The numbers are impressive: Carwash income in 2011 soared 75.4% for the convenience channel, spiking from $2,275 per store per month in 2010 to $3,989 per store per month in 2011. This increase, reported in preliminary numbers from the 2012 NACS State of the Industry Report of 2011 Data, placed carwashes fifth in highest non-fuel gross profit percentages in the c-store channel, behind only prepared food, packaged beverages, cigarettes and hot dispensed beverages. And yet, amid the buzz of foodservice and new profit opportunities, the carwash is the forgotten stepchild, sitting on the outskirts of our lots and the outskirts of our consciousness. Is its unheralded status in the c-store about to change? We asked for opinions from three experts: a car-wash consultant, the head of the national car-wash association and a c-store operator committed to washes.
Before he offers his forecast, Eric Wulf, CEO of the Chicago-based International Carwash Association (ICA), believes it is critical to examine the past in understanding the car wash’s relationship to the c-store. He sees three major phases captured over the past decade. Phase I, the “divestiture site management phase,” as he calls it, created a wandering period for car washes. The marketing support major oil companies commonly provided for car washes vanished as new investors found themselves with diverse portfolios of real-estate properties. As they tried to sort through their acquisitions, carwashes became an afterthought.
Phase II is characterized by a tanked economy and tight lending environment. Again, car washes fade to the backdrops retailers tend to more immediate concerns. In Phase III, where Wulf says we stand today, the situation for these owners has stabilized. Most don’t have category managers for their car washes, but they ‘restarting to realize their car washes need some maintenance and revitalization.“We’re in Phase III: digesting acquisitions, “Ulf says. “People are paying attention again.”
Every year ICA compiles an equipment sales report from U.S. and Canadian car-wash manufacturing firms. From 2007 to 2010, they saw total equipment sales decline; however, in 2011, sales climbed 8.2%. “We think it’s a good sign for recovery in the car wash industry,” he says. As for c-store car washes specifically, Wulf points to a solid spike in in-bay/rollover sales, from $108 million in 2010 to $113 million in 2011.
Invest or Not?
For operators investigating the idea of building car washes on their lots to capitalize on the promise Wulf predicts, he suggests looking at surrounding competition and determining whether the market could support another player.
“A good rule of thumb is that you should be doing at least 100,000 gallons a month before you start looking at carwashes,” Wulf says. “For every 75 gallons you sell, you might estimate that you’ll sell one car wash. It’s got to be in that range before it becomes a smart investment.”
If you’re starting from scratch, figure a minimum of $250,000 to install a wash. Then there’s the operational costs, which Wulf estimates at $10,000 to $30,000 per year for soap, water and electricity, not including credit-card processing. For operators with car washes already on site, the battle is half over. But the second half—making a profit—requires analysis, creativity and vigilant effort.
Mike Perry, of car-wash consulting company Total Marketing Concepts, says car washes have historically been a strong contributor to c-store profit margins, but today the opportunity with carwashes is different than before due to tighter consumer wallets.“You’re going to have to be very innovative,” he says.
Advances in Technology
Understanding technology’s role in creating a good wash for your customers is key to acquiring market share. And technological advances have done wonders for creating a good wash—in quality, environmentalism and efficiency. Modifications to rollover washes are yielding more washes per hour while being sensitive to car bodies.
“Look back 20 years ago, and you had a lot of car washes using nylon bristles to wash cars,” Wulf says. “Stories of car washes tearing off antennas or damaging cars were not uncommon.”
Other innovations include more effective chemical cleaners and photo eyes, which digitally read the profile of the vehicle to adapt washes for different shapes and sizes. Innovations abound, but “there’s still work to do,” Wulf says. “Integration of car washes with existing store technology and POS terminals is getting better but isn’t great.” There’s also work on the environmental front. Participation in programs such as Water Savers—which now involves about 1,100 car-wash locations in the United States and Canada—is growing, but still small.
Charnann Cox, category manager for Houston-based TETCO’s car washes, is a Water Savers member and uses BlueCoral cleaning products, known for being environmentally safe. Environmentally conscious technology is a key part of her approach, but so is using technology to boost sales. Cox led an effort to remove cash options from all 101 car washes she manages and replaced them with credit-card technology.
“The ability to pay for a wash with a credit card at the entrance to the car wash is not that new anymore,” she says, but it’s a technology that has made a huge difference for her business. Thirty percent of her total car-wash transactions occured at the bay; purchases were made there rather than at the pump or inside the store. Seventy percent of those at-the-bay purchases were the $9 top wash package, $3 more than the normal wash. “Our assumption is that they came to our location simply to purchase a car wash,” she says. Perry says observations such as Cox’s are part of a purchase trend. “Ten years ago, car washes at c-stores were impulse purchases, but that’s not the case anymore,” he says. “Marketers need to realize that people aren’t just purchasing washes at the pump on a whim.”
Marketing to Cha-Cha
Insights such as the one above inform Cox’s marketing strategy. She’s determined to make data-driven decisions as a category manager, and she recently conducted a customer survey in each of her stores to do just that. She gave away free washes every Wednesday in February to customers who would take a 20-question survey, accumulating data from 1,500 respondents. Seventy-four percent of respondents said quality was the most important thing in a wash, and 70% said it was important for them to know the car wash was environmentally friendly. She also learned that many of her customers have pet names frothier vehicles—Cha Cha, Ally Cat, Little Honda that Could—and feel as if they have a personal relationship with their car. Such information is crucial for managers such as Cox to understand for allocating resources, updating equipment and advertising. In Perry’s ideal world, all c-store operators would have marketers such as Cox, with well-established strategies.
“A good marketing plan has to be in writing,” he says. “You have to have a very clear focus.” Promotions should be time specific and loyalty programs should be tied to the POS system.“Operators are familiar with the concept. It just has to be implemented.”Cox has a couple of programs in place to capture loyalty from customers with different preferences. One is a simple punch card—buy five washes, get one free—that customers carry with them and bring inside the store to have signed each time they purchase a wash. In addition, TETCO offers customers club cards that track their wash purchases electronically and print vouchers on their receipts when they purchase a fifth wash.
Cox says some customers like the convenience of the club card, some like the interactivity and security of the punch card.
Capturing customers new to the community is another way to establish loyalty. “You can do a direct-mail piece in a ZIP code targeted specifically to new movers,” Perry says. “Give them a free wash. Invite them to your store before they get comfortable with someone else.”
‘A Different Animal’
Foodservice has its category manager, and so do tobacco and beverages. But c-stores chains that commit a category specialist to oversee car washes are considerably rare. “If you’re serious about the car-wash business, you’ve got to give it that kind of mind share,” Wulf argues. “From our experience, it’s not like other businesses that c-stores are in. You have to acknowledge that it’s a different animal than managing salty snacks and gasoline.”
Cox couldn’t agree more. She manages all of TETCO’s carwash marketing, store manager training, equipment maintenance, chemical inventory and service-provider relations, and feels that her company is a more profitable business because of her institutional knowledge and leadership. An example of one of the businesses that inherited c-store car washes through acquisitions, TETCO has a car-wash fleet that includes equipment from a variety of manufacturers. The added complexity it causes is another reason why having a car-wash category manager is crucial for the segment’s success.
“When we do our training with store managers, we tell them, ‘Yes, you’re in the fuel business. Yes, you’re in the c-store business. But you’re also in the car-wash business. You have three valuable businesses on your lot, and all of them should have the same amount of attention,’ ” Cox says. Her marketing efforts on pumps, counter mats and building signs echo her message: “We’ve got a car wash, we’re proud of it and we want you to try it.”
There’s a lot to learn for operators looking to navigate a new day for c-store car washes, but perhaps the most important lesson of all is simply that the opportunity is waiting.
“The car wash has been like the neglected stepchild in the past,” Cox says, “but it’s important to keep reminding our store managers and customers that the car-wash business is there and it’s ready.”