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In-bay Automatic

In-bay automatics: has their time passed?

October 11, 2010
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For many years, the workhorse in the carwash industry has been the in-bay automatic carwash. Numbering over 40,000 in North America and 50,000 in Europe, they remain an integral part of the global carwash industry.

The last time I counted, there were over 30 suppliers of in-bay automatics in the U.S. market, and in-bays are the core product for the largest suppliers in the industry.

Why the in-bay?
In-bay automatics operate in relatively small spaces and generally command high prices ($6 to $7 on average). At a capacity rate of 10-20 or more cars per hour, they can generate more top-line revenue (and bottom-line profits) than a typical self-serve bay.

They make natural additional profit centers to businesses like retail petroleum, quick lubes, car dealers and even self-storage facilities. They also make nice free-standing businesses on strangely-shaped lots too small for anything else.

Over time, they have gone from basic spraying machines to sophisticated cleaning machines using the latest technology in foam, high pressure and chemistry to thoroughly clean every aspect of a car’s surface.

But what of their future? There are those who believe the time for an in-bay automatic has come and gone and the future lies with short, exterior tunnels.

Could it be true?
No way! In-bays are not going to disappear. They are far too useful for the majority of automatic carwashing installations around the world. And there are only so many locations that can support a tunnel, depending upon the space of their layout and their market niche.

However, in-bays will be subject to change and improvement. Let’s look at a couple trends affecting the in-bay market.

Touch-free or friction?
It’s been a hotly debated question for many years and operators and suppliers have made huge bets one way or another.

In the early 1990s, when gas stations used in-bays as a loss leader for selling fuel, they were a cost center and, frankly, not very well maintained. As a result of poor maintenance, as well as the shortcomings of the polyethylene brush technology of the time, many motorists experienced damage to their cars and shied away from in-bay washes.

This gave rise to a wave of touch-free, sold on the merits of “no touch, no damage.” The market trend was touch-free for better than a decade, at several points consisting of 90 percent of the installed base in the traditional operator/investor segment of the market.

Recently, however, the market has shifted. With the perfection of advanced, closed-cell foam technology earlier this decade, friction has made a comeback.

Current foam technology has drastically cut damage claims, vaulting friction back into the mainstream. A lack of damage claims, coupled with a more consistent and better cleaning quality (as well as lower operating costs) have convinced many operators to try friction.

The third way
One trend is becoming quite clear in the shifting make-up of touch-free vs. friction — combination offerings.

This can take the form of either a touch-free unit and a friction unit side-by-side, or a combination unit capable of washing either with foam brushes, with touch-free, or with both. This trend is growing as operators try to reach out to each market segment in their trade area.

The combination washes that can do both types of wash are also an increasing phenomenon, but they are not as straightforward as an in-bay that gives a choice of touch-free or friction.

Generally, they are more geared toward the friction customer segment, mainly because they have brushes. As there is no way to hide the brushes, the motorist’s first impression is friction; touch-free segment customers generally stay away.

Nonetheless, with good marketing and signage, 10-15 percent of the customers will choose a touch-free only wash.

The intriguing thing about the combination washes is that motorists perceive additional value with a combi-wash offering that combines a premium friction wash with a high pressure component — in essence, the best of both worlds.

Prediction: Combination offerings will increase and come to dominate in-bay offerings in the future. Combination offerings will increase and come to dominate in-bay offerings in the future.

Innovations — driving the pricing model
As long as in-bay automatics have existed, suppliers to the industry have endeavored to add features to excite the motorist, thus getting him to pay more for a wash and thereby increasing the average price per wash.

Over the last couple of decades, it seems there was a “game changer” innovation every 5-10 years, like spot-free rinse, on-board dryers or tri-foam.

Today it seems there are more of these innovations than usual. Three of them in particular appear to be driving average wash revenues higher and are therefore improving the ROI picture for an in-bay investment:

  • Rain-X (complete surface protectant) from Ecolab as well as similar products from other carwash chemical suppliers;
  • Friction wheel brushes on touch-free units (eg. HubScrub from Mark VII); and
  • Various combination or hybrid wash options (discussed above).

In each case, these innovations are creating a top-end wash that is higher than the normal market value, usually $1 higher, but sometimes $2 or more.

In so doing, they are changing the game with the motorists by creating higher value perception, and driving average wash prices upward — even in a time of high gasoline prices.

National research from the retail petroleum segment indicates over 80 percent of motorists who buy a top-end wash are satisfied with their purchase, compared to less than 50 percent of motorists who buy a basic wash package.

Given the loyalty factor of the top-end wash consumers and the fact they are willing to pay top dollar for such a package, expect to see more innovations driving wash mixes and prices upward.

Prediction: Wash prices will continue to rise slightly, but only for sites using innovations like these to drive top-end wash packages. Wash prices will continue to rise slightly, but only for sites using innovations like these to drive top-end wash packages.

Wash volumes — they don’t look like you think
Another interesting trend in the in-bay automatic market is that the bell curve of site volumes is a bit counterintuitive.

Normally, I would expect to see a standard bell curve when looking at average wash volumes — meaning most of the sites out there are in the mid-range of volume and there are fewer which have either very low or very high volumes.

But that’s not the case. Rather than a standard bell curve peaking out in the mid-range of volumes, the in-bay automatic curve seems to have two peaks — at the low-end and high-end sites. This tells me a couple of things.

First, there is a vibrant and significant portion of the in-bay market with high-volume sites, so the ability to process cars rapidly is essential.

Second, the largest number of sites, in any given fleet, washes fewer cars than average.

This means speed is not the most critical factor to in-bay automatic success. Rather, the critical factor for success is the ability to build a full menu with premium options to capture as high an average wash price as possible.

As competitive pressures increase and force volumes down, it will be especially important to have a fully-optioned system at a lower price point, even if it means giving up some throughput capacity.

Prediction: A shift toward lower price point in-bays will occur over time; however, the operators will give up speed rather than revenue-enhancing options in order to get a lower price.

Additionally, demand for high speed in-bays and resulting high throughput capacities at a higher price point will remain steady despite being a significantly smaller portion of the market.

A shift toward lower price point in-bays will occur over time; however, the operators will give up speed rather than revenue-enhancing options in order to get a lower price.

The frenzy: express exterior
Here’s the question that plagues me: “What effect will the express exterior phenomenom have on in-bay automatics?”

Yes, in some markets in the southeastern U.S. there is a real craze of express exterior tunnel systems. They dominate all new investment talk and they have had a noticeably negative effect on in-bay wash volumes in the region.

The basic express exterior model is built on low wash prices and high volumes. Typically, it is a sub-$5 price point that is advertised for the base wash (although average wash prices tend to be more in line with average in-bay wash prices across the continent).

They depend upon high volumes to make the investment nut and survive. They generally advertise speed, as well as offer free use of vacuums on site. A typical market positioning is: “Three dollars, three minutes, free vacs.”

It’s easy to see how new investors wonder whether in-bays will survive as a separate category in the future.

In-bays do not have the speed capacities of a tunnel (although some do better than you might think). While they can lead with a cheap wash package, they generally try to build the menu toward the top-end wash, so the perception of pricing is higher. And in-bays charge for vacuum services.

But in-bays will survive for a few reasons:

  • First, there are only so many premium locations that can take an express exterior tunnel. As time goes by, investors will build on top of one another and compete heavily for volume.

    These tunnels will cannibalize one another until there are the right amount for a given population — at the right price point. Over time, prices will stabilize at a level that is competitive with in-bay automatics’ current levels.

  • Second, tunnels don’t fit everywhere. There are tens of thousands of locations that are good carwash locations, but don’t have the space to fit tunnels. These will not simply go away. They will adapt and compete, and while they may emerge with a lower-average volume, they will largely be able to hold pricing.
  • Third, in-bays lend themselves very well to cross merchandising. A majority of in-bays in North America exist as an add-on business, e.g. fuel sales, c-stores, self-storage sites, quick lubes, and even restaurants.

    Investors in these concepts are looking to circle their customers and offer them even more services. Express exteriors compete very well in the carwash-only segment, but in-bays tied in with other retail sites will remain a formidable force.

Prediction: In-bays aren’t going away. Their average volumes may fall, but prices will largely hold.

Express exterior offerings will stabilize over the next few years, but will not make a major impact in the overall in-bay installed base.

In-bays aren’t going away. Their average volumes may fall, but prices will largely hold.

Going hyper over hypermarkets
What about the advent of hypermarkets and other new investors to the carwash industry? Certainly there have been a few unusual entrants into the market in the last few years — Jack in the Box, Home Depot, Sam’s Club, to name a few. What do these trends portend for in-bay automatics?

The answer is not yet clear. Certainly, there could be price pressure if carwashes are used as a loss leader to sell merchandise. However, I believe most of these new entrants view carwashing as a profit center as well as an additional service.

In the long run, they will likely put slight price pressure, as well as heavy volume pressure, on existing in-bay markets. This will not be enough to massively change the segment as we know it, which already depends on many operators who cross-merchandise.

Prediction: Hypermarkets and other non-traditionals will have roughly the same effect on in-bays as the express exterior washes do — slight pressure on prices and heavy pressure on volumes.

Look for traditional in-bay marketers to largely hold pricing, but contend with lower volumes going forward.

Hypermarkets and other non-traditionals will have roughly the same effect on in-bays as the express exterior washes do — slight pressure on prices and heavy pressure on volumes.

The $3 gas panic
They predicted it when gas got to $2 per gallon. They predicted it again when it reached $2.50. And again when it hit $3. And each time, it has come true — carwash volumes dropped, and motorists began to buy down in grade, choosing the medium wash instead of the premium, for example.

Also, each time gas spiked above a psychological barrier, predictions of lower carwash volumes abounded. But it wasn’t quite the downfall that was expected.

True, carwash volumes and average prices fall after a gasoline price “shock” event. But they also rebounded as time goes by and the new gas price gets “priced in” psychologically in the market.

“But this time it’s different,” the critics say. “This time, gas is so expensive that people won’t wash their cars as much anymore.”

To these critics, I again say, “hogwash.” Carwash volumes and prices will actually increase over time, for several reasons:

  • First, cars are always getting dirty. That is never going to change. Although the price of gasoline shocks many (particularly as quickly as it has risen in the last 18 months), the carwash is still fundamentally weather dependent. The dirtier the cars, the more they wash.
  • Second, there are strong underlying fundamentals for growth in the carwash industry as a whole. There are more cars on the road than ever before, and there are fewer people washing at home than ever before.

    As the North American population grows, these trends will continue. The industry as a whole will benefit, and in-bays will also ride the wave.

  • Third, motorists are increasingly looking for convenience and are short of time. Over 80 percent of motorists don’t wash as often as they would like because of a lack of time. This attitude benefits automated washing more so than home washing.
  • Fourth, there are already many examples of similar markets that show $3 gas is not too high to impact wash volumes and economics — all the markets of Western Europe, for example.

In most of these markets, gasoline price is artificially high: generally double our prices, but in some cases even more. And they report the same phenomenon over the last couple of decades — as fuel prices have risen to over $7 per gallon, carwash volumes remain relatively stable and wash prices hold and are even rising slightly (they are similar to ours in most markets).

This tells me we have not yet reached a gasoline price point in any of the major world markets that is too expensive to support automated carwashing. In short—we have a long way to go before this model will change.

Prediction: $3 gas will soon become “priced in” to motorists’ mindsets, and future fuel price increases will follow a similar trend — initial shock and lower wash volumes, but gradually rebounding to normal and holding wash prices within a few months.

Meanwhile, more drivers will be on the road, and more of them will wash their cars in in-bay automatics (as well as other types of professional carwashes).

$3 gas will soon become “priced in” to motorists’ mindsets, and future fuel price increases will follow a similar trend — initial shock and lower wash volumes, but gradually rebounding to normal and holding wash prices within a few months.

Bottom line:
In-bays are not going away, although their offerings will adapt to competitive and macroeconomic forces. It should be a fun run!


Craig Campbell is VP of Sales & Marketing for Mark VII Equipment LLC and has over 10 years experience in the carwash industry. He also owns and operates a seven bay self-serve carwash in the metro Denver area. For more information, e-mail Craig at ccampbell@markvii.net.

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