You are here
How many drivers are purchasing a side of car wash with their tank of gas? Would you like to lather your business up? If the answer is yes, then you?ll be pleased to know that industry experts say the time is ripe again to clean up with more car wash profit.
?Car wash activity has much improved in the last 18 months. The improved economy, PCI [payment card industry] compliance, the overall convenience store environment and more are contributing to a very healthy time for c-store car washes,? said Eric Wulf, CEO of the International Carwash Association. What is especially notable, he added, is ?operators are thinking outside of the traditional c-store car wash paradigms.?
Observing this first from a macro perspective, the overall U.S. car wash industry is benefiting from recent improvement in consumers? disposable income and will continue to rebound in the coming years. Revenue growth of 3.3 percent annually is anticipated through 2018, according to research released by IBISWorld and reported by the Small Business Development Center Network.
The car wash industry is said to rely heavily on discretionary spending and the driving habits of consumers, meaning it is vulnerable to slower economic conditions. Demand is driven by new car sales and growth in consumer spending, both of which have improved as of late. Reacting to this positive news, traditional car wash establishments are gaining an edge thanks to good advertising and savvy customer loyalty programs.
Other key points from the overall car wash industry report include:
- The total number of car wash businesses has declined in recent years, encouraging existing establishments to expand or diversify their services.
- With continued economic growth, car sales are expected to be on the rise, along with the number of motor vehicle registrations, which are predicted to increase 1.3 percent annually through 2018. This will result in increased consumer demand for aftermarket services such as car washes.
- Rising utility costs, combined with increased competition, has pinched profitability. To offset these factors, more efforts are being made to refresh and expand product and service lines. The development of customer loyalty programs is on the rise, for instance.
Taking this macro picture into account can be helpful for convenience store car wash operators when strategizing their channel-specific micro perspective. It?s also beneficial to consider some of the latest activity and best practices within the channel.
TOTAL MARKETING INTEGRATION
A car wash is a common sight alongside a c-store. It is certainly not a new idea, but what is refreshing is ?integrating the car wash into a site?s total marketing program,? according to Wulf. This is particularly applicable to multi-site operators with a regional strategy.
?Integrated, as opposed to treated like a stepchild on the side,? is where it?s at, he said.
Ideally, digital, social, print and in-store promotions are all utilized as promotional tools to align the car wash with the overall store brand. ?Everyone knows a c-store sells gas and quick-serve food, but not necessarily [that it has] a car wash. So, if you have one, you want to make sure it?s not just a thing on the side,? Wulf advised.
Providing multiple places to pay ? at the pump, through an auto-cashier at the car wash and inside the store ? is another way c-store chains like The Pantry Inc.?s Kangaroo Express are integrating the service into the total store strategy. Since last year, the chain based in Cary, N.C., with more than 1,500 stores and close to 250 car washes, has reportedly updated at least 50 of its car washes and married car wash sales with in-store sales.
MORE EQUIPMENT CHOICE
There was a time when operating a c-store car wash meant that you operated what the industry refers to as a ?rollover? or in-bay automatic, whereby the car being washed is stationery and the machine moves around it.
That is not necessarily the case anymore ? and in fact, growth in the segment has moved well beyond that. ?It?s a much more complex choice now, and there is more opportunity for convenience retailers to decide how they want to execute on this concept,? Wulf explained. The channel is now growing its car wash business with multiple bays, hybrid bays (whereby the wash unit is separate from the dry unit, allowing increased throughput), and best of all, shorter conveyor or express tunnel operations.
?Conveyorized car washing has come to the c-store and petroleum segment now that the footprint has shortened,? Wulf relayed. ?Conveyors were thought to have a huge footprint of 100-feet-plus, but we are now seeing from car wash equipment manufacturers, shorter tunnels of 30 feet to 50 feet, which opens them up to c-store sites.?
One of these manufacturers is Ryko Solutions Inc., headquartered in Grimes, Iowa. Ryko recently acquired National Carwash Solutions (NCS), which Ryko Vice Chairman Steven L?Heureux said is ?an ideal strategic fit? partly because of its in-depth expertise in the tunnel space.
Wulf likened improvements to the conveyor systems to improvements in the cell phone industry. ?It?s a much more viable, compact and tight package,? he stated.
Based on his observations, Wulf also pointed out there seems to be more c-store car wash activity lately in ?reload and change,? meaning upgrading and refreshing existing car wash sites rather than investing in new car wash construction.
Car wash maintenance on the part of convenience stores has traditionally been slim to non-existent, especially without the integration of the business into the store. Store managers typically couldn?t find the time to do the work needed, and so it was often ?let go.? If the car wash broke down, it was left that way for a while. The service was viewed as an ?extra? and not an integral part ? certainly not a destination part ? of the business. But that is changing now, too.
?As a bad example, we?ve all seen gas stations with the free air on the side. Most operators aren?t aware of it; the hose is hanging in the street and it hasn?t been used,? Wulf said. ?This is what not to do with the car wash.?
These days, more c-store operators are starting to wake up to the car wash reality of recent times. ?If you have a car wash, it requires regular maintenance and capital attention. You can?t simply treat it like the air pump,? he remarked.
While c-stores don?t often discuss car wash profit, industry reports reveal that car wash operations at a c-store can generate between 50-percent and 65-per-cent gross profit. While maintenance costs can reduce that, regular maintenance and investment can also increase the traffic and, most importantly, lead to repeat business.
Ryko Solutions is one supplier that?s partnering with c-store retailers to help them focus on maximizing profit in the business. The aforementioned NCS acquisition expanded the company?s service support reach to now be a combined network of 250-plus technicians across the United States, according to L?Heureux.
The company also created the new position of senior director of professional services to not only manage this technician force, but also develop and execute on maintenance and customer (retailer) connectivity programs and continue to build on the customer service experience. Sam Toubia was appointed to the new role this summer.
BETTER VALUE, HIGHER TICKET
Just released from the International Carwash Association were second-quarter 2014 c-store car wash figures comparing same-store figures from second-quarter 2013. Revenue is up 9.3 percent and the average ticket spent per wash is up 12.4 percent. Interestingly, total washes are down slightly, by 2 percent. ?So, the bottom line is that even with slightly less traffic, significantly more is being spent per visit,? explained Wulf.
The association is ?just beginning to digest this research,? but he hypothesizes that the channel is ?incrementally, over time, taking the advantage they have in convenient car washes and turning it into a product with a much better value.?
For example, Kangaroo Express is offering ?car detailing? services at some of its North Carolina locations, and Kwik Trip Inc. is featuring a plethora of car wash gift card values on its website ? from a single wash card to five, 10, 15, 20, 25, 50, 100 and 200 count cards. The more washes purchased, the more consumer savings.
Kwik Trip?s four available washes ? standard, deluxe, ultimate and elite ? are described in detail on its website, encouraging customers to trade up in quality and value.
Car wash-specific customer loyalty programs are also turning out to be great marketing tools for the channel. Offering incentives and coupons are a customer perk, but the real value to retailers lies in collecting the car wash customer data and utilizing it to improve programs and services and ultimately, bring customers back more frequently.