Over the last decade, the membership model has been the rocket ship driving growth and profitability in the carwash industry. This shift in focus toward recurring revenue has resulted in new entrants and new investment, and, as a result, operators and vendors have almost exclusively concentrated on solutions and strategies around memberships.
However, amid the membership fervor, the retail side of the business — meaning all non-member transactions — has often been neglected.
When we examine how a membership-focused business grows, it is clear that retail is a critical contributor. By understanding the potential of retail and implementing effective strategies, carwash businesses can tap into a vast customer base, foster loyalty and drive significant growth.
The neglected potential of retail
A typical membership-focused carwash might derive 60% of its revenue from unlimited members, with the remaining 40% from retail. But, this doesn’t tell the whole story.
When we look one level deeper — despite retail only accounting for 40% of a carwash’s revenue — Rinsed analysis reveals that retail washes often account for as many as 80% of the unique vehicles that a carwash sees over the course of the year. That represents the vast majority of a carwash’s customer base, and they are likely not receiving any type of personalized interaction.
It’s no surprise that retail customers are not happy, and according to a recent International Carwash Association (ICA) Pulse survey, only 35% of retail customers are extremely satisfied with the value they are receiving. When looking at the data, it’s clear that carwashes are leaving a lot on the table by only focusing on memberships.
The journey from retail to membership
Most members’ first impression with a carwash is as a retail customer. Focusing on providing an exceptional retail experience from day one is crucial in cultivating a strong foundation for long-term membership growth. Rinsed looked at the drivers of growth for a carwash from 2,000 to 4,000 members over two years. While membership growth contributed significantly to overall revenue growth, a closer examination reveals the importance for a carwash’s retail customer base to fuel that member growth.
About 40% of these new members began as retail customers, so purchasing a membership was not their first interaction with the business. On average, these customers visited the carwash 3.5 times before converting to members. In addition to the members who started as retail customers, the revenue directly attributed to retail washes grew 25% over the same period.
So, zooming out, the data shows that about two-thirds of the business’ revenue growth was ultimately attributable to retail. This data highlights the untapped potential of retail customers and the need to focus on enhancing their experience.
Memberships are not for everyone
The first step to improving the retail experience is realizing some customers are not a good fit for membership. This does not mean that they should be neglected or forgotten about. There are a lot of ways to generate more revenue from retail customers besides converting them to members.
For example, operators can increase their usage frequency or average spend through loyalty and rewards. Not only does cultivating this relationship increase the chances they eventually become members, but if they do not they will still become more profitable customers.
The path for retail success
In order to drive these results, professional carwash businesses need an effective strategy with the proper tools and automation. To start, retail customer communications should be personalized based on usage and transaction history. Messages to retail customers should be timely and sent immediately after visiting.
Businesses should strive to make their retail campaigns actionable, providing customers with a clear call to action, such as an easy way to sign up for a membership online, which encourages them to take the next step. By capitalizing on the positive experience of a recent wash, businesses can leverage the customer’s satisfaction and offer seamless on-ramps to becoming a member.
Collecting customer information, especially from retail customers, is vital to personalizing marketing campaigns and communications. Providing incentives, such as discounts or free washes, in exchange for contact information can help gather valuable data. Instead of generic, mass marketing campaigns, businesses should aim for relevance and personalization. By sending targeted offers, relevant promotions and timely messaging, businesses can enhance the retail experience, increase customer lifetime value, and, ideally, convert retail customers to long-term members.
To help bridge the gap between retail and membership, there needs to be an expansion of tools and capabilities to cater to retail customers. These tools should enable businesses to collect more contact information, segment and communicate with retail customers in a personalized way, and reward their retail customers, resulting in increased usage and spend.
Retail and membership are the future
While membership growth has been the driving force behind profitability in the carwash industry, neglecting the retail side of the business is a huge missed opportunity. By prioritizing the retail experience, businesses can tap into a vast pool of potential members, foster loyalty and drive significant growth.
Personalized marketing, relevant offers as well as the use of effective CRM tools are essential in creating a positive and memorable experience for retail customers, leading to increased satisfaction, repeat visits, and higher conversion rates to membership.
Carwash businesses must recognize the importance of retail and implement strategies that not only focus on membership growth, but also enhance the retail customer journey. Embracing the power of retail alongside membership will pave the way for continued long-term success and profitability in the carwash industry.
Austin Esecson is co-founder and CEO of Rinsed: The Car Wash CRM. Before Rinsed, Austin worked in private equity with a focus on the carwash industry. During this time, he discovered the lack of tools operators had to allow them to manage their customers effectively and provide a high-quality customer experience at scale. To learn more, visit www.rinsed.com.