Though Canada and the U.S. share many similarities when it comes to business operations, it seems like the carwash market is a sector where differences in consumer behavior are quite apparent. Many people think that the similarities between the two countries would lead to similar market behaviors, but many American business models tend to fail in Canada for that very assumption. Remember Target? The company assumed that operations in Canada would be just the same as in the U.S. Spoiler: They definitely were not, and the expansion failed.
Customers in Canada just act differently from customers in the U.S., even if it may not seem like it. That’s why both carwash operators and carwash equipment manufacturers need to pay attention to these subtle differences.
According to IBISWorld, as of September 2021 the carwash and auto detailing industry in Canada was worth approximately $1.2 billion.1 In comparison, the carwash and detailing market in the U.S. was worth over $13 billion in July 2021.2 Now, keeping in mind that the population of the U.S. is about 10 times that of Canada, this difference in revenue is still significant. Even with a multiplier of 10, there would still be a difference of $3 billion between the markets, and that’s no small potatoes. Through a closer look at the trends in each market, we can tell there are three clear differences between Canada and the U.S.
1. Canadians substantially prefer in-bay automatic (IBA) and self-serve to conveyor washes.
In Canada, over 42% of carwash operations are IBA sites, making it by far the most popular carwash style in the country. Self service bays come in second, with over 23% of the carwashes in Canada being the do-it-yourself kind.1 Comparatively, the U.S. has quite a few more conveyor-style washes, with these accounting for around 28% of carwashes while IBAs comprise around 46% of the market. 3 This is a key difference to note between American and Canadian markets, as conveyors only account for about 19% of the market in Canada.
2. Americans, on average, wash their cars less often than Canadians.
According to a study by Ipsos, Canadians wash their cars three times per month on average.4 Americans, on the other hand, wash their cars one to two times per month on average.5 This can generally be attributed to the fact that the U.S. has multiple states that have winters without any precipitation, let alone snow. Since winter is typically when carwashes are at their busiest, this means that states without winter conditions bring the American average down. Simply put, a lot of Americans don’t have to worry about road salt damaging their vehicles in the winter. Canadians have to worry about road salt for about six months out of the year.
3. The U.S. has higher profit margins.
Carwash operators in the U.S. enjoy an average profit margin of 10.9%2, while operators in Canada have an average 7.9%1 margin. Since conveyor washes are the most popular in the U.S., margins are much higher than those of the IBA-loving Canadians. Conveyor washes generally have a higher profit per car since they can charge higher rates for their more intricate wash packages. The ability to stack more than one car on the belt at a time also helps these operators push more cars through their sites per hour, leading to higher sales volume than their Canadian counterparts. IBA washes can only wash one car at a time, so operators in Canada would have to build multiple bays to try and match the output of a tunnel wash with a conveyor. This makes the industry in the U.S. a lot more profitable, due to more opportunities to reduce operating costs per car and increase margins on packages.
What do all these differences mean for the point-of-sale (POS) and pay points carwashes use? Well, management tools and equipment integration are critical to continue innovating within the industry.
Since operators in the U.S. tend to have significant membership-based revenue thanks to the conveyor model, POS systems and pay points must be able to easily handle membership accounts alongside retail purchases. This means that one of the most important features an operator should look for in his or her POS is a reliable and scalable back-office or account management functionality. Using reports to make operating decisions is critical to any business’ growth, but being able to easily track how memberships and charge accounts affect your bottom line should be a priority when choosing a POS system. Not only that, but operators in the U.S. should also expect quite a bit of equipment integration from their POS systems. Being able to monitor the progress in their tunnels through their POS system and have the ability to start, stop or pause equipment throughout the wash cycle is absolutely necessary to avoid safety issues arising in the tunnel.
What can the Canadian market learn from its neighbor to the south?
Even though Canadian consumers are more partial toward IBA washes — and therefore retail washes — operators in Canada should take a note from their American neighbors and think about implementing membership or charge account-based programs for their self-serve or automatic bays. This change to their operating structure has the potential of increasing their revenue regardless of weather conditions, simply because it means having guaranteed monthly payments.
While American POS providers are already quite adept at handling memberships and charge/fleet accounts, Canadian POS providers still lag behind on these features, simply because they are not very popular. So, if you are a carwash operator in Canada looking to improve your business, try to find a POS provider that can handle memberships, fleet accounts and retail payments all in one. Recurring revenue is critical, and it can only be fully harnessed with a comprehensive POS and back-office system.
Despite Canadians preferring IBAs and self-serve bays, operators can still significantly benefit from having remote equipment control capabilities through their POS and pay points. This is another feature operators in Canada should look for in their next pay point and POS purchase, since it’ll help mitigate rising labor costs and allow them to provide better customer experiences through remote troubleshooting of equipment.
What can the American market learn from its neighbor to the north?
On the flip side, American POS and pay point providers need to start addressing the lack of banking security features on their payment points. Though Canada is fully on board with new EMV regulations from Visa and Mastercard, credit card pay points in the U.S. still rely on the highly unsecured magstripe system. The new EMV regulations mean that operators in the U.S. that don’t have an EMV payment option available could be liable for any fraudulent transactions on their systems. Not having EMV options also means that carwash operators lack contactless payment options, an increasingly popular method of payment due to the popularity of Apple, Google and Samsung Pay. Adding this security and ease of payment to their operations will likely be a necessary upgrade in the near future as Visa and Mastercard continue to only issue EMV-certified chip cards.
Carla Rodriguez is the marketing manager at Wiz-Tec Computing Technologies Inc., a point-of-sale and EMV payment point provider for carwashes and gas stations across Canada. Founded in 1991 and located in Calgary, Alberta, Canada, Wiz-Tec has been providing point-of-sale and payment point solutions for independent and corporate retailers in Canada for over 30 years. At Wiz-Tec, we believe in making products that simplify the lives of our clients through automation and remote equipment control. For more information, call 1-866-361-7846, email [email protected] or visit https://wiz-tec.ca.
Want to hear more about the carwash trends in the U.S. versus Canada? Be sure to check out the below video interview.