Source: Bigstock
Following on the heels of last week’s non-digital subscription movement — the community supported agriculture trend — this week I have another non-digital subscription business to profile: car wash clubs.
Although car washes have been around for a long time, this mature, fragmented market continues to show growth in the United States. Here’s some government data extrapolated by Statista to project future trends:
(Source: US Census Bureau with forecast by Statista Research)
It’s a story of solid performance, after a dip in the Great Recession. I suspect that data is not inflation adjusted, but there is still cause for optimism. The International Car Wash Association has its own data to support the US Census data above:
- More than 2 billion cars are washed each year in North America and nearly 1 billion in Europe. Car wash retail sales are approximately $15B in North America, 5B in Europe and A$1.5B in Australia.
That’s $8 billion annually from an independent source and $15 billion annually from a trade association. Your mileage may vary.
However, the data does suggest that more car owners are turning to car washes rather than washing their cars at home. Take a look at this data:
(Source: The Car Wash Show 2015, 2014 National Consumer Survey, slide 60)
That’s four-year-old data, but the trend is pretty significant. More car owners are going to car washes instead of using the hose and buckets in the driveway. And with the bad reputation that car dealerships have in this arena, independent car wash services are thriving.
The market is divided, however. Few major players and many independents make for wide variations. The kinds of car washes offered varies too:
(Source: International Carwash Association estimates, via Statista)
However, all three of those car wash varieties require money to buy and install. The nature of the car wash business is one that lends itself to conservative business practices. A large initial capital outlay for expensive equipment leads to less risk-taking than one sees in businesses with lower start-up costs. Consequently, car wash and detail business owners have been reluctant to leap into subscription services. Any model that allows unlimited uses includes the danger of overuse.
At the Professional Car Washing and Detailing trade news website, Joe Shoemaker has been trying to sell car wash dealers on the sexy, trendy aspect of the subscription model:
- Spotify, Amazon, and Apple all have an unlimited monthly music subscription service. Smartphone carriers are also seeing the benefits of a flat monthly rate for unlimited service and data streaming, which is a big departure from the previous pay-as-you-use model. It doesn’t stop there, either. This trend has even hit brick-and-mortar movie theaters. A new company, MoviePass, now allows you to purchase “unlimited” movie viewing in the theater for one monthly price. As more consumers embrace this monthly plan model across their other purchasing choices, you have a fantastic opportunity to be viewed as someone who has a pulse on their needs, especially as it relates to value and convenience.
I bolded that last bit so you wouldn’t miss it. The argument is that consumers are getting used to, and even expecting, to be able to join a business as a member at an all-you-can-eat table. Might as well give the customers what they expect. Plus, trendy!
The car wash business is especially well suited for this model, because the incremental cost to serve extra customers (or the same member multiple times) is low. How low? Look at this data from the Tommy Car Wash Systems blog:
- Recent hikes in utility costs and minimum wage have brought average wash costs to an average of $2 per car, for thorough washes. Basic breakdown of costs is as follows:
– $0.65 – chemicals (including add-ons such as Rain X)
– $0.40 – electricity costs
– $0.20 – water
– $0.15 – natural gas
– $0.70 – labor
We’re talking about a business that charges $7-$10 for a basic wash, say, at a cost of $2 to supply. No wonder business is growing!
But the subscription angle is this: When the initial outlay is large and the cost per use is low, there is no reason not to keep the car wash filled up. After you pay down your initial capital expenses, it’s all gravy. A seven-location car wash owner put it this way to Car Wash Magazine:
- There are a lot of gaps between cars on those conveyors. We might as well fill them with cars. The old saying about car wash equipment is that you can either wear it out or rust it out, and I’d rather wear it out.
Which is to say, if subscribing members “overuse” the service, so what? The cost per use is low, and the revenue from the subscription is high — higher than that of a regular non-member customer. Still, some car wash owners fear the super-users who come back every day. They should not be afraid, says Car Wash Magazine:
- Unlimited wash programs aren’t for the faint of heart, and the change in business model from pay-per-usage to subscription-based can include some growing pains. But in time, the increased volume and enhanced customer loyalty can give a car wash a predictable, dependable stream of revenue each month.
At Wolford Communications, a car wash marketing service provider, owner fears are answered this way:
- Don’t you lose money when you offer unlimited washes? It seems like by offering an unlimited wash club the business may lose money because the customers have access to discounted (and eventually free) car washes throughout the month, but this is rarely the case. By purchasing the unlimited wash club membership, most customers will only increase their wash frequency by one or two “extra” washes, which means you actually make money because the customers pay more for their monthly membership then they would pay for one or two washes.
These and similar reasons will not surprise readers of these columns. Constant revenue streams, quieting the storms of seasonal or weather variation, customer loyalty, upsell opportunities, and so on, are other obvious reasons to offer membership clubs.
And there are a few specifically brick-and-mortar reasons to move to subscription club memberships, for example, using RFID tags to make check-in much easier.
So, at last, car wash companies are growing their subscription base. According to Car Wash Magazine, the actual numbers show real growth:
- Unlimited wash programs are seeing a surge in popularity, according to the International Carwash Association’s 2016 U.S. Consumer Study. In 2014, only 11 percent of car wash customers were enrolled in these programs, but just two years later, that figure had jumped to 21 percent. And 87 percent of unlimited wash members said they were satisfied with the value they receive from a car wash, compared with only 61 percent of nonmembers.
A June 2018 report by Rich DiPaolo in Professional Car Washing and Detailing calls out subscription programs as the hottest trend. Here he is quoting industry expert Steve Gaudreau, president of Brink Results:
- “The biggest change sweeping the industry is the expansion of the monthly subscription model for the unlimited wash club,” asserts Gaudreau. Today, he adds, operators that do not have a large number of members – over 5,000 per location – are at a significant disadvantage, especially if the competition does maintain a strong customer base.
“Helping operators increase their memberships in their unlimited wash club has overnight become our most requested training service,” continues Gaudreau. “The change in the business model with these plans is undoubtedly the most significant development in the industry.”
Check out this infographic in the same article, next to Gaudreau’s quote:
(Source: Professional Car Washing and Detailing)
An article at ICS Car Wash Systems confirms the trend:
- Customers are attracted to the unlimited wash club knowing they are getting a great value, saving time, and free from worrying about bad weather. These customers visit more frequently and also generate more sales as they tend to believe that they are not really paying for a wash and tend to purchase the additional service items that they normally would not have purchased if they had to pay for the wash too.
As examples of how car wash companies are selling their membership services, check out three examples online:
Insider Take
As consumers are learning and even expecting to use monthly plans to pay for music, video, subscription boxes, and even veggies, car wash operators are beginning to offer unlimited wash club memberships in the same mode. There has been some hesitation among conservative business owners, but the data shows decent dividends for those who make the leap — 21 percent of operators in 2016.
