Over the last several months, I received a number of questions from new investors about the future of the in-bay automatic and its ability to compete against the likes of an express exterior carwash.
Let’s examine the supply and demand sides of the market to identify some of the reasons why in-bay automatics will continue to remain popular and profitable.
What should private investors consider when contemplating in-bay automatics?
1) Don’t look to the petroleum and convenience store industries for answers or meaningful comparisons.
The market characteristics and economics of in-bays at gasoline stations and convenience stores are quite different from what a private investor will face in the open market.
Petroleum marketers have a captive audience or “built-in” demand for carwashing that is primarily a function of gasoline and in-store sales volumes. Gasoline and many convenience items are commodities that consumers need to buy on a daily basis. These products lend themselves very well to cross-merchandising with point-of-purchase technology.
Petroleum marketers also face lower capital costs for in-bays due to the economies of scale in developing sites.
2) Look for viable niche markets.
In addition to serving as an add-on profit center for an existing car-care facility, a single or dual in-bay automatic can be a good candidate for in-fill properties that are too small for other types of retail outlets.
This can include out-parcels in shopping centers, regional malls and other shopping destinations that have strong anchors and national brands.
3) Don’t ignore the golden rule of investing in an income producing property.
One of the keys to success is matching the cost of the investment with the market potential of the location and site. Is a carwash the best use of the property? If so, is an in-bay automatic the best use of the site as a carwash?
Investors that ignore this rule could end up with an expensive job rather than a lucrative in-bay automatic carwash business.
4) Traffic flow is very important, but there are other factors with a strong influence on the demand for carwash services at a free-standing in-bay.
Although many investors continue to use traffic count, capture rate and site analysis checklists to predict the anticipated demand for in-bays, statistical analyses have repeatedly shown there is no strong, positive correlation between carwash volumes and traffic counts.
Traffic counts and capture rates are unbiased, but they are not consistent or efficient estimators of carwash volumes. Our research has shown that income distribution, lifestyle composition and competitive density are equally important factors in terms of characterizing the demand for an in-bay automatic carwash.
5) There is a difference between “Git-R-Done” and getting it done right.
Most new carwash ventures will achieve their potential if the location is good and the operator executes properly. However, investors need to realize there are economic failures in the industry. Most retail outlets which fail to make money will eventually close their doors and the property and building will move on to another or similar use.
However, a carwash facility serves a single purpose and closing down is a rarity. Instead of closing down, the carwash business will usually limp along at breakeven or some low level of profitability until a buyer is found.