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This past June, the International Carwash Association gathered together 20 of the industry’s best and brightest for a think tank session. Their goal: Identify the opportunities and challenges for carwash business owners and suppliers/manufacturers in 2010.
Over the course of two days this group of operators and vendor representatives worked on identifying the changing needs of carwash consumers, brainstorming ideas to improve the supplier/distributor system, and finding opportunities for growth, particularly in the area of environmental messages.
The ICA released a summary report in September, but Professional Carwashing & Detailing was interested in delving further into the synopsis and hashing out ideas which could help operators recover from the industry’s greatest set-back in years. What follows is a road map to success; a guide to jumping over the hurdles of 2009 and into the opportunities of 2010.
STOP: Analyze trends and plan
The group assembled at the ICA’s headquarters in Chicago focused on six macro trends within the industry, but probably the largest concern for operators in the room was lending, according to Eric Wulf, executive director of the Association, who said operators have been hindered by shrinking lending channels as the recession claimed more and more banks.
And lending isn’t the only hurdle, according to Fred Grauer, a partner in Whistle Clean Car Wash, as well as executive vice president for Micrologic Associates; carwashing has become a commodity in the consumer’s mind. “It is difficult for an occasional carwash customer to appreciate the difference between the $3 and $7 exterior, as well as the $9 or $15 full service,” Grauer explained. “The amount of competition for a shrinking expendable dollar is huge so you either have to be the value provider or the low cost provider.”
Both Grauer, who was not present at the Summit, and Wulf encouraged operators to consider the difficulties in raising capital and in attracting customers when planning for 2010. Wulf said operators who acknowledge these challenges will help themselves by being forced to think outside the box to increase and/or maintain revenues. For instance, creating a new marketing plan or focusing on incentive-based employee reward programs can help boost sales with very little cost to the operator.
Take a moment to jot down the hurdles you face in 2010, and then hold a brainstorm session with management and/or your entire staff. Ideas for improving efficiencies, attracting a new customer base or niche market, and growing customer loyalty should be at the forefront, while solutions to some problems, such as difficulty in raising capital for new equipment, should be saved for another year.
YIELD: Push credit cards ahead of cash
Ken Brott, vice president of sales and marketing at DRB Systems, a manufacturer of payment systems for the carwash industry, shared some interesting data with the group assembled in Chicago. In the summer of 2008, Brott said his company noticed that while there was a distinct decrease in dollars-per-credit card transactions at carwashes across the country, there was at the same time an increase in overall credit card transactions. “The net effect of the two trends was an increase in overall revenue,” Brott noted, adding that many restaurants and retailers have also noted a drop in dollars-pre-credit transaction.
“The trend showing a monthly growth in credit card transactions has us a bit more baffled,” Brott continued. “An argument could be made that credit continues to win out against cash in the marketplace and that could explain the increase in credit transactions. But while our measurements show a slight increase in credit over cash, it hasn’t been large enough to account for the overall transaction increase.”
According to Brott, he’s also heard anecdotal evidence that the American consumer – for the first time in two decades – is reducing his/her credit card debt, “so it is possible to conclude that carwash customers are coming in more often, but spending less per visit.”
An increase in credit card usage could pay off once the recession ends, according to Brott, who points out that credit card users tend to spend more than cash customers and will probably grow their dollars-per-credit transaction once discretionary spending rebounds.
“Also, volume increases mean consumers are creating positive habits towards their local carwash,” Brott said, and it encourages word-of-mouth advertising even in competitive markets.
Operators who want to capitalize on this trend should consider methods which encourage and facilitate credit card usage as much as possible, including loyalty programs, monthly unlimited programs, and special discounts to credit card customers similar to those in the gas market channels.
ROAD WORK AHEAD: Changes in the distributor/vendor channel
Although retail operations have undoubtedly been affected by the economic recession, the greatest impact to the carwash industry seems to have affected the vendor channels, including distributors. According to Wulf, the role of the distributor channel came up several times, but in different contexts, during the Leadership Summit.
“For the manufacturer base, the question was, ‘is my distributor going to be around next year?’” Wulf explained. “And in the distributor channel, it was, ‘I can’t make money selling parts; I need to make money in providing services.’” In the middle of all of this, Wulf pointed out that the operator is still wondering 'Who do I go to? Who can I trust?'
To address the growing concerns of the vendor channels, the ICA is currently researching the viability of surveying the supply channel to give manufacturers and distributors better reference and benchmarks. Currently, the only industry analysis offered by the ICA is a study conducted every three years of the consumer in relation to their carwashing preferences and habits. Wulf said a vendor survey could be conducted as early as the first few months of 2010.
“It really is necessary,” Wulf said, “because it continues to hamper our efforts as an industry if we operate without metrics.”
Paul Fazio, president of Sonny’s Enterprises, Inc., agreed, adding that the position of the OEMs has changed drastically in the last few years, and distributors are faced with the choice between representing a single line of equipment or “owning” the distribution and service in their area by offering multiple equipment lines. Meanwhile, the OEM is having to ensure proper representation in each region. “There is a lot of change happening now,” Fazio said, “and it will continue for the next 18-24 months as companies re-evaluate where they want to be five years from now.”
Fazio questioned if exclusivity will even exist in 2015. “We see changes now of companies that only dealt with exclusive distributors now adding multiple non-exclusive dealers in a market — as well as other OEMs buying the distributor and then marketing directly in those territories. This isn’t speculation; it’s a matter of how far do these changes go,” Fazio continued.
Carwash operators should start preparing themselves for turbulence in the supply channels. Fazio suggested operators learn to do their own preventive maintenance and standard repairs. Not only that, but operators will probably have less companies to choose from in the future, Fazio said, so it is important to conduct due diligence now when selecting a supply channel.
For distributors, the changes mean a move towards offering a wider menu of services far beyond just selling hardware and equipment repairs. “[Services that] help with driving the client’s business to the next level,” Fazio said, adding that distributors will be focused on helping clients succeed and become multi-site operators who can run their companies more effectively and efficiently.
“Anyone can offer equipment, but if you can also package for the client that includes education, marketing and automatic supply fulfillment, I think you deliver much better overall support for those clients,” Fazio explained. “I didn’t say it would be easy, but I do believe it will be necessary and better yet — valued.”
SLOW: Children at play
Planning for the future doesn’t just mean addressing the immediate issues of 2010, it also means creating a business plan which incorporates a 10-year vision and seeks to capitalize on trends just now beginning in the younger generation.
According to Wulf, one of the macro trends discussed at the June meeting was a decrease in the number of vehicles on the road, or at least the number of miles being driven. Wulf pointed to research which suggests the increasing popularity of services like the Zip Car, which allows the consumer to essentially share ownership of a vehicle in a large city, and also a decrease in the number of public high schools offering driver’s education training.
Wulf said American children may not be as obsessed with getting their driver’s license as the generations before them, but that doesn’t necessarily translate into bad news for the carwash retailer. Other studies point towards a much more earth-conscious youth, who is acutely aware of his/her impact on Mother Nature.
And while America’s children might be slower to climb into the driver’s seat, its senior citizens are still holding fast to the wheel. “I still believe that on the flip side [of the less miles driven] trend, is the graying of the American population,” Wulf stated, adding that older consumers are more likely to want to purchase carwash services instead of holding the hose themselves.
GREEN LIGHT: Capitalize on eco-friendly trends
Younger customers aren’t alone in wanting eco-friendly services, drivers of all ages are becoming more aware of their impact on the environment. One of the final macro trends discussed at the meeting was the opportunity for professional carwash operators to push the green message.
“Our approach has always been to preach the good news,” Wulf said, instead of aggressively seeking to criticize home washers or charity wash events. Wulf said recent studies from outside the professional carwash industry, like the research published by the city of Federal Way, WA, show that the issue is moving beyond the industry’s scope and that’s a good thing.
“We’re greasing the skids,” Wulf explained. “You don’t want to poke anyone in the eye. They’ll just point out that it’s self-serving, and it is, so instead we’re taking advantage of the momentum we’ve started.” Wulf said the ICA was very careful with the message it created through its WaterSavers program. “We do need to raise the banner,” he stated. “We are a user of water and this issue will only become bigger. We can’t afford to not participate. But we want to do it in a way that doesn’t alienate the consumers.”