, and guarantee the fit.” A diver can’t get the right fit without trying on the gear, one thing etailers can’t offer.

“We make sure you are aware of the gear’s features and we’re trained in how to use these features,” says Farrar. “We register the warranty for you, and we’re here to resolve any warranty issues. We guarantee your satisfaction or all your money back, instantly — no questions asked. We advise you when your annual service is due and honor the annual service warranties. We will always be here for free, cheerful consultation on all the places and ways you can use your new stuff. We want you diving and happy.” They can even arrange financing for gear purchases.

“All we ask,” says Farrar, “is that before you transmit a credit card number to someone in a warehouse in another state who doesn’t know you, give us one last chance... show us the system and pricing you have found in cyberland. We’ll make certain you’re getting the right size, the current model, the right features, etc. And we’ll tell you the cost difference if you were to buy the same system from us, with all the above values added.” Farrar estimates that 8 out of 10 online shoppers wind up buying from his store. A Scuba Pro dealer, he chooses not to sell any merchandise over the Internet, though their Scuba Pro dealer agreement would allow them to put other brands on the Web.

Neither does Aqualung dealer Aqua Hut (Ardmore, PA), which also competes with Internet price-cutters by offering value-added services such as pool tests of new gear, occasional complimentary bench checks for regulators, and loaner equipment for people who suddenly realize they need something for an imminent trip. Owner Christine Vilardo told Undercurrent she’s even given full refunds or replacements on BCDs after they’ve been used on a week-long dive trip, “although we try to advise customers on the right product — and to set it up properly for them — the first time.” In return for this commitment to customers, Vilardo expects her customers to use Aqua Hut for all their scuba needs.

Of course, to provide this service, shops must hire, train and retain competent, customer-oriented personnel, which is not easy to do when profits are squeezed. Although markups on dive gear are substantial, training, repairs and rentals generally operate on thinner margins, according to Dive Center Business Magazine. In other words, services are underpriced to lure prospects, with the hope that they’ll buy all their gear from their local shop.

Shops near popular dive sites on the coasts, or at lakes or quarries, have an advantage because their clientele is likely to dive frequently and use their services often. The same goes for those specializing in niches such as wreck or tech diving. But what about the rest of the dive retail universe? The flourishing dive shop of the future will have to think big and broad.

Gypsy Divers has leveraged its service skills and formed Air Tech (www.airtechscubaservices.com) to service dive gear from other shops and individual divers around the country. In April 2005, Undercurrent reported a favorable experience having a Scuba Pro regulator and Air II properly overhauled and well within Air Tech’s guaranteed 10- day turnaround.

Dive stores are finding bigger opportunities by taking away business from travel agencies. By offering group trips to their customers, they can keep friends diving together while making good money. For example, the Galapagos Aggressor charges $2,995 per person, double occupancy, and offers shops a 15 percent commission plus two free spots. That comes to $5,391 in commissions. Sell those two free spots for an additional $5,990 and the profit hits $11,381. Arrange the flights through an airline and rake in more dollars. While there can be managerial headaches, there is no inventory stacking up in the backroom.

But, to make money, there has to be a sufficient flow of customers, starting with novices seeking certification. Shortened training courses attract customers because it is easier to get certified. Problem is, they aren’t in the store for long. Twenty years ago, to get certified, a diver had to spend six nights and the better part of a weekend in a dive store. That’s a lot of time to make sales. Today it’s faster, less personal, and open water certification is likely to be in the Caribbean, where gear is rented and sold. And, shorter courses can produce less confident divers who are more likely to drop out. Dropouts don’t buy equipment and they don’t buy travel.

Furthermore, there are still hobbyists running shops. Dusty Neef says the closest dive shop is about 70 miles from where he lives (Pampa, TX) and is also an office supply store and nail salon. The store has to order most items he’s looking for. A diver we’ll call John reports suffering with two part-time dive shops near his home in Bloomsburg, PA. He says, “The owners both have full-time jobs elsewhere, so their shops are no more than a hobby or a tax write off. They don’t put their heart into it.”

One shop ordered a dry suit for him, and it took three returns and six months before he got something he could use — though he still wasn’t satisfied with the fit. When he came in looking for a HP tank valve, the proprietor of the other shop asked, “Why would I stock something I only sell once in ten years? Two months later the shop owner called and said the tank valve John had ordered was in. “I never told him to order it.” says John. “I went home, called Leisure Pro and had one in a couple days.”

Look for Mega Shops

At DEMA’s dive industry show, expert Dave McClure predicted that smaller stores will merge into mega shops that can carry more inventory at lower costs and greater operating efficiencies.

World Watersports, for example, has become a “multichannel player competing not just on the Internet, but in bricks-and-mortar-retail as well,” says executive vice president Chuck Whiteman. From its initial Divers Direct outlet in Key Largo, the chain now has six stores in Florida stocking more than 25,000 different watersports products, including a “Divers Direct Pro Shop” store-within-astore, plus catalog and Internet commerce divisions. The Internet accounts for less than 10 percent of the chain’s volume, says Whiteman.

In May, the chain announced a partnership with Gander Mountain, the nation’s largest retail network of stores selling hunting, fishing, camping, marine and outdoor products. This fall, Gander Mountain will introduce scuba and snorkeling products and services in four stores: Middletown, NY; Spring, TX; Lakeville, MN and Lake Mary, FL. World Watersports will recommend and supply diving products and services, train Gander Mountain associates, and develop relationships with local dive instructors.

That partnership will emulate the L.A.-based Sport Chalet (www.sportchalet.com), which operates sporting goods superstores in California and southern Nevada. The company offers more than 40 services for serious jocks of all sorts, including scuba training and dive boat charters, in 36 locations. A typical store includes a pool for scuba and watersports instruction and demonstrations, and an air compressor. With such a wide-ranging product mix, these stores can stay busy year-round, instead of being subject to the seasonal appeal of a single sport such as diving. The publicly traded chain just announced that sales sales increased 17 percent in the quarter ending July 2 increased 17 percent, while net income jumped 36 percent.

As these emerging chains know, there are plenty of people who prefer a hands-on retail environment, where they have established relationships with the staff and, perhaps, other customers. A good local shop is a focal point for trading information, planning dives, and making new friends. But to some buyers, only price matters, and the best prices are on the Net. There’s another subset of shoppers who trust the information they receive over the Internet more than a retail salesperson who may be biased toward the lines he carries, and may be less knowledgeable than the customer. To survive, dive stores must view the Internet as a tool rather than an enemy, recognize their customers’ options and find a way to offer something they need or want.

– Larry Clinton and Ben Davison