Dive Stores in the Internet Age

The recent announcement that Scubapro has joined with LeisurePro to allow some of its gear to be sold online reveals a break in the last wall of resistance that the dive industry has put up against Internet equipment sales.

As we wrote five years ago, online sales of dive gear were seen by dive stores as a looming threat. Many divers we surveyed preferred shopping online for a variety of reasons. While many dive stores were upset and most dive manufactures refused to accept the Internet as a sales opportunity, we recognized the rapid change in dive consumer behavior and that the industry had to adapt. In response to our survey, the reasons divers offered for preferring Internet shopping still, for the most part, hold today.

Lower Price, and Maybe No Sales Tax

Dive gear is expensive, but some websites, even those of brick-and-mortar dive stores, offer deep discounts. However, most online sellers add the cost of shipping (though policies vary). In nearly all states, consumers pay sales tax with rates as high as 7 percent, plus add-ons from counties, cities, and local districts that lead to rates of 8 or 9 percent. States, however, are generally not collecting tax on out-of-state online purchases, so for nearly all divers, there's an additional cost incentive to shop online. Today, with states shopping for increased revenues, legislation is underway in many states to tax out-of-state online sales. By adding as much as 10 percent to the cost of online sales, divers may have a greater incentive to walk into a dive store.

One drawback is that if the e-tailer is not an authorized dealer, manufacturers won't offer warranties on the merchandise. So some e-tailers are offering their own.

Convenience

One can sit at home (or in the office on a boring day), place an order, and have it delivered the next day if he wants. Websites are open 24/7. There's no driving to the store, and no wasting time in the shop looking for merchandise they may not have. And if the item has to be returned, you don't have to drive to the store and explain the reasons for the return - - or persuade the retailer to accept it.

Most Internet retailers have satisfactory return policies. The biggest hassle is having to pack things up and ship them, usually at your cost, with an additional fee if you want UPS or FedEx to pick up the parcel from your home or business.

Unlimited Online Information and Selection

Internet purchasers love surfing the web, comparing products and features side by side. "It's easier to look at a wider selection on Internet sites, and you can get some unbiased comparisons that are manufacturer- neutral," says survey respondent Denton Byer. "I ended up selling half the gear I bought through my shop, because it wasn't the right gear for me. Not knowing what else was available was a big reason for this. When I'm ready to buy a product, I already know exactly what I want. The only decision left is where to buy it, and that gets determined by who has the best pricing."

There's a 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. Many local dive stores carry only two or three major brands of BCDs, regulators, etc., and clearly can't stock all sizes or gear. Some divers order a couple sizes over the web to try on, and one of our readers told us that he ordered six BCDs from an Internet retailer, determined which one suited him best, and returned the other five for refunds.

Specialty Items

Tech divers comprise a small market, so their equipment is often not available locally. Paul Winter, a tech diver from Raleigh, NC, noted that 120 cu-ft. HP steel tanks couldn't be obtained through any local shop "without putting cash up front and waiting for items that would in all likelihood not show up for six months." Mark Scheele purchased a Shark Shield online because local shops in New Mexico didn't carry them. On the other hand, many divers will not purchase life support equipment online, believing it is much better and safer to see the equipment and engage in face-to-face business.

Industry Supports Shops

Of course, the scuba industry's motto continues to be "support your local dive shop," and seminars over the years at the Diving Equipment Manufacturers Association (DEMA) trade shows have helped dive shops to cope with Internet competition. At the DEMA convention in 2011, seminar leaders discussed how dive shops could use the Internet more to their advantage.

Dive Center Business publisher Mark Young told Undercurrent recently that Internet sales account for about 10 percent of the annual volume. By comparison, the National Sporting Goods Association reports that online sales amounted to 12.5 percent of the dollar volume of all sporting goods sold in 2010.

In a 2009 Dive Center Business survey, retailers expressed less concern about Internet competition than before. To compete with the Internet, they focused on the innate strengths of the brick-and-mortar dive shop experience: training, air fills and hands-on customer service. Here's a sampling of their replies:

"We offer 'custom fitted' packages. We offer in-house warranty and service. We sell all our gear with a smile and a 'thank you for supporting our store."

"Free financing and free trip with full-system purchase. Free day of rental gear with snorkel system purchase or $5, $10, $20 off future purchases. Free trip with an open-water student referral."

"Tell Internet sales customers we are loyal to them if they will be loyal to us. If not, we tell them their next Internet purchase should include a USB fill whip to fill their tanks, because if everyone buys off the Internet then we go out of business just filling."

"You buy a package, you get an incentive check to put toward another purchase. We give free labor on regs, computers and BCs for the first year with the purchase of a dive package."

"When customers purchase hard goods from us, we hook up everything, provide tanks and other needed gear, and get in the pool and show them how their new gear works. We take at least 10 percent off the price if they buy a package (BC, reg, computer), and match any price they find on the Internet from an authorized dealer."

"We back the equipment we sell. If there's a problem with your equipment, it will be easier to deal with your local store and their suppliers."

"Try it before you buy it. Personalized consultation, fitting, etc. Warranty support."

Note the strategy of offering to match prices of other authorized dealers. That works because many major manufacturers, such as Scubapro and AquaLung, enforce strict pricing guidelines on their authorized dealers. Dealers can only advertise discounts of about 10 percent off the manufacturer's suggested retail price. This is known in the trade as the Minimum Advertised Price, or MAP. Some dealers get around MAP rules by bundling packages that include products that can be more deeply discounted in order to drive down the overall package price.

If You Can't Beat Them ...

The most striking evidence of the industry adapting to online competition is Scubapro's recent decision to make LeisurePro an authorized dealer. For years, Scubapro has refused to market over the web.That hard line didn't prevent Internet marketers like LeisurePro from obtaining Scubapro merchandise via the so-called "gray market" - - purchasing controlled products from a dive shop going out of business, an overseas reseller, a manufacturer closeout, or perhaps from an authorized dealer who buys more than he'll sell and surreptitiously ships it to an Internet seller with a markup. Scubapro spokesperson Cynthia Georgeson even warned about counterfeit merchandise sold through gray market channels.

But last fall, Scubapro and LeisurePro reached a compromise. Here's how Harry Ward, director of sales for the Americas, announced Scubapro's stunning turnaround to its dealers in early October:

"The Scubapro business model has always been successful in ensuring our diving consumers receive proper training, education, and equipment. With consumer demand and changing trends in consumer behavior, it is now time to expand upon that philosophy and help you be more competitive in today's retail environment.

"Beginning October 15, 2011, we will allow our authorized dealers to advertise, sell, and ship our products online. Over time, it has become apparent that our 'in-store sales only' restriction has encumbered sales and service to your clients, as well as expansion into new markets. We will continue to strongly enforce and maintain our MAP policies for both Scubapro and Subgear brands. We believe this will enhance your business, and allow you to provide even better customer support. "

A few days later, LeisurePro began displaying the "authorized Scubapro dealer" logo. The move seems to have been accepted by Scubapro's dealer base. Sal Zamitti of San Francisco's Bamboo Reef Enterprises told Undercurrent, "LeisurePro had been getting their entire product anyway." He believes he can handle the competition as long as LeisurePro sticks to the MAP rules. In fact, we compared the manufacturer's suggested retail price on Scubapro's popular MK25S600 regulator ($695), and found LeisurePro's price ($729) to be 14 percent higher.

The good news is that after purchasing Scubapro products through LeisurePro, divers can now bring them to any authorized dealer for servicing. The bad news, as we reported last month: Scubapro has watered down its "free parts for life" warranty program. Aqua Lung has also loosened its restrictions on Internet marketing. Authorized Aqua Lung dealers can now apply to sell selected Aqua Lung, Apeks and Suunto products on their own websites, as long as they adhere to MAP guidelines without discounts, instant rebates or special offers. Or dealers can feature a link on their sites to the Aqua Lung store, where customers can complete a purchase online. Aqua Lung dealer Jack Kuhn of Harbor Dive Center in Sausalito, CA, says that although it's not clear on Aqua Lung's site, shoppers can decide whether to have the merchandise delivered to a nearby shop or to an address of their choice. Store delivery is free, and the dealer can then complete any necessary testing or assembly.

The Internet is even affecting dealers packaging dive trips. Despite the fun of traveling with friends and the help of trusted trip leaders, there has been a general decrease in group dive travel. A recent issue of Dive Center Business notes, "It's easy to go online and see 100 dive vacation options that can be booked without a dive store. Often these trips are priced lower than a similar trip the dive center is selling." Some shops compete by tacking on "value added" goodies such as land excursions, extra dives, nitrox fills and extra days, which attract clientele but eat into profits.

Our reporting back in 2006 concluded: "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." That prediction seems to be coming true.

-- Larry Clinton