Ask most c-store owners and petroleum marketers how consumers’ purchasing decisions are being impacted by the current recessionary economy and you’re bound to hear similar stories. Impulse buying is down and consumers are paying close attention to what they pay at the pump. One area of concern is the lucrative car wash market, which has taken a hit in recent months. With reduced discretionary income consumers are cautious when it comes to purchasing items, such as car washes, that seem extraneous to their every day needs. The good news? With the right marketing mix and ongoing development, car wash bays will once again be flowing.
Going With the Flow
A well operated car wash can contribute significant additional revenues to a c-store’s bottom line. “Food service is a top revenue producer. However, credit card fees and tobacco taxes are continuing to erode c-store revenues,” said Tim Sater, director of marketing at D&S Car Wash Equipment Company. “Lower and lower gas margins compound the ability to generate meaningful revenues. A car wash can offset low gas margins, increase customer satisfaction and generate significant profits.”
The recent economic crisis has created an even tougher challenge for successfully marketing car washes. The economy, coupled with inconsistent weather has played a role major role in the wash industry over the past year.
According to Steve Robinson, director of marketing and product management at Mark VII Equipment, Inc., wash volumes have been down over the past two years, but it's not just because of the recession. “In 2008 gas prices peaked and caused consumers to drive less and wash less, although gas prices returned to ‘normal’ in 2009,” he said. “In 2009 unfavorable weather patterns caused consumers to wash less. But the biggest factor is that the average age of installed equipment is now eight years or more, and that means wash quality and customer satisfaction is declining steadily.”
And for those organizations seeking capital improvement funds, namely for the creation or improvement of a car wash, through traditional financing methods, it has proven to be difficult. “This recession brought the car wash industry (and most of the economy) to a screeching halt – no new construction, no remodeling, and no capital improvements,” said Tim Sater, director of marketing at D&S Car Wash Equipment Company. “Quite simply, our customers rely on credit to finance large projects. The organizations that did have the means, or access to credit, took the conservative approach and either pushed out projects indefinitely, or have decided to wait on the sidelines until economic conditions improve – which they haven’t.”
Many operators have understandably delayed capital investments during the recession, but this has resulted in lower wash volumes. Yet in spite of the environmental challenges, Robinson said that operators who have been actively marketing their car washes and investing in needed equipment upgrades, have been able to increase their wash volumes and revenue in spite of high gas prices, bad weather and the recession.
“A car wash can sometimes be thought of as a luxury instead of a necessity,” said Troy Wade at Oasis Car Wash Systems in Galena, KS. “With consumers experiencing tighter incomes, they may not be as willing to spend the money for something they think they can do without. Because of this, retailers have to be more creative in their efforts to entice them to utilize their facilities.”
As David Dougherty, senior product manager for In-Bay Automatics at PDQ Manufacturing explained, many consumers are watching their pocket books a lot closer these days, as a result, operators are being forced to show value at a reasonable price. “As consumer confidence moves up and down so does the car wash industry,” Dougherty said. “Disposable spending is typically the first luxury to be dropped in tough economic times.”
Weather also has had as much impact on revenue as the economy. “Car washing is a luxury and consumers have less discretionary income,” said Mark Brock, director of marketing for Lustra Professional Car Care Products. “With this more cautious approach to spending, operators need to become more aggressive by offering promotions and other incentives to increase traffic and up sell consumers.”
That being said, car washes have always helped to drive volume at the pumps and in the stores. “Having a top performing wash in your market is a great way to pull consumers to your store and drive over all store revenue,” Brock said. “By offering promotions or discounts that require customers to come inside the store are also effective in increasing revenue.”
In today’s economy, marketing your car wash system to consumers is paramount. Storeowners and petroleum marketers must stay competitive on price when marketing their car washes.
Because a car wash purchase is often the result of convenience or impulse, actively promoting the car wash is the best strategy to follow. “And due to the high margins associated with operating a car wash, it is important to convert as many opportunities as possible to a purchase,” Sater said. One easy and effective technique is to discount at-the-pump sales, typically structured as cents-per-gallon off with purchase of car wash. Another strategy for success is to offer POS codes for your car wash. This follows the basic marketing premise, “make it easy for your customers to do business with you.”
“Depending on their particular area, it is also imperative that c-store operators develop a plan to constantly remind consumers of everything they have to offer,” Wade said. “Too many times in a tough economy, the marketing budget is the first thing to be cut, but it is actually a great opportunity to increase a business’ market share by remaining in the forefront of the mind of the consumer.”
For Brock, the key to driving carwash sales is to market at the pumps, inside the store and at the wash. “Signage should be simple, informative and visible,” he said. “Highlight top
packages to show wash value and product performance.”
Lustra provides point-of-sale marketing materials to customers customized to their location. “With automated pay machines and self-serve gas the only way to communicate with customers is through this kind of marketing,” Brock said. “This can be very effective in getting customers to buy a wash or upgrade to the top package. We also offer cashier training with emphasis on suggestive selling to increase wash purchases.”
Industry experts agree that offering carwash discounts with a minimum gas purchase is less effective these days. “Gas discounts with the purchase of a wash is used as an incentive and is much more effective,” Brock said. Offers of 10-20 cents off per gallon are not uncommon with the top packages receiving the higher discount.
Robinson agrees. “Smart operators don't discount the car wash, they discount the gas. Given the high profit margin on the car wash and the low margin on gas, plus the average consumer's obsession with gas prices, discounting gas a few pennies a gallon is a more powerful marketing tool than discounting the car wash a dollar or two,” he said. And, as mentioned above, taking advantage of every opportunity (signage, transactions in the c-store, etc.) to up-sell the customer is very effective if you just articulate to the customer a reason to spend that extra dollar or two.
And while some retailers have gone so far as to lower the price of gasoline with the purchase of a wash, others have their cashiers at the c-stores become more involved with selling washes at the register. And some have even implemented bonus plans for employees to persuade them to increase the number of car washes sales.
Also, loyalty programs and pre-paid wash passes, whether implemented via automated card, bar code or RFID entry systems or the old fashioned way using a punch card, virtually guarantee increased wash sales provided these programs are actively marketed to customers.
“Consumers also will actively look for a green wash when given the choice,” Brock said. “Again for upsell, gas discounts are effective as well as dollars off or wash club promotions like buy five washes get one free. Unlimited wash clubs, although new, are showing promise in increasing wash and store revenue. Touting add-on protection and shine products are a great incentive also.”
Indeed, for Dougherty, once you get the consumer in front of your car wash it is a great time to upsell via the entry station. “Buy up programs and ala cart are great ways to increase that almighty average ticket,” he said.
Another important technique you can use is to have c-store personnel ask every customer if he or she wants a car wash. This is cheap and easy to do, yet experience indicates that it happens way too infrequently.
“Research shows that a high percentage of customers will accept a cross-sell or up-sell offer if you simply give them a good reason to accept it, so make sure that every customer that makes a purchase in the store gets asked if they want or wash or, if they're already buying one, if they want to upgrade to the top wash to get the added features that it includes,” Robinson said.
Also, use promotional signage everywhere—at the pumps, on the c-store and car wash building exteriors, and inside the c-store at the point of sale and anywhere else you can get customers' attention. “In addition, although it's not marketing per se, use signage to make it clear how to navigate to the car wash bay,” Robinson said. “Many c-stores miss this opportunity to make the customer experience easier and to reinforce to the customer that there is a car wash on site that they should consider using.”
Partners in Progress
Lustra not only offers chemicals, cleaning systems and marketing materials, they have the largest distribution network in the U.S. and their team of regional and territory managers work with solutions representatives to evaluate wash sites and offer improvements to the wash.
When choosing to incorporate a car wash into your facility, the key is to not only choose the right product offering for your market but to also partner with a distributor that will help you operate and maintain your facility efficiently.
There are also key factors to consider before incorporating a car wash into your operations. First and most, with a new or existing site, do you have the room to add a car wash bay and the required support equipment?
As Sater explained, the average required bay dimensions are 42’L x 12’H x 16’W. The equipment room should be 20’L x 12’W, at a minimum. Ideally, you must factor “stacking” room into the site plan. This is vehicle space required for 3-6 cars to wait in cue for the next wash. Car wash ingress and egress must be intuitive and easy to follow.
“The most critical consideration, however, is gallons pumped per month. In order for an investment, such as a car wash, to provide a return on investment, a site must pump a minimum of 100,000 gallons of gas per month,” Sater said. “A conservative ‘capture rate’ is one car wash for every 75 gallons sold. Some sites actually perform at a higher capture rate, depending on the location and traffic counts. Most of all, a car wash is a way to differentiate from a competitor!”
And remember, financing is one of the biggest problems the industry is facing at the moment. “Banks have become more strict with loans they are requiring a larger amount of cash equity from the operator,” Wade said. “Many leasing companies won’t even consider new investors, so it is important for owners and operators to go into it with their eyes wide open and a detailed plan on how they can make it work.”
When faced with the decision on what car wash to choose operators need to be diligent in their selection process. Look for the manufacturer that has financial stability and one that provides a machine that offers a variety of ROI generating services. Dougherty says c-store owners and petroleum marketers need to make sure that the machine they choose can keep up with the demand their site could present. A fast wash with plenty of ROI generating options is the best solution for most sites.
“The car wash has one of the highest gross margins of any product or service sold at a c-store site (in the neighborhood of 70 percent),” Robinson said. Operators who put the time and energy into marketing the car wash and maintaining the equipment to ensure a good quality product are consistently recognized as being leaders in the c-store industry. Of course, that's not because of the car wash alone—it's because they devote the time and energy to maximize the return of every profit center within their business model, including the car wash.
“Without a doubt, a car wash can add a whole new source of income for a convenience store,” Wade said. “Advancements in car wash manufacturing have enabled store owners to add or enhance car wash equipment without requiring a lot of extra land. Also, the more modern the system, the greater the number of cars that can be serviced in a short amount of time which means a greater return on investment for the owner.”
It’s in the Details
The quality of the car wash experience—both in the products used and the overall customer experience—can often make or break your car wash program. Ecolab offers its Ecolab Vehicle Care program, which combines superior product performance with name brand recognition and personal service. “Our certified specialists work with you to positively impact your wash performance by helping increase your business performance, consumer experience, and operational efficiency,” said Megan Loch, vice president of marketing for Ecolab Vehicle Care. “And our Blue Coral Beyond Green program ensures powerful, accurate cleaning using sustainable chemistry throughout your entire wash.
One key component of effectively marketing a care wash is by understanding your customers and your purpose in marketing. “No one marketing plan is going to work for all businesses,” Loch said. “However we have seen customers achieve consistently good results by branding their top package as the Rain-X package. Merchandising the top package to include Rain-X can result in greater perceived value and an increase in top wash package purchases, with some operators achieving 10-20 percent or more gain.”
Ecolab offers turn-key revenue programs, a full line of multimedia market materials and custom retail merchandising to meet the specific needs of your business and your consumer demographics.
“Every consumer is different, but one consumer desire is especially prevalent in today’s economy – value. And by value, I don't mean the lowest price,” Loch said. “Consumers are spending their money, but are looking to get the most value for the dollars they spend.”
In some locations it might be towel-drying that is worth an extra dollar, or maybe it’s a complete surface protectant in addition to the triple foam conditioners. In others, consumers might be interested to know the operator is environmentally responsible, recycling water, using chemistry with lower total impact on the environment. “Offering add-on services here can be appealing,” she said. “And regardless of the economy, quality and convenience are always on top of the list of consumer site selection drivers. I would recommend that you work with your chemistry provider to bring industry best practices to your operation. Their expertise is part of the value they provide to you.”
Running a car wash for the first time, in many ways, is the same as any other new business venture. The winners seek out the industry experts and learn from their experience. They find the success stories and adopt their best practices. “It’s a shame to see an operator invest thousands of dollars and hours of sweat equity only to have customers turned away by poor traffic flow, difficult entry layouts, confusing menu boards, excessive wait times or discourteous staff,” Loch said. “If you are looking to incorporate a car wash program into your facility, find a chemical provider that not only brings quality chemistry to the table, but also can bring nationwide industry expertise, consumer understanding, and is truly looking to be a partner with you in driving your bottom line.”