A decade ago, they were the 500-pound gorilla threatening to attack c-store car-wash operators in the United States.
The biggest and best in the mass and club sectors talked about rolling out a line of conveyor washes. And why not? Multibillion-dollar behemoths such as Costco, BJ’s and Sam’s had already demonstrated success in selling gasoline gallons 5 to 10 cents below street price. Their thinking: Let’s leverage that buying muscle to expand into the highly profitable car-wash business and become a total forecourt destination.
Westborough, Mass.-based warehouse club BJ’s was first to make known its intent to roll out washes, in addition to groceries and other warehouse goods.
It was 2002, and UBS Warburg liked the message. In a research note, UBS said, “We believe car washes will enhance the destination value of BJ’s clubs and thus drive incremental club traffic as well as enhance the value of a BJ’s membership.
“Car washes should also improve the economics of gas stations,” the UBS report continued, “which are a low-margin to break-even business at best.”
The hype, from the outset, outpaced the motivation. BJ’s spokesperson Julie Somers was quoted at the time saying, “It’s just preliminary for us now. We don’t have a partner. We’re in the process, but nothing is final yet.”
And nothing happened. Today, BJ’s says it is not in the car-wash business, and its spokesperson refused to discuss what happened to the plans, or whether BJ’s may get into the business at any of its 203 locations in 15 states.
This vignette underscores a figurative threat that may never materialize. But if big-box players do decide to flex their muscles, their imprint would be felt immediately.
“Consumers simply have more options,” says Steve Robinson, vice president of business development for Arvada, Colo.-based Mark VII, one of the leaders in car-wash equipment manufacturing. “Those who shop at big-box stores can conveniently wash their cars there, in addition to washing their cars at a c-store.”
There is no official tracker counting the number of washes across the big-box segment, but unofficial estimates suggest they make up a fraction of 1%. Nevertheless, as pressure mounts on large-footprint operators to maximize every square foot of space, some believe a revival of the carwash conversation could be nearing.
“They are a threat to the c-stores’ washes in the sense that the format and price point is often similar and, much like the c-store, it allows the consumer more one-stop shopping,” says Chelsea Beyer, senior vice president of sales and service for Eagan, Minn.-based Zep Vehicle Care Inc., a car-wash chemical and material supplier.
However, she says, size alone does not guarantee the big boxes’ future success. “Like all competitive situations, ability to execute, run a good program, price competitively and offer added features and benefits all play into the long-term success of either wash,” she says.
“Car washing is an impulse buy, in many cases,” says Kevin J. Collette, vice president of sales for Tamarac, Fla.-based Sonny’s Direct, the largest U.S. manufacturer of car-wash equipment. “Car washes run professionally, offering car-wash club, premium chemistry and Lava conditioners, make car washing easy and create value and convenience for the consumer.”
CONTINUED: BJ's Is Not Alone
BJ’s Is Not Alone
BJ’s competitors, Sam’s Club and Costco, have fared a bit better, but nowhere close to what some first imagined.
Issaquah, Wash.-based Costco tried and failed to open a successful car wash in Federal Way, Wash., in 2003, but it did cut the ribbon on a successful car-wash operation in Seattle three years later. Still, the company has been treading lightly. Its most recent car wash opened with great fanfare in December 2013 in San Juan Capistrano, Calif.
“It’s state of the art, the best car wash built in the United States, with a capability of washing 1,000 cars a day,” said Costco manager Steve Heller during a ribbon-cutting ceremony.
The hoopla did not continue chainwide. Of Costco’s 462 warehouse operations in the United States, car washes appear at only nine sites scattered across four states. Costco declined comment on the success or failure of its car-wash locations, or to reveal any details about future plans. But at least one major industry insider says Costco “has recently started to build washes within their program again.”
For Costco’s program, the insider says, the company has purchased Mac- Neil wash equipment, Pur Clean water treatment and Zep Vehicle Car chemicals. “They also employ a full staff at each wash dedicated to the wash and run exceptionally high-volume locations.”
Bentonville, Ark.-based Sam’s Club, meanwhile, has become the leader in the big-box car-wash segment. It opened its first car-wash center in 2003 in Chandler, Ariz., and now operates washes on 41 of 635 Sam’s Club sites in 20 states. Despite a modestly impressive count, Sam’s last car wash was opened four years ago in Richmond, Va.
Carrie Moore, senior communications manager for Sam’s Club, says the car wash “continues to be considered a pilot program.” Also, she said, “As we carefully prioritize the needs of our members and the communities we serve, Sam’s Club recognizes that car washes are not a focus for growth at this time.”
But Moore would not reveal if additional car-wash sites are planned, saying only, “We continue to operate and learn from the limited service centers we have.”
Atlanta-based The Home Depot entered the car-wash business in 2006, after announcing a year earlier that it would expand its home-improvement centers to include up to 300 c-stores and gasoline retailing by 2010.
The “fuel stores,” according to a Home Depot announcement, were designed “with an eye on attracting business from contractors in addition to do-it-yourselfers and commuters.”
“Entering into [the c-store/fuel/car wash] market fits well with our strategy to grow the company by enhancing and extending our offering to customers,” said Home Depot spokesperson Paula Smith at the time. “The convenience-store industry is a $268 billion market. We see great potential in adding to our … growth while driving incremental traffic to our retail stores.”
But today, Home Depot, with more than 2,000 locations, has opened only six c-stores with fuel pumps in the parking lots of its centers, all in Tennessee and Georgia. Only two include car washes. And the company has no plans to expand the car-wash program.
“Although we’re pleased with the way the fuel stores have performed,” says company spokesperson Paula Drake, “we don’t have any plans to expand them because we are focused on our core retail business.”
CONTINUED: What's the Problem?
It’s a Wash
Why haven’t these mega-big-box companies been more successful with car washes?
“Given the high margins of car washing compared to margins generated by other profit centers at a big box, you would logically expect c-stores and big-box retailers to put a lot of focus on car-wash operations,” says Robinson of Mark VII. “But in the real world, many of them are pulled in so many directions that they fail to fully realize the profit potential of the car wash.”
Beyer of Zep Vehicle Care agrees. “Big-box operators have different expectations of returns,” she says, “in particular the balance of space occupied by the car wash vs. the ability to have more parking spots, which has a direct calculation to in-store sales.”
C-stores have another advantage over big boxes, says Beyer: the marketing of their products. “Generally speaking, the purchase at a big box/grocery is entirely unattended; from the fuel pumps to the car wash, there is rarely an attendant available,” she says. “That limits the opportunity to promote various programs that require an attendant availability.” Such programs could include giveaways—an air freshener with a car wash, for example—or a punch card loyalty program.
“The c-store operator has the opportunity to have a closer interaction with the customer,” Beyer says. “Additionally, a c-store operator that understands their wash can often troubleshoot a wash that is down or having issues, as opposed to waiting for a local service provider to respond.”
“I think the big-retailer niche will grow modestly,” says Collette of Sonny’s. “Car washing is not for everyone. It’s a business in itself. Big-box retailers in most cases have land, cash and customers, so the opportunity is there. Ones that operate their car washes on a professional level will succeed and expand their car-washing business.
“Others that do not make it a priority will lose interest and utilize their resources in other ways.”
“The fundamentals of running a successful c-store carwash program haven’t changed,” Robinson advises c-store operators. “A focus on providing convenience, a clean and attractive wash bay, active marketing of the car wash and turning out a clean car is the best strategy for competing for market share, regardless of whether the competition includes big-box retailers.”
And those strategies could keep the 500-pound big-box gorillas out of the world of washes for years to come.
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