CHICAGO — Mention the word “competition” to operators, and you will get a wide range of responses. It seems that competition breeds both panic and defiance.
What does a good scouting report on the competition entail? What effect, if any, should the competition have on your pricing? How much business can you take from a competitor?
We asked several distributors to tackle these, and other, questions regarding the competitive world of self-service laundries.
COMPETITION SHOULDN’T DETERMINE PRICES
Stephen Bean approaches the competition question from the perspective of both owner and distributor. “From a distributor’s point of view, when looking at a site, we look for a demographically valid location, a good real estate deal, and at the competition,” says Bean, Universal Coin Laundry Machinery, Livonia, Mich. “All of these three points carry equal weight.”
When evaluating competition in an urban setting, you might be looking at two miles as the area draw, he says. “If the competition is outside the trade area, we focus on its quality, hours of operation, equipment, etc. It might end up not bothering us.”
In the case of evaluating a potential site that lacks any competition, Bean will still advise against opening there if the demographics and real estate factors aren’t favorable.
Competition shouldn’t influence pricing. “[Worrying about what the competition charges] is an overstated excuse for being afraid to raise prices. Price is not the sole determination in choosing a store.” Bean says his laundry is one of the highest-price stores in the area, and it does good business because it offers many good things. “The price leaders can do most of the business.”
Bean advises clients to raise prices when needed, and to utilize signage explaining the need for a price hike.
When scouting the competition, he urges owners to wash a bundle of towels at the laundry on a Sunday. “Look for friendly attendants, hours of operation, cleanliness of the machines, the number of inoperative machines, ancillary vending products, and the vend prices.” Even the store’s marketing attitude should be taken into consideration, he adds.
Regardless of the competition, don’t start a price war, he says. “[If you start a price war,] you can drive the prices down the drain for everyone. Instead, I might recheck my hours of operation, add some promotional features like prize drawings ($50 worth of free washes, free gasoline, etc.) or have some value-added stuff such as free Wi-Fi. Give people four or five reasons to come to your store.”
If marketing is your solution to battling competition, never mention the competition for any reason. It’s an ethical thing, plus you don’t ever want to tell someone about a laundry that they may not be aware of, Bean explains. You might want to honor a competitor’s coupon that was mistakenly brought in, but this can be risky, he adds. “You might honor coupons for a certain period of time, but be careful because the offer could hurt your business.”
Are you frustrated because you have a great store, yet can’t capture a big enough chunk of a weak competitor’s business? “You can win over a significant amount of the competition’s customers, but you will never get all of them because some people feel comfortable in certain laundries. People also generalize; if they are used to mediocre laundries, some think all laundries are mediocre, so why change?” Bean also believes that some people may be intimidated by a new store — the equipment may be different or they might feel self-conscious about intermingling with different customers.
Price incentives might win over some more customers, but they may leave when prices return to normal. “It’s just tough to put another laundry out of business.”
KNOW YOUR MARKET
On a scale of 1-10, competition rates an 8-9 in determining whether to move into a new location, says Ron Jansen, Laundry Pro, Lakeland, Fla. “If a new store can’t bring something new to a market, which is like a pie, it won’t be profitable,” Jansen says.
Because some Florida markets don’t have adequate population density, Jansen works with 1-, 3- and 5-mile rings. “With the right operation, you can draw customers from as far as five miles away.”
The Florida market is suffering because of the housing situation and a reduction in the Hispanic population, he says.
The recession has made pricing more of an issue, Jansen believes. “People are more price-conscious than ever before. They will drive across town today to save a quarter.
“On the other hand, if you have a nice store offering a good experience, 25 or 50 cents extra isn’t a big sticking point. But in the past, stores could easily get away with being 30 to 40 percent higher than the competition.”
If operators are up against tough competition, little things may help, but it really depends on the market. “For example, if you’re located in a student area, comfort is key. In a lower-economic market, the layout and the equipment mix is more important.”
Scouting the competition can be a detailed task, Jansen says. “Start with a simple question: ‘Would I do my laundry there?’”
When marketing, the most important thing is to act like you have competition every day, he advises. “Draw attention to what you offer; don’t be concerned with what the competition offers.”
If you’re set on winning over a large group of the competition’s customers, you may be disappointed. “Even the worst stores still have loyal customers for either transportation reasons or because they are creatures of habit. Look at the entire market, and decide what percentage of the business you can reasonably take if you offer a better product.”
Remember, if the number of new customers you expect to gain is too high, you could end up disappointed because your competitor may counter to win back those people, he adds.
Check back next week for Part 2