Trend analysis is the practice of collecting information and attempting to spot an underlying pattern or trend in the information.
In the analysis of information, amounts are presented as a percentage of a base year. Here, 1999 is the base year and the 1999 amounts will be restated to 100. Amounts for 2000 through 2014 will be presented as percentages of 1999 amounts. In other words, each year’s amounts will be divided by 1999 amounts and resulting percentage will be presented. Regression analysis is used to measure statistical significance of the trend.
The trends described herein were obtained by analyzing data taken from Auto Laundry News Self-Service Surveys.
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The trends presented herein are to judge past events and not for making forward-looking projections. Trend analysis tries to predict a trend like a bull market run, and ride that trend until data suggest a trend reversal (i.e., bull to bear market). Consequently, trend analysis is helpful because moving with trends, and not against them, may lead to profit for an investor.
MOVING WITH TRENDS
The self-service trends presented derive from Auto Laundry News survey responses. Significant trends were prices (upward) and debt and equity (upward, implied). What was not discussed was relevance to industry trends.
Demand for car washing has changed considerably. Since 2000, the conveyor category has captured over 70 percent of the total available market (TAM) up from 40 percent. Conversely, self serve (wands) declined from 18 percent to 7 percent TAM. The significance of which may relate to the downtrend in self-serve wand and in-bay sales volumes.
As mentioned, moving with trends, not against them, may lead to profit for an investor. For example, in 2006, full service accounted for 66 percent of TAM and express exterior 20 percent. Today, the percentages have reversed.
Technology
Since automated car washing offers the greatest market potential, how does a self-service operator move with the trends without foregoing TAM for wands?
One method is to adopt technology, which trends suggest self-serve owners have been very slow to do. For example, less than 30 percent of survey respondents have a website, about one half have credit card payment and bill acceptors, and about one half have in-bay automatics (virtually no change over the period).
Without a website, e-commerce is not possible nor is a mobile marketing strategy. Without tactics like a smartphone app, there is one less way to drive the younger generation to the wash. Without an in-bay automatic, there is no way to attract segments that offer the greatest market potential.
Pricing
Another method of moving with trends is increasing price. Operators who haven’t raised wand or in-bay prices for several years are most likely falling behind. Another method is to become more like other washes and price on the basis of specific wash services rather than based on time. One way to accomplish this is to adopt the pay-one-price business model. Here, a barrier is constructed around the property with a self-pay terminal at the entrance to control access. Customers pay one price (e.g., $6 or $7) and they use all they want. Unlimited requires sufficient wand and vacuum capacity and a modest capital investment.
An alternative approach would be to adopt a competitive pricing strategy — $5 for 15-minutes, no extra-time purchase allowed, meter box dispenses free vacuum token. This allows for a capacity of four cars an hour per bay, down from an average of six.
Exterior Only
Experts believe industry wash revenues will grow by an annual average rate of 2.5 percent through the decade. Roughly 50 percent of the TAM is now exterior-only car wash dollars.
How can self-service operators move with this trend? One method is to adopt the exterior-only business model. This means minimize wands and expand automated operations.
There are several ways to accomplish this. One approach is to reduce the number of wand bays and retrofit the building for multiple “fast” in-bay automatics. Another approach would be to reduce the number of wands and retrofit the building for an in-bay automatic and a mini-tunnel. If public demand is sufficient, it might even make sense to raze and rebuild as an express wash.
Core Assets
Consequently, moving with trends may require operators to change trajectory. For example, the trends suggest a threat to core assets. This is where durable resources, knowledge, and brand that once made a company efficient at performing core activities are failing to generate value.
Experts find when core assets and activities are threatened with obsolescence a radical change is recommended. Here, operators would pursue profit short-term as well as determine segments in which they can protect competitive position.
This requires strategic decision-making. Is it worthwhile to fight industry change? Can the business be reconfigured for revenue growth? Does the operator have the ability to change activities and move resources into the business?
Bob Roman is president of RJR Enterprises – Consulting Services (www.carwashplan.com). You can reach Bob via e-mail at bob@carwashplan.com.