Rethink - A Model for Success

By Robert Roman

01/01/18

According to Kalibrate Technologies, a provider of intelligence solutions to the retail petroleum and convenience store industry, there are seven elements that encompass end-to-end consumer experience and value-chain for sustained retail performance. These elements are price, location, market, merchandising, facility, operations, and brand.

These elements form a framework or model to explain what makes a successful retailer and highlight where a retailer should focus in order to improve performance and quantify the potential value derived from that improvement.

An analogy is a viability assessment model that validates a business concept by the core dimensions (elements) of market, business model, management, technical, economic and financial, and exit strategy viability.

To illustrate, let’s consider Bill Roberts, founder and past owner/operator of Miriam South Car Wash, Lakeland, FL.

Lakeland is a city in Polk County, FL, located approximately midway between Tampa and Orlando along Interstate 4. The city is a combination of small-town community and big-city amenities. The geographic area has ideal year-round climate, world-class attractions, well-balanced economic growth, and a community population base of about 220,000.

Miriam South is a traditional full-service car wash operation with a 100’ conveyor, two-bay detail shop, and lobby situated on an irregularly shaped 1/2 acre lot along a divided highway with average daily traffic of over 40,000 vehicles.

In business for over 30 years, Miriam South had a history of slow but steadily increasing sales volumes and revenues. In 2007, gross sales were $1.15 million.

In attempt to capture value from the network effects of thrift-conscious consumer behavior that began to kick in back then, Bill added an exterior-only lane to attract price-conscious consumers.

Unfortunately, what works great for one car wash operator may be a poor choice for another. For example, Bill’s results were dramatically different than he expected. After adding the exterior-only lane, sales volumes increased from 65,000 to over 80,000 but gross sales dropped to about $1 million.

Then, in 2009, along came a spider when Bill learned that a developer was planning to build a new $3 express-exterior wash with free vacuums and a two-bay oil change practically in his backyard.

Knowing that the exterior express had proven to be a fierce competition to many types of washes, Bill understood the need to find ways for his business to continue to thrive against it. After all, car washing was not only Bill’s vocation, Miriam South was also his only car wash site and represented a good portion of his retirement nest egg.

Instead of resorting to hardball tactics and giving away car washes for free, Bill decided to find a fresh perspective and identify things that would help widen the gap between Miriam South and the new competitor.

The assessment of Miriam South included gap analysis to identify opportunities for improvement and benchmark analysis relative to the competitive environment.

For example, the express exterior is a category killer. It features low-priced, low-margin services to draw in customers and a merchandising strategy to lead customers to make impulse, high-margin purchases. On the other hand, express-exterior washes are designed as pride-of-ownership properties to have corresponding appeal to consumers. They are usually the biggest, brightest, and most modern car wash in a market.

However, fulfilling the needs and demands of customers goes well beyond considerations about the physical building. For instance, it was suggested that Bill consider repositioning his business from traditional full-service to a flex-serve operating platform or, better yet, jump on the bandwagon and switch to the express-exterior format with free vacuums.

However, Bill’s property did not have the site characteristics necessary for efficient flow, maneuvering on the lot, production capacity, or parking space sufficient to meet customer needs at peak times.

Bill was also worried about consistency. For example, he found many customers had a difficult time adapting to the exterior-only lane because full-service washing creates a certain familiarity and comfort level with customers.

Bill was also worried about return on investment. For example, Miriam South was unencumbered, but the conversion to flex-serve or express exterior would require a considerable capital investment and Bill was looking to retire in five to six years.

In the final analysis, Bill decided to follow a path similar to successful convenience retailers by diversifying his business to satisfy a broader range of consumer needs. This included strategies to drive volume and profits such as adopting a new pricing policy, adding a loyalty rewards program and unlimited washing options, refining car wash and detail operations, and creating a mobile-friendly website and Internet marketing strategy.

By seeking to understand and optimize a broad range of factors in the customer experience, Bill was able to increase sales volumes and revenues from 80,000 and $1 million in 2009 to over 115,000 and nearly $1.9 million by 2015.

On November 17, 2016, Mister Car Wash announced it had acquired Miriam South Car Wash. Said Joe Matheny, the company’s director of field operations, “This location will be a nice addition to our existing presence in Tampa and Orlando, helping bridge our service between the two cities.”

According to its website, Mister Car Wash looks beyond the “physical plant,” placing value on the intangible assets such as quality of the customer base, well trained staff, and growth trajectory.

 

Bob Roman is president of RJR Enterprises – Consulting Services (www.carwashplan.com). You can reach Bob via e-mail at bob@carwashplan.com.



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