Auto Laundry News - October 2011

Reload — Change and Adapt to Market Conditions

By Robert Roman

Experience has shown wash formats once popular with motorists have given up market share to low-priced, automated express exterior conveyors with free-use vacuums, possibly the healthiest segment of the industry and showing the most diversity.

Besides developing freestanding express washes, investors have combined express wash with discounted gasoline and other profit centers. Some investors have built express washes using two fast in-bay automatics instead of a single conveyor. In the self-service segment, operators are adopting some of the express features such as pay station and controlled access, while others contemplate conversion of a wand-bay into an express mini-tunnel.

Pundits believe the express trend can be attributed to greater price sensitivity across all consumer segments, rapid changes in consumer preferences for more convenience and greater value, and a strong aversion to labor by investors.

Perhaps the continued interest in lower-priced express washing also reflects great anxiety about the future following the big hit the car wash industry took in 2008.

Consider Ecolab’s Vehicle Care Division that provides vehicle cleaning, protection, and detailing products and services for full-service tunnels, quick-service in-bays, self-service sites, detail shops, and corporate-owned transportation fleets.

In 2005, Ecolab reported corporate sales of $4.53 billion with Vehicle Care accounting for 1 percent of its business mix. Vehicle Care enjoyed a solid year, growing sales by 12 percent. That was the year Rain-X Online was introduced. In 2006 and 2007, the Vehicle Care Division posted sales growth of 5 percent and 7 percent, respectively.

In 2008, Ecolab reported a 10 percent decline in Vehicle Care sales as the impact of the recession and high fuel prices throughout much of the year reduced car wash demand. In 2009, division sales declined another 6 percent as the car wash industry’s second consecutive year of double-digit wash volume declines impacted results.

Consider the 20 percent or so decline in sales volumes experienced by many car washes as a result of the recession, and the plight of many in the industry becomes clear, as well as the continued interest in formats capable of higher volumes at lower expense like express and flexible service. Digging out of the quagmire requires a willingness to change and adapt to market conditions.

To combat declining sales, Ecolab launched Beyond Green, a sustainability program that offers products reformulated to help operators conserve water and energy. Ecolab also launched a reformulation program that resulted in a 30 percent reduction in products, helping offset costly raw materials. In 2010, the company focused on markets perceived as having the most potential: convenience stores, large car wash chains, and car dealership accounts.

Regardless of category, car wash operators suffering from declining sales should consider similar strategies.

Today, Gen-Y is known as the Internet generation (ages 18 to 27) and accounts for roughly 70 million people. Gen-Y has less money to spend than their earlier counterparts and they have decidedly different needs and tastes, like shopping online.

A recent study of car buyers by TrueCar.com showed not a single brand from a domestic automaker made the top-10 list in models bought in 2009 and 2010 by Gen-Y. How does a generation driving around in little cars like Scions and Civics rationalize paying the same price for a car wash as those driving large vans, pickup trucks, or a Cadillac Escalade?

Gen-X accounts for about 44 million people (born between 1965 and 1980) who are entering their peak earning years. Gen-X is raising families, mostly two-car households, and is the next generation of baby-boomers and DIFM consumers. Gen-X is also tech savvy, they love to shop and time is a definite concern. Gen-X values work/life balance. They will pay for services, but want guaranteed time for service.

Very soon, 79 million baby boomers will be 51 to 70 years old. The sheer numbers of this generation and tendency to make new rules have created business opportunities since the 1950s.

Boomers will account for 40 percent of U.S. spending by 2015 and a disproportionate share of the growth and consumption in a wide range of industries including car washing. Boomers are more physically active than their parents, but gravitate to “less stressful” activities that are easier on the aging body. Many of us can attest to this.

Consequently, car wash operators should start targeting services that baby-boomers want: full-service and detail.

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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