According to the National Association of Convenience Stores (NACS), there are more than 150,000 convenience stores in the U.S. Of these, more than 118,000 sell gasoline, and about 20 percent have a car wash.
Arguably, there are not more car washes because the store value proposition has changed from a grab-and-go environment to a more sophisticated one, where customers can find staples and fresh prepared foods and coffee.
Reportedly, this has paid off, with in-store sales generating more than twice the gross profit of fuel sales. Consequently, one of the design criteria for a convenience store is having sufficient customer parking spaces.
To illustrate, shown in Figure 1, is an artist’s rendering of a contemporary Quik Trip convenience store and refueling station. Something would have to go to inject a car wash into this equation.
If it’s parking spaces, there may be fewer in-store visits. If its store size, there would be fewer products to sell. If MPD’s, there might be less traffic to drive in-store sales.
Shown in Figure 2 is an artist’s rendering of a Gate Petroleum site. The 1.6-acre space contains a 6,400 SF convenience store, 20 fueling positions (10 MPD’s), car wash, but only 24 parking spaces. Given the store size and number of MPD’s, most developers would have opted for 60 to 75 parking spaces.
The car wash also presents issues. A wash requires a long entranceway to accommodate vehicle stacking but only a short exit. Here, the entrance is short and the exit long.
Consequently, there is little room for vehicles to line up at the car wash entrance without crossing paths or possibly interfering with customers trying to buy fuel.
Capacity is another issue. Developers do not build 6,000 SF stores with 20 fueling positions unless they anticipate selling hundreds of thousands of gallons of gasoline every month.
According to car wash equipment manufacturer NCS, consumers will purchase a car wash service on average for every 100 to 200 gallons of gasoline sold. Consequently, if a store sells 300,000 gallons of gas per month, we expect between 1,500 and 3,000 car wash customers.
Table 2 contains the estimated per-hour requirement for a car wash site at peak times. If the small car wash in our example is the typical in-bay automatic, hourly production capacity will range from 12 to 15 cars an hour.
Consequently, if we washed 1,500 cars a month, an in-bay would have sufficient hourly capacity to meet demand during the busiest times. Conversely, it would not if we needed to wash 3,000 cars per month.
Here, when busiest, expect exceedingly long lines, wait times, and increased line defections. All of which will hurt customer satisfaction. This could be overcome by installing two short in-bays, an express in-bay (requires a longer building), or a short conveyor (mini-tunnel). The latter is lauded as a way to elevate the capacity constraint and provide the capability to wash more cars per hour than an in-bay in the same amount of space.
For example, one car wash equipment manufacturer claims a 43’ conveyor can wash up to 50 cars an hour. However, providing this capability on a day-to-day basis requires full-time attendants.
According to the NACS compensation report, employee turnover in the convenience channel has increased to 150 percent, with full-time at 119 percent and part-time at 182 percent. Arguably, the labor required to wash higher volumes will be a major issue for some convenience store operators.
For example, large networks such as Quik Trip, Wawa, and Thornton’s do not offer car wash services. Even mighty 7-11, with 9,500 stores in the U.S., has only 300 car washes or 3.0 percent of stores.
However, for the single-store operator (60 percent of stores) selling typical 4,000 gallons of gasoline a day, a car wash may have a higher and best use than a portion of the parking lot that is rarely used.
Determining the practical potential of this business case should begin by developing a business model. For example, the value proposition of a commercial car wash from the consumer’s perspective is to clean, shine, and protect their vehicles. The car wash service should be marketed as a high-quality convenience wash. The market segment for car washing at convenience stores will include consumers who want to keep their cars clean but are unwilling to do the work themselves.
Most car wash sales transactions occur at the pump. This requires car wash and gas pump integration for all payment types. However, people don’t normally spend much time at convenience stores. According to NACS surveys, the average time at the pump is 4.5 minutes. The average time to go from pump to store and return with a purchase is 3.5 minutes. The overall stop is an average of 15 minutes to get gas, buy food, and use the bathroom.
Consequently, a car wash service that adds 15 minutes or more to the total guest visit time will probably not be an experience that customers will want to repeat.
One strategy to elevate this constraint is to consider convenience store pricing. Prices at convenience stores are a lot higher than at grocery or discount stores because running costs are higher. Convenience stores have longer hours (24/7), smaller inventories, and slower merchandise churn.
According to NACS, the markup for food prepared on site is 120 percent, hot beverages 170 percent, milk 43 percent, bread 29 percent, and automotive 93 percent. By comparison, gasoline is competitively priced.
Moreover, after paying for labor, utilities, maintenance, insurance, and credit card transaction fees, the net profit per gallon of gas is only around $0.03 to $0.07. According to Auto Laundry News surveys, the average gross revenue per in-bay customer is $9.90 and variable cost per unit is $2.50 or a gross profit margin of 75 percent.
In my area, express conveyors are priced at $10/$15/$20/$25, whereas convenience stores may price in-bay at $8/$10/$12/$14. There is a lot of room for higher prices (i.e. $9/$12/$16/$20) and, therefore, a higher gross profit margin.
However, prestige pricing requires premium products and services. This means a first-class building, top-tier equipment, high-quality chemicals, a marketing program, and personnel.
For example, in-bay does not require attendants to operate, but some physical presence is necessary for housekeeping, maintenance, customer service, and administration.
Shown in Figure 3 is a great example of how appearance can help maximize store attraction rate. Another element of market share is the customer loyalty rate. For example, experience has shown it is possible to increase sales by appealing to consumers’ need for instant gratification by offering fuel discounts with a car wash purchase at the pump.
Another effective tactic is to offer some form of loyalty rewards program. This could be as simple as a card-based program (i.e., BOGO) or more sophisticated such as a monthly wash plan that requires vehicle identification technology (i.e., RFID, LPR).
Bob Roman is a car wash consultant. You can reach Bob via e-mail at bob@carwashplan.com or by visiting www.carwashplan.com.