Professional Carwashing & Detailing

Carwashing's New Year revelation

October 11, 2010

The end of the calendar year is the time when most firms evaluate financial and operational performance and set course for the next year.

For most carwash operators, the holiday season coincides with the peak carwash season when operators are extremely busy trying to do everything possible to maximize wash volume and sales revenue.

Unfortunately, it is easy for operators to ignore or overlook strategic planning during this crush of business.

Trying times ahead

During 2004, Professional Carwashing & Detailing published several editorials that discussed some of the issues that are expected to challenge many carwash operators for the foreseeable future.

These issues included the exploding cost of labor, insurance and other operating expenses, increased competition from low priced exterior-only carwashes, over-development, and the quality of the unskilled labor pool.

These things will be especially troubling for low and medium volume carwashes and operators that are experiencing stagnant volumes. In addition, the industry is now facing the uncertainties of globalization and the walmartization of our economy.

Carwashing imports and exports

Many economists believe that globalization will ultimately benefit the US economy. According to economic theory, a country has a comparative advantage in those products where its efficiency relative to other countries is highest.

This economic doctrine seems to explain why we have seen the demise of the steel, furniture, textile and other industries in the US and a subsequent increase in our trade deficit.

However, some economists are now questioning the validity of comparative advantage because Asian countries are increasingly more competitive in both lower and higher-value goods.

Imagine how the landscape of the carwash industry would change if one of the carwash equipment manufacturers was able to produce equipment in China and then sell it here for 30 percent less than what it costs to produce in this country.

Will globalization affect carwashes?

Globalization has also caused many companies to outsource blue-collar and, increasingly, white-collar jobs overseas in order to become more competitive.

Unfortunately, the displacement of US jobs appears to have mostly a sobering effect. According to data from the University of California at Santa Cruz, 68 percent of job-losers found work within 3 years, but their average wage declined 10 percent.

Forty four percent of those re-employed saw their average wage drop by 49 percent. According to data from Forrester Research Inc., only 46 percent of the top 1,000 largest US companies plan to do virtually no white-collar off shoring. Forrester also estimates that an additional 3.4 million non-factory jobs will move abroad by 2015.

If this trend continues, the decision to purchase a non-essential service like a carwash may become increasingly more difficult for displaced and re-employed workers.

Globalization and the Wal-Mart effect

The pressures of competing globally has also created large firms such as Wal-Mart that operate on razor thin margins in order to capture market share and sales necessary to support long-run growth.

Wal-Mart, the world’s largest company in terms of sales, is often accused of coming into a marketplace and devastating local businesses with everyday low prices and replacing good jobs with low paying ones with little or no benefits.

Wal-Mart and other hyper-marketers are testing the carwash waters. Imagine the impact that a legion of $2.00 Wal-Mart carwashes could have on the carwash industry.

Carwashing’s globalization realization

Unlike the challenges that carwash operators face every day, the secondary effects of globalization and walmartization may result in subtle structural changes in our economy that could ultimately affect the overall demand and distribution of carwash services.

Investors and operators who believe that a certain business model is the panacea for the pressures of competing in today’s marketplace may be disappointed when faced with the prospect of competing against a company like a Wal-Mart that has a clear advantage in terms of being the lowest cost producer.

In the final analysis, the ultimate competitive advantage might be valued-added car-care services, manual labor and quality customer service that many new investors seem to eschew.

Robert Roman is a former carwash, express lube 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.