LDS profit on tanks & air fills?

[awap]

Originally Posted by mike_s

I'd be surprised if you didn't get a free fill from a local shop if you bought a tank.

New tanks typically come with a VIS, which requires some air afterwards. Usually it's a full fill as it's kinda pointless just to fill it to a few hundred psi.

yeah... and like no one in the dive business has ever lied before to their customers.

.09/cf * 77cf for a AL80 fill = $6.93.

at $6.93 per tank and a 90% profit, he's saying his cost to fill an AL80 is way under $1 buck.

He's either lying and knows it, or he really sucks at his math and doesn't know he's lying.

And perhaps he means 90% markup which would produce more believable numbers. Maybe he just remembered it was 90% something and it was producing a profit.

I'm not saying that gas is a major profit center for most shops. They pump gas because they must be able to do that to qualify as a scuba shop. They used to make their main profits from gear sales to new divers. Now they are probably making more from training and only getting the large profits on gear wsales to those new divers that fail to locate the internet in time or are successfully scared away from the internet in their training. All I'm saying is that the idea that each fill sold to a customer is putting the shop further in the red is BS.

[BouzoukiJoe]

Originally Posted by awap

All I'm saying is that the idea that each fill sold to a customer is putting the shop further in the red is BS.

I think we can all be right on this one. The reason that its not profitable for low volume shops is the fixed costs. The "variable" cost of each additional fill is small, so it doesn't hurt the shop to sell more air- in fact it helps them get closer to the break even point. So you are right that each additional fill puts the shop closer to the black (or further in the black if they are already profitable) as long as they charge more than their variable cost.

[cummings66]

The loss leader concept is well established and the dive shops I am sure are well aware of it. That's what is being discussed here, take a small hit for this and make big profit on that and the end result is you made money.

I know a guy who services compressors, big ones that some have hinted cost upwards of $60k. They are more efficient than the smaller ones, but they are not free to operate and to be honest selling a $5 fill isn't making money, nor is it losing a lot of money. Consider how many divers get air, then look at the group as an average. Even if a couple of them buy something that money the air fills are covered by the new sale.

If they only did air fills they would go out of business.

[crgjpg]

Exactly

[ScubaToys Larry]

We are more efficient than a lot of other shops. We make $27.85 per tank fill that we charge 5 bucks for. That extra profit lets us drop our prices on the other gear sales, and offer the gift certificates on the forum.

Realistically, a tank fill costs a shop right near the $5.00 mark when you take in capital investment, floor space you are using, electricity, filters, synthetic oils, testing, labor, etc. If doing a lot of fills, and very stream lined operation with a big compressor - might get that down to 4 bucks. But if you factor it all in... that's probably the cost. But shops do it with the hope that while the guy waits the 10 minutes to get the tank filled - he'll buy a t-shirt or a mouthpiece... that's it folks!

[ReefHound]

A good accountant can do that kind of thing for you.

[in_cavediver]

I do want to add one thing - it is possible for a dive shop to make money on air. It just takes pumping a LOT of air to do it.

My preferred shop - Cave Excursions - pumps a LOT of air. (Its my favorite because it means I am cave diving!). At one time, they banked something like 10,000 or 20,000 cubic feet of 32% and went through it each week. They bank air, 50/50 and trimix 21/35 as well. Bill has a rotation of Haskels and compressors just to keep up. Then again he sells by the cubic foot and was a founding member of cave fills in LP tanks so a single diver may buy 120-200cft of gas in a single fill. Its all about volume.

[georoc01]

I'd say, if they are taking a loss on fills, they must get killed on tank rentals. The shops around here rent them for a dollar more than the fill, and given the cost of keeping them in hydro and vis, it must be a real loss leader.

[in_cavediver]

Originally Posted by georoc01

I'd say, if they are taking a loss on fills, they must get killed on tank rentals. The shops around here rent them for a dollar more than the fill, and given the cost of keeping them in hydro and vis, it must be a real loss leader.

You'd think but really, once a tank is paid for, it only costs money every five years and even then, its only 10-15 dollars. VIP's are in house so its just time on that. Take an AL80 and assume its cost to the shop is $100. 100 rentals at $1 profit paid for that tank. In 5 years, if you do 115 rentals, its paid for.

Compressors though, they have periodic costs whether you use them or not. Each quarter, you have the gas testing done (required for selling breathing air). With usage, based on hours, you have compressor oil, filters and scheduled maintenance.

[mike_s]

Originally Posted by awap

All I'm saying is that the idea that each fill sold to a customer is putting the shop further in the red is BS.

Each fill doesn't put the shop further in the Red.... but in most cases fills are a loss. But they are a "loss leader". You have to have them. Like Larry said, he hopes while they're filling your tank that you're buying other stuff. Or will make them your main shop for purchases.


The cheap oil-change-place near where I live does a "loss leader" on oil changes on your car. they charge $12 bucks (as a loss leader) and when you get in there they try to "upcharge" you on ohter services, like alignment, brakes, or anything else they can find in their "20 point inspection process". The $12 is just to get you in the door, then once your car is on the rack, they give you the "bad news". THAT is how some loss leader shops run. Luckily most dive shops just sell air at a cheaper price to get you to buy other stuff.

Originally Posted by georoc01

I'd say, if they are taking a loss on fills, they must get killed on tank rentals. The shops around here rent them for a dollar more than the fill, and given the cost of keeping them in hydro and vis, it must be a real loss leader.

Well that depends on how you factor the cost of the rental tank. Most rental tanks aren't paid for entirely out of the capital purchase budget just for being rental tanks. They also use them for student tanks for open water classes, etc.

I wouldn't call them a big profit center, but around here a rental tank runs about $4 more than a fill. 20-25 rentals and it's paid for. In the FL keys, that could be done in less than a month. Inland shops, maybe done in one diving season. Every year after that isn't a loss, but I wouldn't call it "gravy" either. But the extra income on a rental tank on top of air helps offset other costs.


If we could get super rich running a dive shop, then we'd all be doing it instead of trying to play "monday morning quarterback" on here....