Every year, Auto Laundry News invites executives from various segments of the car wash business to share their views on what lies ahead next year for the industry. This year, the participants are:
• Lawrence Stovall, president of AutoBrite Company
• Kevin Ahnert, general manager of Innovative Control Systems
• Brent McCurdy, president of McClean Solutions LLC
• Katie Balash, president of Vaughan Industries Inc.
We asked the panelists to consider four issues of general interest to car care business operators:
1. The economy – the outlook for 2023 and its impact on the car care industry.
2. What’s next in car wash technology/automation?
3. Can full-serve, in-bay automatic, and wand-bay self-service wash formats keep up with express exterior?
4. What other issues should operators expect to have to deal with in the New Year?
While it is difficult to see into the future, inflation, rising interest rates, higher gas prices, and the first two quarters of 2022 having negative GPD are indicators that have me believing we are going to be in a prolonged recession well into 2023. In talking to some of our customers they are seeing the effects already. Many are reporting slow periods with occasional spikes when conditions are favorable due to weather or natural events. This is reminiscent of 2007/08 when the housing bubble was about to burst.
Although I am very optimistic for 2023, it will come down to customer sentiment in the end. If, after November elections, the nation feels optimistic then the industry will continue to grow but should something unforeseen like an escalation of hostilities in Europe or an invasion of Taiwan happen things could flip dramatically and quickly.
The macroeconomics of the economy in 2023 will continue to impact growth in our industry in several areas. We already know we are facing higher interest rates and inflation with more potential increases on the way. These factors are already causing delays in new construction and pushing out site completion dates from six months to a year. Basically, it keeps getting more difficult to build, and getting sites completed today requires more planning and less room for error than ever.
The impact on existing locations has more to do with how consumers will choose to spend their disposable income in 2023. In the last recession, locations with high reliance on labor felt the most impact. This will continue to be a challenge this time around, but we will also have to see how well unlimited club membership retention fairs as consumers cut back their spending. To combat this, operators will need to focus on the customer experience and overall perceived value. As a result, monitoring customer feedback and predicting their decisions is more important now than in the past.
Here’s my guess on the economy: Late 2022 and early 2023 the Fed rate hikes will cool inflation and the emotional reaction from consumers re economic news will create a reactionary slowdown that will cool inflation to 3 percent or less — inciting a slowdown that might only last six to eight months. But the Fed, with the support of the Democrats hoping for re-election, will be quick to reduce the Fed rate and the bump will be short lived. I think consumer confidence will return quickly in late 2023 and things will be back to “normal.” Consumers will have historically normal wash patterns and most operators will be satisfied with their business. Keep in mind, 2023 itself might be a little rough.
While parts and equipment demand remain high, I think it’s important to pay attention to changes in the economy, as well as current world events. While we have seen a reduction in material outages due to COVID and weather events, other growing world events may bring us new and unexpected outages of more products. If the economy continues to struggle, the car care industry may be faced with a dual challenge. Just in time ordering to help manage costs on a reducing scale may become very difficult.
A. Touch free car washing will make a comeback because of the increase in the number of sensors being put onto vehicles. As the auto industry moves closer to the self-driving or autonomous vehicles, we are seeing the number of sensors needed increase on automobiles. I was talking to the VP of operations at a local dealership chain, and he told me that they have had to recalibrate the sensors on the newer vehicles, and he believes it is from the brushes in the express tunnels. The basic Rivian has at least 18 sensors and Tesla already advises to only use touch-free car washes for their vehicles. This will affect the chemicals we use to wash cars in the future so the chemical manufacturers will probably have to reformulate some of their lines to work faster in future touch-free express tunnels.
B. Dual belt conveyor systems will become the dominant form of conveyor. Because of the ease of entry, vehicle safety, and comfort for the customer the dual belt systems will become dominant. Recently the wife of a friend texted me that she had just gone on her first car wash with a belt system while visiting her brother in Ohio (she lives in Virginia). She loved it and said it “was the greatest car wash ever.” That is how the majority of people react to the belts versus the old chain and roller.
C. Unless the government gets heavy handed on business, a move away from cash is the still the next biggest change in the industry. We may even see hand/palm print readers at the car wash where the palm print is attached to a credit card which is how the payment is made.
At ICS, we are always working with our customers to develop technology that continues to push the industry in new directions. It is what we did with the express exterior model, and it is what we continue to do now. As I stated above, we need to be focused on the customer experience and our technology needs to be in alignment with this. Reliance on business intelligence tools to provide insight into the predictive analytics of clubs and customer satisfaction is the key to this equation, but it is not just about data. The wash equipment itself is now more interactive and adaptable than in the past. For example, we have developed the Washnetics line of equipment that focuses on adaptability and flexibility to produce a cleaner car at higher chain speeds without prep. Since most customers are riding through the tunnel these days, the customer experience is not just how clean the car is but also how did the customer perceive the equipment “treated” their car as it progressed through the wash. Vibration, noise, scent, cleanliness, and visual experience are all playing a major role in customer satisfaction these days.
I am not sitting here ready to unleash something new that no one has imagined or heard of yet in the car wash market. I think we will see continued growth in belt conveyors, lighting, and upgrades like ceramic protectants. I think we will see continued push, investment, and professionalism in selling monthly wash clubs. I think technology will aid the wash club selling with more information as customers arrive, whether they are new to the site, regulars, or former members, and this information will guide the sales staff to approach that customer with a refined sales approach for better results. I think more automatics will offer memberships, leveraging the value that investors find in guaranteed income as evidenced in the express-exterior wash craze.
Car wash technology has seen impressive growth in the last several years. I believe there will be a continuing focus on improving output and profitability using lean techniques.
I’m not sure what is meant by “keep up” but will they remain relevant in the industry? The answer to that is yes! I’ll take each one individually.
Full Service: There will always be a market for the car owner that wants someone to wash their car for them, inside and out. The way the product is delivered my vary in the future. We may see more of these types of washes at locations where the customer can leave the vehicle and go on to attend to other business or leisure activity while their car is being cared for. It may even become part of a package while attending some event. I think entrepreneurial creativity will keep this option open.
Wand-Bay Self Service: This type of wash will always be around because it services so many different types of customers. Where does one wash their boat, RV, horse trailer, camper, 4-wheeler, motorcycle, the list goes on. The future for this type of business is not to cater to the regular car wash crowd (leave them to the tunnels and IBAs) but to focus on those other types of customers. In the future most of these operators will probably have mini express tunnels at their washes to cater to a local customer base, much like a local diner or burger joint. This hybrid style of car wash will have a loyal base who can get multiple types of vehicles washed.
In-Bay Automatic: I think the future of the IBA rests on two areas. First is the increased demand for those wanting a touch-free wash for their cars. The second is areas where the car volume is too low for an express tunnel but there is a demand for an automatic car wash system. We have seen a demand in the request for quotes for touch-free washes.
Each segment has its advantages and disadvantages. The immediate challenge of the express exterior model is the amount of capital investment needed due the size of the real estate footprint and the increased construction costs. Existing full-service locations can greatly benefit from converting, but it is not as simple as adding pay stations to the location. They need to make sure they are changing the wash process to support the model at the same time. We are seeing growth in the in-bay automatic side of our business. For existing IBA sites, we are seeing locations that are upgrading their older payment stations to become EMV compliant and to utilize the features and benefits offered in the express exterior washes to attract and retain customers. We are also seeing license plate recognition and RFID systems being commonly added to offer club and fleet programs. On the new construction side of things, in many cases IBAs offer an additional profit center to gas station/convenient stores as we start to see more electric vehicles on the road.
Yes, full-serve, in-bay automatic, and wand-bay self-service wash formats can absolutely keep up with express exterior. Self-service and in-bay automatics are the overlooked superstars in the car wash business. Over and over again, I see these washes continue to be successful surrounded by express-exterior washes. Of course, the self-service and automatic investor needs to keep these washes modernized with all the bells and whistles — they need credit card payments including tap to pay, they need lights and colorful signs and marketing, they need quality chemicals including ceramic offerings, the automatics need to be modern and in decent shape. Too often these operators are discouraged with the new washes popping up around them instead of meeting the competition with awesome locations. Time and again these washes keep their volumes and grow in spite of express exteriors in the market if they offer a product that is of comparable quality. Consumers like the 24-hour convenience these washes offer. Consumers love the touchless nature of the touchless automatics when they own Teslas and BMWs.
The car wash consumer has always had a preference for the style of wash they use. While there may be some adjustment of use due to economic factors, I believe that multiple wash formats are partially driven by geographic location.
I think the rising costs of energy will affect car wash the most. The cost of water, utilities, chemicals, parts, and equipment all rise when energy cost go up and those increases must be passed on the customer. This will lead to having to further increase prices or decrease quality.
As mentioned before, there are potential global political problems that could change everything quickly, some of which we don’t even know about.
I wish I knew all the issues we will face in 2023, but if the last few years have taught us anything it is, we can expect things to continue to change. Regardless of where you stand politically, I think we all can agree that we need better results from our politicians than we have seen recently. In the recessions since World War II, we have seen an average drop in the stock market of around 29 percent, so we could be at or near the bottom of the gap now, but how long it will last is a big question. Fortunately, so far, we have not seen much of a change in the employment rate, but we do know that because of inflation and rising costs the average American’s savings has gone down. All of this equates to a potentially tumultuous 2023, so we need to make sure we are listening to the needs of our customers and paying attention to any opportunities that present themselves in 2023. Having a strategic marketing plan with a focus on enhancing the customer experience and retaining customers is going to be the key to navigating this landscape.
Two biggies are: 1) What happens with further consolidation of the express-exterior space? Can companies keep paying top dollar for sites and satisfy investors? 2) When will the express-exterior market saturate to the point that expansion stops or slows?
Another issue is whether self-service and automatic owners will believe in their model and re-invest in competing? If they don’t, it’s a self-fulfilling prophecy that these sites will fail.
Lastly, how will consumers treat an economic slowdown in their wash patterns. Before and after COVID, the industry saw strong economic times where consumers were in spend mode. Buying new cars (if they could) and basically feeling flush in a strong economy where incomes were growing and things seems great. How will consumers react to
bad economic news with their memberships? Some argue that memberships are the best value out there, but followers of Dave Ramsey and the like will tell people to get off of memberships. Will they? Big question for 2023!
If we suffer a lasting downturn in the economy, operators could face a variety of problems. A reduction in customers across the board is a reality. That disruption could bring rise to several challenges including loss of monthly memberships or a reduction in new membership sales and a rise in membership use as opposed to pay as you go customers. An overall reduction in customers will impact cash flows as well as employment opportunities.