Forces and Trends in the Car Wash Industry

Introduction

Sailing Hawk Car Wash is an independently owned car wash. The current owners have operated this business for four years. The business was established about 15 years ago. Upon purchasing this business, the current owners upgraded the plumbing and replaced other structural components. One of the largest changes that were made to this business was the addition of an automatic car wash stall. Prior to the current owners, this business only supplied two self-serve bays. Now it is one self-serve bay and one automatic bay. The business is slowly growing and posted a gross income of $36,000 for 2007. The current owners would like to expand this business. In addition to adding new locations, the owners would like to add a tunnel bay which would offer the customer the very latest in car wash technology. Car washes are somewhat green companies. They are capable of recycling water, and it has long been established that when citizens use car washes the amount of water consumption is greatly reduced. On the other hand, the chemicals that are used in car washes are harsh and not earth friendly. The owners would like to make changes to the car wash so that the effect on the environment is negligible (Mills, personal communication, 7 Apr 08).

Although this is a small business, it would benefit from an analysis of the trends and factors that might affect it (Pearce & Robinson, 2004). Since the owners are looking to expand this business, knowing the potential issues and opportunities will only help the owners determine the best way to expand.

The three areas that are going to be addressed for this business are Industry Trends, Remote Trends and Operational Trends. In examining these trends the owners should have an insight as to what challenges and favorable conditions they are facing.

Section 1: Richard Shives: Industry Trends

The industry factors or trends are associated with Michael Porter’s five forces that shape competitive strategies. These five forces include Threat of Entry, Supplier Power, Buyer Power, Substitute Products, and Competitive Rivalry. This section will focus on the power of the buyer regarding the car wash industry as a whole and specifically Sailing Hawk Car Wash.

According to Market and Research, the car wash industry in the US includes 14,000 full-service car washes with combined annual revenue of about $5 billion. Large chains include Wash Depot, Oasis Car Wash, and Autobell Car Wash. The industry is highly fragmented: the 50 largest chains hold just 15% of the market. Chains are local or regional. A typical firm has one location. A large location has 35 employees and $1.5 million of annual revenue. (Car Washes - Industry Profile, 2008) Because of the high fragmentation and standardized products the purchaser power force of Porter’s five forces is very important to this industry.

According to Ryan Carlson, author of Wash Ideas, a recent car wash industry trend is that consumers have been changing what they want, how they want it, and how they want to pay for it. This is the number one variable in whether business is good or bad. It comes down to the buying trends of the customers themselves. Successful car wash operators are quick to point out that by making the necessary changes to their own wash business they have been able to capitalize on competitors that have become complacent and fail to keep their appeal with their local customer base. (Carlson, 2008)

This indicates that the consumer buying power is a major industry force Sailing Hawk Car Wash will have to strategize for. According to Porter, customers can force down prices, demand higher quality or more service, and play competitors off against each other—all at the expense of industry profits. (Porter, 1979) Sailing Hawk’s ability to meet this trend and strategize ways to adapt will determine how successful the company will be. The owners have introduced upgrades to the present operation by adding an automatic stall, upgrading the pluming and making structural enhancements. In order to stay ahead of the trend in customer power Sailing Hawk should consider adding various ways to purchase their service and adding high margin miscellaneous products.

Consumers pay for services in various ways, credit/debit card machines, cash, bill changers, and with additional services or products. Sailing Hawk should consider implementing one or all these. High margin, miscellaneous products include drying towels, vacuum cleaners, floor mats, and air fresheners, among others. By adding a vending machine with these products Sailing Hawk can differentiate themselves from their competitors.

Section 2: Barbara Carpenter: Remote Trends

The factors or trends that are associated with the remote environment include social, economic, ecological, technological and political. Usually these trends are independent of any given business, however, they are sometimes linked and changes in one factor will cause changes in another (Pearce & Robinson, 2004)

As Sailing Hawk Car Wash looks into expanding, and even now, the company is going to have to take into consideration which, if any, of these trends impacts the business. For this business, social, political and ecological trends are going to be interlinked. As environmental concerns increase, these trends could affect this business and industry. Changes in regulations could impact the business as it did in Georgia. In 2007 carwashes were put on the list of companies that could not use fresh water in Georgia. Since then carwashes has been reinstated due to conservation programs and willingness to use new technological processes (Whitney, 2008). Knowing what the trends are will allow the owners to plan accordingly and make changes. Technological improvements may help the company comply with any regulatory changes and may also help the company become greener.

As the current economy slides into recession, the company is going to have to monitor customer spending trends on a local and an industry wide level (Pearce & Robinson, 2004). Knowing why customers come to the car wash as well as why they may stay away are key questions the owners should already have the answers. If additional capital in the form of a business loan is required to expand the owners must keep abreast of the current economic trend related to business loans. Recent trends show a tightening of standards and loans in every industry. The slowing of the economy has caused a shortage of funds, and it may be harder to obtain the loan, or the interest rate may be especially high (Haubrich & Zaman).

By monitoring the remote trends, the owners of this company will have an excellent idea of when to expand how to expand and what areas of expansion to put their funds (Pearce & Robinson, 2004). No matter what the remote trend is, if a company is going to continue to survive and to grow, owners and shareholders alike must analyze them to see what will potentially affect the company.

Section 3: Frances Mills: Operational Trends

A car wash that wants to stay in business must watch operational trends and avoid sticking their heads in the sand. Some of these operational components are the composition of its customers, its reputation among its customers and suppliers and its ability to attract employees. Sailing Hawk car wash must keep track of its customer profile and know the demographics, buyer behavior, and the psychographic details, (Pearce & Robinson, 2004). One way to accomplish this is through a website. The car wash can use a well designed website to advertise the business, keep track of customer purchases and learn what the customers want through customer comments and customer surveys, (Carlson, 2008).

In addition to credit cards, Sailing Hawk can offer the “wash card” which is a card only for the car wash. Customers can purchase in advance and use the card as a credit card in the wash. Using the website, those customers can update the cards on line and save time at the wash. Most car wash customers want fast, reliable, consistent service. The cards can be used for all of the wash services, so they provide convenience for the customer and on-line information about their spending habits for the business, (Carlson, 2008).

In addition to the website, the business needs keep up with technology in the equipment area. The most popular car washes today are the express washes. They offer more specific cleaning equipment than an in-bay automatic and are less labor intensive and faster than a full service car wash. One thing that customers want is consistency. The better the operating technology on any of the equipment, the more consistent the wash will be, (Essenburg, 2008).

Employees are also part of the equation. While, Sailing Hawk does not have employees now, there is a possibility of adding some part time employees to provide better service for the customers. Happy employees equal happy customers. When Sailing Hawk does add employees, the company must look for employees who will see the value of the customers. That translates to training and rewards for the employees and time spend up front by the owners to find the right employees, (Gorgos, 2008).

Conclusion

Sailing Hawk needs to be in touch with the environment. New equipment on the market, new requirements from the customers and new regulations from the government all affect the success of the business. A successful car wash must be proactive. Sailing Hawk cannot wait until business is waning to start looking at new equipment, new marketing techniques, and ways of being more environmentally friendly. In the world today, an organization cannot wait until government regulations are put into play. If a large portion of the industry is doing things to protect the environment now, those government regulations may not become necessary.

The company must be actively seeking new customers and looking for ways to attract and keep them. The website is an excellent say to advertise, sell and to collect key information about its target market. The owners must invest in state-of-the-art equipment and convince its market that the quality and consistency is there. If they do provide that quality, the ROI is there.

If Sailing Hawk is going to expand with a tunnel wash, the owners will need to seek a new location and research the best areas. This will be a huge project, but the rewards can also be huge if the research and planning are done appropriately. The elements of operating, industry and remote trends will be the basis of the research to find the best location and determine what the customers are looking for.

References

Carlson, Ryan, (2008), Trends of the Self Service and In-bay Automatic market for 2007-2008, http://washideas.wordpress.com/2008/01/15/industry-trends-of-2007, retrieved April 10, 2008.
Carlson, Ryan, (2008), Your Carwash Website, Professional Carwashing and Detailing, January, 2008.
Essenburg, Ryan, (2008). Tunnel Technology, Professional Carwashing and Detailing, January, 2008.
Gorgos, Debra, (2008). Happy Employees = Happy Customers, Professional Carwashing and Detailing, January, 2008.
Haubrich, J., Zaman, S., (2008) Economic Trends, Business Loan Markets, Retrieved from the Federal Reserve Bank of Cleveland Website: http://www.clevelandfed.org/research/trends/2008/0308/01banfin.cfm
Pearce, J., Robinson, R., (2004), Strategic Management: Formulation, Implementation, and Control, 9e, Ch 3, The External Environment, The McGraw-Hill Companies, New York, New York
Porter, M.E., (2008) “How Competitive Forces Shape Strategy,” Harvard Business Review, March–April 1979 retrieved from Strategic Management: Formulation, Implementation, and Control April 9, 2008
Research and Markets, (2008), Car Washes - Industry Profile, http://www.researchandmarkets.com/reports/c26702, retrieve April 10, 2008
Whitney, D., (2008) Georgia Removes Carwashes from Outdoor Water Use List, Retrieved 8 April 2008 from http://www.moderncarcare.com/hotnews/georgia-carwashes-removed-from-outdoor-list.html