Is the tide ready to come back In?
by Gene Muchanski, Editor
Dive Industry Professional
They say the tide cannot start to come back in until it has stopped going out. I guess that also applies to the economic development of the recreational diving industry. Problems caused by the COVID-19 pandemic are still hurting our dive businesses and the negative aftermath is still going to be with us for at least another year. Let’s look at what has happened to our industry.
The first quarter of 2020 was a good one for most of us. The 2nd, 3rd and 4th quarters of 2020 were a disaster. So was the 1st quarter of 2021. Things started to improve in the 2nd quarter of this year and I believe they will be better than last year as time moves on. I don’t foresee a speedy recovery for our industry and things will definitely not return to the way they were before the pandemic. Here’s why I believe that.
In 2019, the manufacturing sector was purchasing raw materials and creating inventory at capacity. There were approximately 1,400 – 1,500 retail stores with ongoing educational and travel programs, and they had sufficient inventory. Two years later, the industry is suffering from the negative momentum of decreased sales and business closures. We are talking to manufacturers today who are either low on inventory or out of stock on key product lines. It’s going to take time to bring their inventory levels up to meet any kind of increase in demand. We believe that a number of dive stores have gone out of business and many of the marginal ones have painfully low stock levels. I am afraid that too many stores spent their limited resources paying their overhead in the past two years instead of replenishing their inventory. Since many stores cut out their travel programs and cut back or cut out their training programs, replenishing their inventory was not a high priority with them last year. If demand for classes and travel return this year, in any amount, replenishing inventory will be the number one priority for stores that want to stay in business.
I believe we are at the crossroads of a very complex year. By this time in May, the industry should be gearing up for a successful season, based on the planning that normally takes place six months before the new season. Manufacturers normally place orders with their OEM’s for their products based on dealer orders they receive in the fall. That didn’t happen last year. This year, retail inventory levels are down, many fill in orders are on back order, new classes have just started for a small percentage of the dive stores, and travel programs are either on hold or are getting cancelled due to COVID-19 fears. I just had a FAM Trip to Curacao cancelled last week.
We’ve spoken to a number of Sales Reps recently and not all of them are on the road yet. It’s very expensive for Reps to make one-on-one sales calls, and the orders they are getting is not sufficient to cover their costs. Of course, there are exceptions and the State of Florida may be that exception. However, let’s be honest about our projections. Florida accounts for about 17% of the dive stores in the U.S. I would estimate that we account for over 25% of the sales revenue for the industry. Florida is currently open for business. Some of the small to medium dive stores are doing OK, but not everyone.
Now for the bad news. The 2021 Hurricane Season starts June 1 and runs through November 30. Researchers at Colorado State University have named 17 storms for this year, eight of which are expected to become hurricanes. We are praying for a mild Atlantic Hurricane Season but preparing for an above-average Atlantic Hurricane Season. I fear that a bad Florida Dive Season this year will have a very negative impact on our plans for a 2022 industry recovery.
With all of that harsh reality talk behind us now, let’s come up with a recovery plan, that starts with salvaging this year’s season, and not put all of our eggs into the “2022 is going to be a great year” basket. We need input from the Dive Equipment Sales Reps who are on the road. We need to have an open dialog with the dive stores that are still in business. We need status reports from equipment manufacturers, training agencies and travel businesses. A few things we will be looking at this month are the numbers of initial certifications compared to last year; this year’s sales revenue compared to last year; the number of dive stores that are still in business, and the dollar value of existing inventories. A major bit of information we need is the number of Dive Industry Professionals who are going, not going, or undecided about going to DEMA Show this November. We need to know how many equipment and travel buyers will be attending the show in spite of possible bad weather, unpredictable travel arrangements, possible prolonged covid restrictions and an ever-declining or non-existent open-to-buy budget they will be dealing with at the time.
With the above data collected from the industry, we can put a sensible plan together to determine where we are as an industry, how bad the pandemic has affected our economic development and what we can do to return to sustainable numbers. This is an all hands on deck request. We will start with our Retail Dive Store Survey and our Manufacturing Sales Rep Survey that are posted to our website. In the weeks to come the Dive Industry Association will create a few more surveys to gage our industry’s current economic situation.
For more information, contact Gene Muchanski at email@example.com