PC&D MAGAZINE
A competitive future for full-service washing
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From Volume 27, Issue 1 - January 2003
Feature
C-store/gas in-bays are dominating some markets and getting stronger, but full-serves will maintain some distinct advantages.
by: Robert Roman
 
 Related Information
  External market threats for full-service operations
  Factors affecting the growth of carwashing at c-stores
  Table 1: Automatic carwash numbers
  Table 2: Tampa MSA demographic profile
  Table 3:  Tampa MSA market profile
  Table 4: Carwash market estimates

Although it has been described as the “go-go 90s,” the past decade was actually a period that created tough times for many carwash operations.

By some accounts, the notion that full-service carwashing is in trouble is greatly exaggerated. For example, industry trends show that both price and average revenue per car have kept pace with the rate of inflation.

In addition, trade associations are helping operators cope with environmental issues; OEMs are providing better chemicals and equipment; and the International Carwash Association (ICA) is embarking on a marketing campaign to improve the image of professional carwashing and to get more homewashers through the door.

An unsettling future?

Certainly the demand for full-service remains strong in many regions of the country, however, there are several factors that suggest an unsettling horizon for full-service carwashing:

· Industry averages show that the trend in wash volume for full-service is flat;

· The rate of new construction is lower; and

· An upward trend in the ranks of operators that are converting from full-service to exterior-only.

The greatest threat to the future of full-service is perhaps increased competition.

In a sector of the industry where labor expenses can consume as much as 50 percent of each sales dollar, this is one area where full-service operators can probably expect to get the least amount of relief.

In-bay surge

Next to driveway washing, full-service operators often complain that it is the lower-cost in-bay automatic sector that continues to steal away the cream from the top of the bottle.

For example, the ICA has reported that at-home washing has dropped by 6 percent and yet, convenience industry surveys show that the percentage of c-stores offering carwashes has surged from 2 percent in 1998 to 8.9 percent in 2000.

When you consider that 24 percent of gas/c-store sites, 26 percent of fast lubes and 42 percent of self-services operate automatic carwashes, and the fact that the vast majority of these carwashes are lower cost in-bay automatic units, the growth of carwashing outside of the full-service arena is not something to be taken lightly.

Carwash/c-store match

As shown in Table 1, the proliferation of automated carwashing is greatest in the convenience store industry. After all, carwashing is a natural fit for a gas/c-store site.

Why is it smart to have a carwash at the same site where consumers buy gasoline?

· Gas/c-stores can average anywhere from 240 to 500 or more cars per day on site;

· In-bay automatics require only limited management attention;

· Gas/c-stores tend to have excellent site and location characteristics;

· It’s relatively easy for gasoline marketers to get into carwashing.

Given these characteristics, retailers need only to focus on the cost of development, maintenance expenses, downtime, marketing and residual values.

This is the same “build-it-and-they-will-come” philosophy that OEMs and distributors used to expand the self-service sector. Although there is nothing intrinsically wrong with this approach, it will do nothing to improve the influence that full-service operators have on manufacturing design and business strategy.

Increasing volumes

Convenience and gasoline retailers have also made significant in-roads in developing carwash volume. New and remodeled facilities now feature washes with clean, bright wash bays and modern equipment that have a high degree of marketability.

In addition, gas/c-store carwashes are no longer being used as a loss leader for selling gasoline.

For example, in the Tampa Bay region, there is less than a $1 difference between the average carwash price with and without a fill-up.

Retailers are also getting better at promoting and marketing their carwash operations and managing them as distinct profit centers, including cross-promotion, loyalty programs, pay-at-the-pump technology, POS merchandising and personal selling.

A closer look

We can illustrate the entrenchment of convenience store carwashes by using the Tampa/St. Petersburg-Clearwater Metropolitan statistical area as an example.

The TPA MSA is located on the West-central coast of Florida along the Gulf of Mexico and includes the counties of Hernando, Hillsborough, Pasco and Pinellas.

The trade area is socially and economically diverse and is home to 189 gas/c-store carwashes, about 40 full-service conveyor carwashes and an even greater number of self-service facilities.

Competition for carwashing within the MSA is fairly intense and the full-service market has often been described as saturated.

The TPA MSA may not be representative of the typical metropolitan carwash market but our results strongly suggest that gas/c-store carwashes clean far more vehicles per year than the full-service segment.

What to do?

If you consider the area’s annual average growth rate of facilities for each segment - approximately 4 percent for gas/c-stores versus 1 percent for full-service - the argument can be made that full-service will continue to be at a disadvantage in terms of competing for market share based on sheer numbers alone.

Does this suggest that full-service operators should throw in the towel? Absolutely not. Our models suggest that the demand for full-service remains strong even in a supposedly saturated market such as the TPA MSA.

Second, despite all of the marketing hype, it still requires a certain amount of time to get a carwash at a gas/c-store. If customers spend the average of three to four minutes at the pump, three to four minutes in the c-store, five to eight minutes in the carwash waiting line and another five to eight minutes in the wash-bay, it can take as long as 16 to 24 minutes to get a car washed.

Finally, there is usually only a certain level of service that gas/c-stores are able or willing to provide.

For example, the vast majority of their operations are unattended in-bays that do not produce the highest quality wash and where it is not possible for consumers to purchase extras such as exterior and interior detailing and other car care appearance services.

Robert Roman is a former carwash and detail shop operator and is president of RJR Enterprises (www.carwashplan.com), a Clearwater, FL-based company that provides professional advisory services to the carwash industry.
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