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Discount carwashing: A case study

October 11, 2010
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This month’s cover story focuses on the long-term impact discount, conveyorized carwashing will have on the face of car-care (see page 56).

Opponents of discount carwashes say these washes prey on existing operators; supporters of discount carwashing say it increases carwashing activity in a market by using a low price-point to attract homewashers. Let’s use a crude model to see who is right.

Assume a market with 100,000 registered vehicles. Research tells us half of these vehicles will be home-washed, so only 50,000 of the market’s vehicles are in play for professional carwashes.

If these 50,000 cars are washed monthly, that would amount to 600,000 carwashes a year. The average full-service washes approximately 75,000 cars a year, so this market will support 8 full-service carwashes.

Now, let’s assume an express wash is built in this market and washes a very conservative volume of 150,000 cars a year. The presence of this wash has a culture-shifting impact on the market, and a quarter of the homewashed vehicles (12,500) are now in play.

Let’s even assume that the 62,500 cars now in play wash 50 percent more — 18 times a year. We end up with 1.125 million carwashes, or 975,000 minus the express wash’s volume —enough for 13 competing washes at 75,000 cars.

But this model is very dependent on the express wash maintaining a conservative volume and affecting significant purchasing changes in the homewasher market. What if:

  1. The express wash now washes 250,000 cars, as many do. We lose a wash and a half from the market (down to 11.5); and
  2. The express wash only draws 10 percent of the homewashed vehicles into the market. We now have 55,000 cars washed 18 times a year. That’s 990,000 washes, minus 250,000 for the express, so 740,000 total. We just lost another wash and a half (9.85 total); and
  3. Will new consumers average 18 washes a year? Let’s assume light activity by former homewashers will offset gains by regular carwash patrons, keeping the mean around 12 a year.

Now we only have 660,000 total carwashes in the market per year — 410,000 washes after subtracting the express wash’s volume.

That will support 2.5 fewer carwashes than the market supported before the express was built. Add to that the chaos experienced by the market as carwashes try to compete by making disastrous pricing decisions.

In fact, this is the very situation that has played out in several U.S. markets over the past few years. There’s no right or wrong to it — if express tunnel washes have invented a better mousetrap, carwashing is in for some major structural changes.

Most carwash operators who have competed with discount washes will tell you their experiences have been uniformly negative.

Discount washing will bring more carwashing to a market, but also redistribute where those cars get washed.

Operators must work hard to build customer loyalty, so it will be harder for discount washes to affect buying shifts.

Success inevitably will come from shoring up your base — and making sure you don’t take it for granted.