One of the downsides of consolidation is it tends to wreck consumer markets. The tomato category has shown this over the past 15 years where lack of competition made big Florida tomato companies complacent and their product poorly merchandised. This allowed small- to medium-sized greenhouse companies located outside of Florida to thrive by focusing on flavor and launching higher-flavor, higher-cost tomato products. Snacking tomatoes transformed the category because of innovative packaging and great-tasting products. As a result, Florida tomato growers had to focus on supplying foodservices as they lost significant share in retail stores. In our industry, consolidation has been driven by mature markets, recession, and decline in relative spending power of consumers. The outcome has been unused capacity as well as pessimism about the future, which has prevented low interest rates from stimulating investment. What has materialized is a convergence of positioning strategy on the express-wash format where stores share common characteristics in store layout, services, and pricing. Like most proven concepts, developers ran with express in different geographies. Today, this convergence has been compounded as consolidators have turned their attention to acquisition assimilation rather than the marketplace and creation of differentiation. For example, if we examine the trade journal list that comprises the nation’s largest conveyor car wash chains, we find “express/free-vacuum” chains offer essentially the same product and shopping experience with simply a different name on the front door. Conversely, with the other 80 percent of the list, we find companies with distinctive positioning strategies and identities. Consider Mike’s, Hoffman, and Terrible Herbst car wash chains. All three have won with differing strategies and none has the low-price position in their markets. Mike’s Carwash has over 40 stores and is based out of Fort Wayne, IN. Mike’s chain offers exterior car washing, coin-operated spray bays, self-service vacuums, and vending, which includes car care products, glass cleaner, and micro-fiber towels. Mike’s competitive advantage is sustained with a satisfaction guarantee, customer-focused team members, proprietary chemistry, customer loyalty, fundraising, and donations. Hoffman Car Wash has 21 stores based out of Albany, NY. Hoffman’s chain is comprised of exterior, full-service, self-service, touch-free, and flexible-service car wash facilities, and Jiffy Lube. Hoffman’s competitive advantage is sustained with cross-marketing, fleet services, a customer loyalty program, online purchasing, and fundraising activities like its “Helping Hands” program. Terrible Herbst, self-described as the best bad guy in the west, has 29 stores based out of Las Vegas, NV. The Herbst chain is comprised of “Terrible’s” gasoline and convenience stores, car washes, lube shops, and smog inspection stations. Herbst’s competitive advantage is sustained with cross-marketing, “Team Terrible” customer loyalty, motorsports (desert racing scene), and community involvement including fundraising activities and “Safe Place” program for young people in crisis. Unlike the express wash that offers customers a value proposition built around speed, low price, and free vacuums, these owners considered their customers as well as leading trends to gain insight which in turn supported the selection alternatives to develop a marketing strategy suitable for the chain’s goals and culture. Consolidation will most likely define the car wash industry in the short term because the fragmented market continues to offer significant growth opportunities through further acquisition. This poses challenges especially for the self-service segment where owners have been slow to react and continue to cling to “selling time.” Meanwhile, the category has been greatly affected by discount washes that have blurred the distinction betweenconsumer segments. When a market has been redefined so, it is suggested business owners expand beyond the traditional whatever-suits-their-need way of thinking and approach to strategy. For example, when a product-oriented business loses significant market share to a more customer-oriented business, it is not price alone that causes customers to leave but rather satisfaction levels. After all, customer loyalty is the foundation of the car wash industry — quality of products and services leads to satisfaction, which leads to loyalty, which leads to profitability.
Bob Roman is president of RJR Enterprises – Consulting Services (www.carwashplan.com). You can reach Bob via e-mail at firstname.lastname@example.org.