What to expect?

[simone]

Hi everyone, we have a 5 year old car wash here in Australia which is going very strongly . We are 1 touchfree, 5 ss and 2 dog washes. Just got news that a full service hand car wash is to open at a large shopping centre about 1 mile away. Should I be concerned.?What should I expect to lose revenue wise given the assumption that their basic wash is likely to be priced 25% above our top wash and 50% above our cheapest wash. Will our s/serves suffer much . Any thoughts would be much appreciated especially from any operators that may have found themselves in this scenario .
Kind Regards Simone.

 

[robert roman]

Losses often depend on competitive environment.

For example, carwash users can be broadly segmented into DIY and DIFM. DIFM includes people who use automatics (in-bay, conveyors) and buy assisted-services like interior cleaning, express detail and reconditioning.

In the absence of a facility that provides these services, where would people clean their vehicles?

If the trade area has only one self-serve site, motorists (including DIY and DIFM) may choose to use this site, clean their vehicles at home or use some wash located outside the area.

If 25 percent of this self-serve’s customer base has characteristics of DIFM, the potential loss of customers could be 25 percent if all of those customers defect to the new store.

So, loss is a function.

Loss = customers that fit DIFM times average money these customers spend times percent of these customers that might defect.

Self-serve benchmark is 28,000 cars per year or roughly 7,000 customers. If 25 percent fit DIFM profile and all of them defected this equals 1,750 customers.

If each of these customers spends, on average, $20 annually, the loss in gross sales would be $35,000 (1,750 X 20).

Plug in your numbers and see what you get.

Hope this helps.

 

[rph9168]

We have several situations like this here in Atlanta. In most cases there is very little loss of business since the hand car wash will only attract those that usually do not want to wash their own vehicle and are willing to pay more to have it done. There is one situation near where I live and both seen to be doing well. I know the owner of the automatic. The washes are kitty corner from each other on a busy street. He said he did not notice any significant loss and actually believes he may have picked up some customers from those that tried the hand wash and decided to try his wash as well.

 

[robert roman]

Well, there you have it Simone. Straight from the land of saturated markets and torn down car washes, its "forget about it!"

Competition is no issue. In fact, competition is good for business. Maybe you will capture some of those customers that don;t exist yet.

 

[rph9168]

Competition raises the bar and often eliminates the poor competition and makes the good operators better. There was another wash only three blocks away from those washes I described. It has been in bankruptcy several times and changed ownership numerous times in its 5 year existence. The wash was built by a "chain" that franchised it. I am sure they had some formula that predicted success. Unfortunately the competition turned out a better result and had much better management so the site has struggled and looks like it is headed for bankruptcy again.

Maybe Simone would be better off putting figures into some convoluted, complicated formula and come out with the right answer. I gave an answer based on a real life scenario. The saturation of any market has little to do with other possible sites. As I have said before, even in our "land of saturated" markets" there are still some good sites and with the closing of some poor choices some of those washes in areas where others have been torn down are doing okay. I was at a rehabbed unit last month that is doing very well in a formally "saturated" market area. You can take all the pro formas and other "instruments" to predict success but I think some common sense and operating a quality wash often makes the difference. I have seen some "can't miss" sites end up in bankruptcy and some sites that were considered secondary at best succeed. If I had to answer why that happened I would say the difference was the operator and the way the site was producing quality results. I prefer to rely on known successes and and failures along with common sense over using formulations.

I really don't care to get into a ****ing match over this since all I was trying to do was relate a true life scenario. It's up to Simone to figure out what works best for him and make the best of his situation. I wish him the best of luck.

 

[Earl Weiss]

IMNSHO The full service hand wash targets a different market than your SS or IBA touch free. Crossover will exist but be nominal.

I think you have greatest crossover from the SS market to the Express exterior. People go to the SS becuase of the lower price point and because they like or want to do it themselves. The touch free is likely a lower price point and quicker. So, the hand wash offers little benefit for those people. Certainly you may have an IBA or SS customer thatfeels the need for the higher price service on occasion. But I would not expect it to be a huge issue.

 

[robert roman]

“….putting figures into some convoluted, complicated formula….”

Nothing convoluted or complicated about DIY and DIFM.

DIY + DIFM = total available market

Breaking a market down into its component parts (segmentation) is fundamental in determining size, sustainability and potential value of a market.

Competition is also fundamental.

For example, “The saturation of any market has little to do with other possible sites.”

This is incorrect because index of saturation equals the number of existing stores in a defined trade area divided by the number of supportable stores.

Likewise, “It's up to Simone to figure out what works best for him and make the best of his situation.”

How do we know if Simone is a man or a woman?

We also don’t know the characteristics of Simone’s market located in “Australia.”

So, I suggested fundamentals.

Competition may be good for consumers but I never met a small business owner with millions invested in a store that welcomed the idea of someone new building a new store in their backyard.

 

[rph9168]

"Competition may be good for consumers but I never met a small business owner with millions invested in a store that welcomed the idea of someone new building a new store in their backyard."

It depends on who is building a new store.

Once again you are trying to use formulas to achieve an "index of saturation" while you also say "We also don’t know the characteristics of Simone’s market located in “Australia.” I live in a large metropolitan area, Atlanta, where there has been quite a bit of overbuilding of washes but even at that there are still areas where a wash could perform well since a wash does not draw on the entire metropolitan area but rather a much smaller radius.

I trust good, old common sense and business acumen more than any "Index" or other formulations. While Simone needs to be cognizant of his competition, a new hand wash as competition to his automatic with self service and dog wash should not be grossly affected as Earl points out. They share only a very small portion of common customers. It would be much more disconcerting if the new wash had a similar configuration.