Al robson

What will the dry-cleaning industry look like in five to ten years and where will you fit in that picture? Only by examining and understanding the underlying forces that are driving this industry today can you position your business for success tomorrow.

Stagnant demand

Although demand for drycleaning is flat, casual wear and the home office are not the only conditions that are putting pressure on piece volume. New strip malls are being built everywhere and every new mall has one storefront designated for a drycleaner.

These locations are being picked up by existing drycleaners who: 1) want to expand their market share; and 2) want to keep out the competition. These new locations do absolutely nothing to increase the drycleaning piece volume in the areas where they are built — but they sure do cut the pie into smaller pieces.

Another reason why the pie keeps getting cut into smaller pieces is the proliferation of newbies in the business. We all know the basic attractions to the drycleaning industry:

Low start-up costs.

No experience necessary.

The promise of huge profits.

Increasing sales

In talking about increasing sales, we must consider piece sales and dollar sales. The drycleaning industry is very competitive. To grow your business you must do something to make your company stand out. Unfortunately, people — even astute business people — have a tendency to act like water running down a hillside: they take the path of least resistance. For many, that path leads to low prices… the easiest thing in the world to sell is low prices.

No doubt, you can increase your piece volume with low prices but what about increasing your dollar volume? If you discount your prices 10 percent, 20 percent, 30 percent or more, how much will you have to increase your piece volume to maintain the same dollar volume?

The fact is that the bigger the discount, the bigger the piece volume increase has to be. In other words, as you discount your prices at an increasing rate (going from 10 percent to 20 percent), you will need to increase your piece volume at an increasing rate (from 11 percent to 25 percent). See the chart “Discounts and Piece Volume.”

This means that a 10 percent discount will require an 11.1 percent increase in piece volume to generate the same $4,000 (111 pcs. Divided by 1000 = 11.1 percent). Additional pieces required are calculated by subtracting 1000 from 1111 (equals 111).

As the amount of the discount increases — the number of pieces required to generate the same dollar volume increases at an increasing rate. A 20 percent discount requires a 25 percent increase in piece volume while a 30 percent discount requires a 43 percent increase in piece volume.

We know that discounting can increase your piece volume and that it is unlikely to improve your dollar volume. Which brings us back to the question,

How can you increase your dollar volume without increasing your piece volume? There is only one answer to that question – increase prices.

Next question, How do you increase prices?

The only way your can increase prices is by improving the quality of the work you do and the quality of the service you provide.

Once you improve quality, you can increase your prices. After which you can afford to advertise. Every drycleaner I know who is increasing their piece and dollar volume is spending between 2.5 and 4 percent of gross sales on advertising.

The most successful drycleaners are providing the best service and work; are charging prices that reflect the quality of their service; and, are advertising. If you make a commitment to spend 3 percent of gross sales on advertising, where will the money come from? It can only come from one of two places – your pocket or your customers’ pockets. Improve your quality, increase your prices 4 percent across the board, and your customers — not you — will be paying for the successful growth of your business.

As for what this industry will look like in five to ten years, don’t fret. No national chain is going to take over within the next ten years. What will happen in the next five to ten years is that the drycleaning industry will be required to respond to the changes in society in general.

The gap between the haves and the have nots is getting bigger! As this gap continues to widen, the middle class will continue to shrink. You must decide which market you will cater to — the lower end, price-conscious market or the harder-to-please, more affluent customers… your call.

Remember, in the game of business the more you know the better you can play the game.

Alan Robson is a private consultant dealing with the specialized needs of the drycleaning industry. For more information, contact him by telephone at (508) 753-6619 or send e-mail to him at: alan@bizbuilderonline.com or visit the Biz Builder web site: www.bizbuilderonline.com.