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June 2006 Vol. 21, No. 6   RSS Feed for Undercurrent Issues
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Divers, the Internet and the Industry: Part II

. . . authorized vs. unauthorized dealers

from the June, 2006 issue of Undercurrent   Subscribe Now

Selling dive gear on the Internet is big business and many divers find plenty of reason to shop for gear online, as we reported last month. The changes in buying habits are creating a great upheaval in the way the dive business — in fact, any business — is conducted.

From the inception of scuba, the industry’s business model has been to drive business to local dive stores. Some large manufacturers still cling to that model. In fact, 37 percent of retailers surveyed by the trade journal Dive Center Business agreed with the statement that, “The Internet is a major threat to our business.

Dive shops keep our industry alive,” Tom Phillipp, product manager for Aqualung, told Undercurrent. By providing air fills, training, local and overseas trips, and rentals -- as well as sometimes sponsoring local clubs -- dive shops recruit new divers and help to retain them by building local loyalty.

Cynthia Georgeson, from Johnson Outdoors, parent of Scubapro and Uwatec, told us that an authorized dealer network ensures that consumers get genuine parts, factory warranties, limited guarantees, technical expertise and support, plus personal service and advice. She adds: “Our dealers routinely check to ensure new products are functioning properly, and perform final detailing,” such as adjustments to regulators and BCDs. Regardless, at least some e-tailers (e.g., scuba.com and diversdirect.com) also preassemble gear before shipping.

Manufacturers support local shops by naming them authorized sellers for their area. They receive product, marketing support, and training, but some manufacturers require that dealers sign agreements that restrict price cuts. The strictest dealer agreements, such as those from Aqualung and Scubapro, limit how much a dealer can discount merchandise from the manufacturer’s suggested retail price (MSRP). It’s generally no more than 10 to 15 percent. If a shop cuts more off a price it can lose its dealer agreements.

There are rumblings among retailers that this price protection is not uniformly enforced. Phil Ellis, proprietor of Dive Sports in Decatur, AL, was dropped this year as an Aqualung America dealer for discounting “covered” product for less than 90 percent of MSRP. Ellis, who aired his grievances with Aqualung on an Internet message board, claims he was forced to offer discounts to compete with other dealers. He reported that a customer came into his shop with a written quote from a nearby competitor on a Suunto Vyper computer (distributed by Aqualung) at 35 percent below MSRP.

Some dealers get around pricing protections by bundling products that allow deeper discounts into packages, such as a Sherwood regulator with an Aqualung BCD.

Authorized Dealers vs. Gray Marketers

Beyond restricting discounts, some manufacturers like Scubapro and Aqualung prohibit mail order and online sales. To get around the restrictions, some mail order and Internet sellers — including so-called “gray market” operations — purchase the controlled products from a dive shop going out of business, from an overseas reseller, from a manufacturer closeout, or perhaps from an authorized dealer who buys more than he will sell and surreptitiously ships it to an internet seller with a markup. Of the most popular e-commerce websites, only a few are gray market discounters. The most dominant is Leisure Pro.

Most scuba e-etailers, like www.scubatoys.com, www.diversdirect.com, www.scuba.com, www.diveriteexpress.com and even www.diversdiscount.com, have become authorized dealers for the products they sell. They don’t discount as deeply as the gray marketers. However, there’s no sales tax on Internet purchases and many can undercut local dive shops (especially when they offer free shipping – which some do on promotional “specials”). E-tailers sometimes throw in “freebies” (gloves or a mesh bag, for instance) to sweeten the purchase experience. You may not see Aqualung or Scubapro products on these sites, but you will find most other well-known brands.

Factory Warranties from Authorized Dealers

Another benefit manufacturers reserve for authorized dealers (and their customers) is factory warranties on dive gear. Often regulators and computers must be inspected or overhauled annually by authorized seller/servicers using factory-trained tech reps, to keep the warranty in force. Although many manufacturers offer free parts for the life of the warranty, there are service charges for each inspection and overhaul ($15 to $75, depending on the work performed). For shops with their own technicians, annual service provides income and an opportunity to sell other items.

Some manufacturers restrict dealer price cuts
to no more than 10 to 15 percent; if a shop
cuts more it can lose its dealer agreements.

If you buy your gear from an unauthorized dealer, the warranty won’t be honored by the manufacturer or an authorized shop. So, forget the free regulator parts. Jack Kuhn of Harbor Dive Center (Sausalito, CA) says those parts typically retail for $18-$22. It’s up to the technician whether to replace any. And often, no new parts are necessary. So the free-parts benefit may not mean much.

Scubapro warns customers: “Any Scubapro or Uwatec equipment purchased from a non-authorized source will not be covered by Scubapro Uwatec warranties. These non-authorized sources include Internet and direct marketing companies who obtain our products from questionable sources and do not undergo the rigorous training programs necessary for proper representation of our gear.” When Marcia Smullen (Big Sur, CA) tried to register a Scubapro regulator she purchased from Leisure Pro, she received a form letter saying, “We have no way of assuring the ultimate consumer that any item purchased via this source has not been tampered with or modified. Nor can we assume that our product has been properly tested and inspected.”

Pretty strong language, but spokesperson Georgeson told Undercurrent, “We are aware of product serial numbers having been removed or defaced so they are no longer readable, which is very risky for the diver. Scubapro relies on product serial numbers to track product service and warranty records. Consumers and dealers rely on product serial numbers to keep track of service upgrades and alerts on products.” Georgeson adds: “We are also aware of product counterfeiting, which is when a wellrespected brand name is ‘stolen’ and put on a fake, lowerquality product and sold as the genuine article.”

Frankly, however, can divers be persuaded by such arguments, especially when the same issues don’t seem to bother other manufacturers? Who tampers with regulators? What guarantees are there that an authorized dealer “properly tests” or that a nonauthorized dealer doesn’t. What dive stores inform their customers of recalls or e-mail problems. Many online dealers have sophisticated email programs to reach their customers. And, if Scubapro is concerned about safe products, why not allow someone who bought it from a nonauthorized dealer to register it, so Scubapro can get in touch with her if there is a recall.

As for fakes, when we asked Scubapro if they have seen any, Georgeson did cite one — a BC ripoff by a California company in 1998, a story that Undercurrent broke to the dive community. But we’ve found no proof of others. Apparently, rogue manufacturers in foreign nations aren’t producing knockoff scuba products. It’s a small market and New York vendors don’t peddle regulatators on the street.

To defend against online sellers, the manufacturing/ dive store cabal argues that a diver who shops at an unauthorized dealer won’t have a warranty and won’t get repairs. So the largest Internet dealer, Leisure Pro, competes by offering its own warranty program. A buyer sends the product to them for annual servicing or repair. Like many dive stores, they service some products themselves and send others out to independent repair facilities. However, they’re not upfront about it. Several divers have complained to us that they aren’t pleased to learn after their purchase that the factory warranty is invalid and Leisure Pro supplies the warranty. It means they have to ship it back to LeisurePro and can’t carry it into their local dive store.

Since so much effort is focused on warranties to keep some brands exclusively in dive shops, one has to ask just how valuable are warranties? We’ll cover that in the next issue.

Larry Clinton and Ben Davison

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