Should you sell online?


Shopping CartWhen it comes to games like Powerball and MegaMillions, we can just about guarantee you two things:

  • Somebody has got to win.
  • It sure as Hell won’t be you!

When it comes to selling dive gear on line, we can make similar guarantees:

  • A handful of dive stores will do reasonably well by branching into online equipment sales.
  • In all likelihood, yours won’t be one of them.

“Experts” will tell you we’ve got this all wrong. That an ever-increasing percentage of retail sales — including dive equipment sales — are taking place on line. And that, if you don’t start selling dive gear on line, you are going to miss the boat.

Well…it’s not quite that simple. (It seldom is.)

In this article, we’re going to look at some of the harsh realities of online sales. It can be done, but it is not easy (despite what you may have heard).

Why Sell Dive Gear On Line?

This is kind of like asking Why get up in the morning? “To make money, stupid!” There is more to it than this, though. Dive retailers who branch into online sales are generally driven by one (or both) of two reasons:

  • They think that, by offering equipment sales on line, they will quit losing sales to the LeisurePro.coms and Scuba.coms of the world.
  • They want to steal sales from the dive store across town — or across the country.

Are either of these expectations realistic? Well, it will depend on the circumstances but, in general, for the average dive store the answer is No.

  • For the average dive retailer, thinking you can complete head-on with these large, online retailers is about as realistic as thinking that, by opening up an Ace Hardware across the street, you’re going to take down Home Depot or Lowes.
  • As far as taking sales away from other dive stores, you have to ask yourself, How are these stores’ customers going to find out about you and how much will that cost?

The fact is, the average dive store owner (who can’t seem to put together even a modestly effective websites) hasn’t got a clue what is involved in online selling. That’s okay; neither do some of the people who seem determined to push dive stores into online equipment sales.

What Does it Take to Sell On Line?

That’s easy: Money. Lots of money. (Having a few bushels full will help.)

Seriously, selling dive gear on line cannot be done on a shoestring. It takes either a lot of money, or a lot of time — generally both.

Just setting up an effective online sales site will require well into five figures (or the equivalent number of man hours). And that does not address the additional investment in inventory you will need. Let’s break this down further so you can see what we mean:

  • To start, you will need shopping cart software and web hosting. Figure around $70/month for that. (Yes, there are free and low-cost alternatives — but you have to be a very savvy web person to use them.)
  • Next, you are going to need the “full” version of Photoshop (figure close to $700 for a legit copy) and someone who is very good at using it. Why? Because, for every item you sell, you are going to need clear product images — usually in three different sizes. You may be able to get some of these from manufacturers; others you will need to shoot yourself — and then use Photoshop to knock the background out of the photo.
  • You are also going to need a killer copy writer (these products will not sell themselves). For every product you offer, you are going to need a concise description and a list of features and benefits in bullet-point format. And it is not enough to just lift this info off the manufacturer’s website (assuming they even have something for you to lift). You need to present product info in a consistent format so that consumers can easily comparison shop similar items
  • Finally, you are going to need hundreds of man hours to set everything up. It takes time (a lot of time) to learn a shopping cart system and then manually enter all of the photos, text and data on colors and sizes.

Start totaling up the cost of everything listed thus far. If you are honest about the value of the time involved, you will realize that you could probably buy a Subway franchise for about as much. But wait — there’s more!

The Inventory Challenge

You need a lot more inventory to sell effectively on line. Even if you limit online sales to a dozen or so products in each category, you may need to stock these items at least twelve deep or risk running out. The old “one to show and one to go” won’t cut it.

Consumers have high expectations when they shop on line. They expect that when a product shows on line as being available, and your shopping cart software charges their credit card for it, you will ship it within 24 hours — if not the same business day.

This means you need to be ready for demand that can spike wildly. For any given item, you might go days without selling a single one, and then get a half dozen or more orders within hours or each other. Will you be ready?

Most shopping cart software does not integrate with any sort of inventory control system (Intuit’s Homestead program is one exception). To keep from having to field dozens of irate phone calls every day, you must be able to show what is in stock and what is not. And if you cannot keep most items in stock at all times, no one will want to buy from you.

You know how much you have tied up in inventory right now. If you want to sell on line (and in sufficient volume to offset your startup costs), you are going to need to at least triple that — if not more. You’ve got that much in your piggy bank — right?

You Gotta’ Advertise…

It is utterly amazing the number of dive retailers who think, that simply by adding a shopping cart to their website, the world will begin beating a path to their electronic door. Get. Real.

LeisurePro.com, Scuba.com and ScubaToys.com did not get where they are by trying to stay hidden. Each has an advertising budget that is likely well into six figures. They advertise in print, by mail and — most extensively over the Internet itself. (Check out the YellowPages.com listings for Scuba in any community and see who shows up ahead of local dive stores.)

“Okay,” you say, “I’ll just start by advertising to my own customers, on my website.” And by doing this, you will accomplish…what?

  • If your goal was to quit having your customers purchase gear from large, online retailers, guess what? The vast majority of these people will not stop buying from LeisurePro.com just because you now have a shopping cart. The fact you didn’t offer online sales before was not the reason they started shopping on line in the first place. If anything, your new shopping cart site will merely serve to endorse their previous behavior.
  • The only people who are likely to purchase from you on line in any significant numbers are the customers who would have purchased equipment from you under any circumstances. By selling on line (with all the extra overhead it entails), all you may accomplish is to lower profit margins.

Recouping your initial investment in set up and inventory requires an economy of scale. In other words, you have to start selling to a much larger audience or you are going to lose money. And, to do that, you have to advertise. The question is, along with all your other startup costs, can you afford it?

But Wait…There’S Even More!

One of the worst things you can do in marketing is to send mixed messages. If yours is like a lot of stores, your primary vendor is a company like AquaLung or Scubapro, who (at least at the moment) does not support online sales in any way, shape or form.

These companies have invested considerable resources in promoting the position that dive equipment is something that requires the professional advice, personal attention and after-sales service that only in-store sales can provide. Odds are that, if you carry these brands, you’ve supported the same position as well.

Therefore, if you begin selling on line, it is going to have to be with brands other than the ones you’ve spent years telling customers are the only ones worth having. What kind of message does that send to customers?

  • Are you now saying that it is okay to buy on line — but only certain brands?
  • If it’s okay to purchase certain brands on line from you, what is wrong with purchasing the same (or comparable) items on line from a larger retailer who offers better selection, lower prices and faster service?

Selling on line is an all-or-none proposition. Either it has to be okay for consumers to purchase everything you have to offer on line, or you need to stick with the position that the preferred way to buy is in-store, over the counter. Anything else will only confuse the issue and lower the trust customers have in what you say.

What Are We Really Saying Here?

Is it wrong to consider selling dive gear on line? Hardly. There are stores who have done well by branching into online sales, and stores that will do well by following suit. The question is, is yours one of them?

Among other things, it is important to remember that selling dive gear on line is an entirely different business from selling it over the counter. You are marketing to a very different group of customers, over a diverse geographic area, and putting a helluva lot more investment capital at risk. In fact, the only aspect of the business that is in any way similar is that dive gear is involved.

You need to know what you are getting into. Visit the top online scuba retailers and, as you do, ask yourself these questions:

  • Can i offer such a wide selection of products?
  • Can I afford to match these prices?
  • Can I stock sufficient inventory to meet potential demand?
  • Can I create a website that inspires the level of confidence that some of these websites (notably Scuba.com) do?

If you can’t answer each of these questions with a resounding Yes, maybe you should be thinking of alternatives — like that Subway franchise we mentioned earlier. It’s likely a safer investment (and probably no more different from running your present dive store than selling on line would be).

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 Walmart 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.

…And What We Didn’t Say

This is important. Based on some of the things you read in the last few pages, you might get the impression we are somehow “against” selling dive equipment on line. We’re not.

Like most consumers over the past few years, we buy computer equipment, software, books and electronics on line — just as you probably do. To say that selling dive gear over the Internet is “immoral,” “deceptive” or “just downright evil” would be very hypocritical at best (although we do feel that the average consumer generally gets the best value when they rely on the personal advice and after-sales service that only a local dive retailer can provide).

What we are saying is that selling effectively on line requires an economy of scale that is well beyond the means of the average dive store. And, if this describes your store, don’t panic. There may well be alternative routes to profitability that do not depend solely on whether you sell a certain number of equipment packages within a given time frame.

If there is one thing we have learned after more than two decades of working closely with some of the most successful dive retailers in the country, it’s that you can’t use the words always or never in conjunction with what a local dive retailer should and should not do. Consumer demographics and behavior varies so widely from one market to the next, there is no cookie-cutter approach to dive retailing that is perfect for everyone.

We can tell you this: Change is constant. You can’t succeed following the same business plan you did ten years ago. Or five years ago. Or last year. Your success — in fact, your very survival — depends on your ability to recognize and adapt to change.

The “experts” are right about one thing. You do need to sell on line. It just may not be dive equipment that you sell there. Every dive store needs a strong Internet presence, even if just to sell who you are, what you do and what makes you different. You need comprehensive information about your classes. trips, activities and the services you offer. Potential customers will look for this on the Internet first. If they don’t find you, they’ll find somebody else. Count on it.

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