Cline 2011 Dive Retailer Study

Cline 2011 Dive Retailer Financial Study

Conducted and Compiled by William Cline/Cline Group
May 2011

Total Dive Retailer Respondents: 80

Survey Responses & Summary Report

This survey was created, conducted and tabulated at no charge as a service of William Cline/Cline Group for the recreational scuba diving industry. Full and unrestricted reprint rights are given as long as any quotes or references credit “William Cline/Cline Group’s 2011 Dive Retailer Financial Study.”

OPEN LETTER FROM WILLIAM CLINE

May 1^st, 2011

To Whom it May Concern:

This study was commissioned to examine the financial health of dive retailers over the last three years, plus lay down a base line of collective information for future growth measuring purposes. All surveys were collected via internet-based collection systems, using research-industry standard techniques for collection, tabulation and analysis. All data within this report has been carefully examined, and to the best of my professional knowledge, is valid and correct as shown.

Cordially,

William Cline
President

TABLES OF CONTENTS

I....... Executive Summary .......................................................................... 4

II..... Study Introduction and Objectives.................................................. 5

III.... Statistical Tolerances of Survey Data............................................... 6

IV.... Methodology and Questionnaire Development............................ 7

V..... Sampling Issues and Geographical Groupings for this Study..... 8

VI.... Average Store Profile & Demographics.......................................... 9

VII.. Retailers’ Study Results.................................................................... 11

........ a. Unit Gross Revenues.................................................................... 13

........ b. Business Classification Breakdown............................................ 14

........ c. Staffing Comparisons................................................................... 17

........ d. Dive Equipment Brand Sales...................................................... 20

........ e. Training Agencies......................................................................... 24

........ f. Advertising & Marketing Costs & Expenditures...................... 25

........ g. Unit Debt & Personal Income from Unit.................................. 27

........ h. Factors for Changing Vendor/Supplier................................... 29

........ i. Dive Travel Sales............................................................................ 30

VIII. Appendix A: Questionnaire............................................................. 32

II. Study Introduction and Objectives

For the last five years, Cline Group has been sending a quarterly business survey to over 10,000 email addresses around the world across all sectors of the recreational scuba diving industry. The surveys create a snapshot on a quarterly basis for retailing, travel, manufacturing, training, etc. Plus the “Cline Quarterly Industry Survey” forecasts ‘feelings’ for the future quarter, offering the industry’s only forecasting tool for the dive business.

As a result of the recent 4th Quarter 2010 survey results e-mailer, I was approached by a dive shop owner, Joel Silverstein from Tech Diving Ltd. in Lake Havasu City, AZ, and asked if I would consider doing a special economic survey of dive shops. Mr. Silverstein asked if I would survey specific financial information that has not been typically asked of retailers, of course in a non-identifying manner. After a lot of time back-and-fourth, with Joel's help, a survey question set was created.

The survey was launched in February of 2011, and data collected until May 1^st, 2011. The data shows important information that will help retailers better manage their personal and corporate financial issues in our current economic cycle. Execution of the survey took about 15 to 20 minutes to complete, and covered 2008, 2009 and 2010 financial and sales data.

The survey form can be seen here: http://www.williamcline.com/limesurvey/index.php?sid=14

As mentioned, no identifying information was collected, and only one person from each retail shop was allowed to complete the survey. The objectives were to collect specific financial data to create a national picture of how retailers have fared with the economy over the last three years.

This survey may be repeated each February, in an attempt to maintain up to date data on the health of dive retailing in the USA and other locations.

III. Statistical Tolerances of Survey Data

In interpreting survey results it should be kept in mind that all surveys are subject to sampling error, that is, the extent to which the results may differ from those that would be obtained if the entire dive retailer population in the U.S. had been interviewed. The size of such sampling errors depends largely on the number of interviews. The following table may be used to determine the allowances that should be made for the sampling error of a percentage. The computed tolerances have taken into account the effect of the sample design upon sampling error. They may be interpreted as indicating the range (plus or minus the figure shown) within which the results of repeated samplings in the same period could be expected to vary, 80% of the time, assuming the same sampling procedure, the same survey execution, and the same questionnaire were used.

Recommended Allowances for Sampling Error of a Percentage at 80% confidence levels.

In Percentage Points (at 80 in 100 confidence level for a sample size of 100)

Total Count........................................................ 80

Percentages near 10%.................................. 4.4%

Percentages near 20%.................................. 5.8%

Percentages near 30%.................................. 6.7%

Percentages near 40%.................................. 7.1%

Percentages near 50%.................................. 7.2%

Percentages near 60%.................................. 7.1%

Percentages near 70%.................................. 6.7%

Percentages near 80%.................................. 5.8%

Percentages near 90%.................................. 4.4%

Overall Average for All Samples………..6.1% (@ 80% Confidence Level)

Note: Average Sample Error Rates for Individual Groups will be lower than the total, as the error rate is based on the total number of respondents. However, in general, the chances are 80 in 100 that the sampling error is not larger than the figures shown.

The above table should be used as follows for the total sample: If a reported percentage is 22, look at the row labeled "percentages near 20". The number at this point is 5.8, which means that the 22 percent obtained in the sample is subject to a sampling error of plus or minus 5.8 points. Another way of saying it is that very probably (80 times out of 100) the average of repeated samplings would be somewhere between 16.2 and 27.8, with the most likely figure of 22 obtained. All sampling error rates listed in this study are well within acceptable tolerances for a survey of this nature.

IV. Methodology and Questionnaire Development

The retailer questionnaire was developed by jointly by William Cline and Joel Silverstein. Prior industry experience in conducting market studies, as well as specific diving industry expertise was applied to the creation of this survey to ensure accurate data were collected in the most efficient manner possible. Mr. Silverstein provided very specific dive retailer experience and perspective in the creation for many of the questions. This study utilized a web-based survey collection technique, offering no incentive for completing the on-line survey. A copy of the survey is included in the Appendix of this report.

Questionnaire Administration

To accomplish the outlined objectives, a single survey deployment was utilized and sent to a gross list size of 9,000 dive trade-only respondents. Furthermore, Aqua Lung, and PADI also sent the link to their retailers, plus William Cline made a total of three solicitations directly via email. The survey employed IP tracking to prevent multiple surveys from the same IP location or address.

A total of 121 surveys were recorded for this final report, of which 80 were completed by dive retailers specifically. All the respondents to this survey are shown:

Data Analysis and Report Generation: Caution should be exercised when interpreting data reported on any sample below 50 responses for any given question. Industry-standard data tabulation and analysis software was utilized in the data collection, entry and tabulation process for this report.

V. Sampling Issues and Geographical Groupings for this Study

A cross-section of the entire dive industry was sent this survey. The sample represents a varied and large list of scuba trade. Survey responses from the mailings produced the following Country respondents:

Furthermore, the time-zone breakdown of the respondents is as follows:

VI. Average Store Profile & Demographics

As a summary, listed is the typical demographic profile of the average retailer for this survey:

a. Gross Income for 2010: $499,449

b. Percentage of 2010 Gross Sales Categories:

1. Dive Equipment: 44.9%

2. Dive Travel: 13.9%

3. Training and Instruction: 23.9%

4. Service and Airfills: 10.8%

5. Apparel: 4.0%

6. Equipment Rentals: 6.1%

7. Books, DVDs, Misc: 2.0%

8. On-Line Sales: 5.9%

9. Other Classification: 6.1%

c. How Retailers Purchased Goods from Vendors in 2010:

1. Open Charge Account: 41.6%

2. Credit Card: 56.0%

3. Pre-Pay: 14.7%

4. COD: 28.2%

5. Cash/Check: 29.6%

d. How Retailers Restocked Their Inventory in 2010:

1. As Needed: 78.1%

2. Weekly: 19.0%

3. Monthly: 22.0%

4. Advance or Pre-order Programs: 22.0%

5. Other Method: 0%

e. Retailers Employment Was as Follows for 2010:

1. Full-Time Employees: 4

2. Part-Time Employees: 3

3. Contractors as Needed: 8

4. Non-Paid Staff: 5

f. Dive Instructor Staffing in 2010:

1. Full-Time Employees: 2

2. Part-Time Employees: 5

3. Contractors as Needed: 10

4. Non-Paid Staff: 3

g. Top 10 Brands by Sales in 2010:

1. Scubapro

2. Aqua Lung, all lines

3. Aeris, Oceanic, Hollis

4. Mares

5. Trident Mfg.

6. Innovative Scuba

7. XS Scuba

8. Henderson

9. Atomic Aquatics

10. TUSA

h. Top 5 Training Certification Agencies

1. PADI

2. SSI

3. SDI/TDI

4. NAUI

5. PDIC

i. Advertising Percentage Expenditure of Gross in 2010: 7.0%

j. How Advertising Dollars Were Spent in 2010:

1. Newspaper Ads: 13.2%

2. Magazine Ads: 15.6%

3. Direct Mail: 20.6%

4. Coupons Offers: 15.7%

5. Consumer Shows: 12.1%

6. Email Marketing: 22.0%

7. Website: 29.8%

8. Google Adwords: 14.6%

9. Radio Ads: 10.6%

10. TV: 11.1%

11. Other: 32.2%

k. Average Amount Debt Load Increased Over The Last 3 Years By: $20,332

l. Number of Years Expected To Take The Company To Payback Loans Made to The Company: 5.2

m. Percentage of Personal Income Derived from the Retail Business: 58.4%

n. Most Influential Factors in a Decision To Change Vendors: Product Availability and Profit Margin

o. Average Store Revenue from Dive Travel Sales in 2010: $38,177

p. Top 5 Dive Destinations Sold in Dive Stores:

1. Bonaire

2. Cozumel

3. Florida / Florida Keys

4. Cayman Islands & Bahamas (tied)

5. Fiji, Belize, Other USA Locations (tied)

Detailed data is presented in the next section.

VII. Study Results

The full data with analysis, where warranted is offered for this data. Each question will be printed in order of survey:

Question 1: What best describes your status

Conclusions:

Although 121 responses were recorded as shown, of which 80 were Dive Retailers, with the rest of this report focusing on the 80 retailer respondents.

Question 2: In what general region are you located?

Conclusions:

As shown, the 80 retailers were distributed as indicated with 91% being from the USA.

Question 3: If USA, which Time Zone are you located?

Question 4: What was your total gross income for your shop/retail facility for the following years?

2008 $580,431

2009 $371,374

2010 $499,449

Question 5: How did your Gross breakdown with regard to the following areas of income within your business for 2008, 2009, and 2010?

Conclusion:

As shown, the classification breaks varies little over the last three years.

Question 6: What was the method of purchasing from your suppliers/vendors for your 2008, 2009 & 2010 revenues?

Conclusion:

As shown, the classification breaks varies little over the last three years.

Question 7: How did you restock or order your inventory for 2008, 2009 & 2010?

Conclusion:

Pre-Orders were higher in 2008, as compared to 2010.

Question 8: In general, what was your store's overall staffing in 2008, 2009 & 2010?

Conclusion:

Gross Revenues were 14% less in 2010 as compared to 2008, yet staffing stayed very similar, indicating a much less profitable year.

Question 9: In general, what was your dive instructor specific staffing in 2008, 2009 & 2010?

Question 10: 9. What is your title??

Question 11: What is your store's SALES revenues for the major dive brands you sold in 2010?

Conclusion:

Sales are shown from the 80 respondents. These are the actual reported sales by store, as shown above. This first list is sorted by sales, whereas following page is a sort by the number of stores where a brand is sold. The average dive retailer reported an average of 6.7 brands they sold in their store in 2010.

CAUTION:

Please keep in mind that with this limited ’80 store’ sample, error rates make these numbers for reference only. Some brands may have larger or smaller sales and penetration rates than what is shown. Furthermore, not all brands were included in this list, as many brands are owned by larger brands, further creating market confusion in responding to this survey.

This second listing is sorted by number of stores where the brand is sold:

Conclusion:

This sort shows which brands are sold the ‘most’ in terms of store penetration.

CAUTION:

Question 12: Which Training Agencies did you work with in 2010?

Question 13: What percentage of your gross revenues did you spend on overall advertising and marketing for your store for the following in 2008, 2009 & 2010?

Conclusion:

As indicated, in spite of a 14% drop in revenue from 2008 to 2010, advertising and marketing expenses increase from 6.4% to 7% or an 8.5% increase in expense.

Question 14: How do you spend your advertising and marketing dollars in terms of percentage of your overall advertising budget for the following classifications in 2010?

Conclusion:

As indicated, Website and online marketing account for over 65% of their advertising and marketing expense with retailers.

Question 15: Over the last three years, has your company's debt changed?

Conclusion:

As shown, retailer’s debt has increased 344% since in 2010 as compared to 2008.

Question 16: If you have added cash to your company over the last three years, how many years do you expect to get that money back from your company?

Average: 5.2 years

Question 17: What percentage of your 2010 personal income is derived from the following?

Conclusion:

Surprisingly, slightly over half of the owner’s personal income is derived from the dive retail store.

Question 18: On a scale from 1 to 5, with 1 being the least important, and 5 being the most important, how do these factors influence your decision to change suppliers/vendors?

Conclusion:

As reported, availability and profit margin are the two most important factors in selecting or switching vendors.

Question 19: How much in gross dollars has your store sold in dive travel, either individually or in groups to destinations where the trip lasted 3 nights or longer?

Conclusion:

As reported, these figures are an average per store that responded to this question.

If these numbers are applied to the entire retail base of approx. 1,700 retailers, the numbers look this way for dive travel sales:

Year Ave. Dive Travel Sales Applied to Universe of 1,700 Stores

2008 $45,099 $76,668,479

2009 $37,717 $64,119,159

2010 $38,177 $64,900,461

The average dive retailer reported an average of 2.2 destinations they sold in their store in 2010.

Question 20: How much in dollars did your company sell in terms of Dive Travel to these destinations in 2010?

Due to the small sample of this survey, individual destination analysis is subject to very high error rates and therefore only able to report general regions as follows:

REGIONS
Destination	Count	Pct of Stores	Sales	Average per Store
Caribbean Only	47	58.8%	$1,105,610	$23,523.62
Mexico/Cent Am/Close Pacific	28	35.0%	$534,300	$19,082.14
Pacific	24	30.0%	$928,511	$38,687.96
USA	33	41.3%	$313,251	$9,492.45

Furthermore, these numbers indicate the following data when extrapolated:

Average percentage of stores that sold dive travel in 2010:

Year	Counts	Pct. That Sold Travel	Applied To All Stores
2008	44	55.0%	990
2009	44	55.0%	963
2010	47	58.8%	999

Conclusions:

As indicated, 3% more stores are selling dive travel in 2010 as compared to 2008, in spite of much higher travel sales.
VIII. Appendix A: Questionnaire

http://www.williamcline.com/limesurvey/index.php?sid=14&lang=en