Diversification, sure. But how?
By Bruce Baldwin
Profitability in the drycleaning industry
is basically an equation of volume and price until a break-even
point is reached. Profits grow quickly after reaching the
break-even point.
Companies that choose to have high prices
will reach the break-even point with less volume than companies
that have chosen low prices. Low prices can stimulate volume by
letting consumers get more from their disposable income.
It is through the exploitation of these
basic facts of drycleaner economics that the “one
price” cleaners idea was born.
Using this idea the break-even point will
require much greater volume but will still be achievable. Costs
are also lowered by reducing production costs or the quality
level.
The birth of the “one price”
cleaners, in my opinion, marked the change in our
industry’s evolution from one of diversification to one
of specialization. The trend towards streamlining costs and
squeezing profit margins is an economic fact in all levels of
the marketplace.
This article is not about which of these
path is the correct one. In my opinion, the important thing is
knowing which is your market segment and being the best in it.
It is a popular belief that a population
of approximately 10,000 people is needed to support an average
(moderate price) drycleaners. It is estimated that an
unhindered (by competition) population of 30,000 is needed for
the “one-price” cleaners concept.
Problems with low volume are usually
caused by exceeding these population-to-cleaners ratios (an
overly competitive market), by negative consumer trends (casual
wear), or economic conditions.
When a cleaner suffers from low volume,
it’s easy to get caught up in a desperate search for
solutions. Diversification will only add to the problem.
Diversification, by its very nature, is a
move away from focus by requiring investments of equipment,
supplies, or time (usually all three).
Whether that diversification is selling
drapes, books, cleaning rugs, heirlooming wedding gowns, or
cleaning leathers, focus is always diverted from the core
business. How does one compete and profit from offering a
diversity of related services without losing focus on the core
business? Outsource!
The logic behind this answer is obvious.
By doing the actual work themselves, drycleaners take on the
cost and risk, not the profit.
Outsourcing reduces production costs by
allowing key team members to focus on the core business, which
is the source of true profit potential, Using a high quality
subcontractor can help a company raise its reputation and
advance the business to a higher price position in the
marketplace. High-end cleaners can also gain in profitability.
Consumers are routinely amazed with the
high quality of service provided (spots removed, excellent
pressing) from a drycleaner’s high standard of focus. In
the same way, specialists are equipped and skilled in a
specific area to do a superior job at a lower cost through high
volume and focus. Because specialty cleaners work for their
peers, the quality standard is raised.
Take a serious look around. Successful
companies have become more profitable by focusing on their
drycleaning and laundry services while embracing change and
minimizing costs through outsourcing. The question should not
be whether to outsource, but with whom to partner.
Bruce Baldwin is owner of Rawhide
Leather/CLEAN and TimeCapsule Heirloomers in Austin, TX, and
specializes exclusively in bridal gowns, leather and furs. He
is a past president of both the Southwest Drycleaners
Association and the Greater Houston Cleaners and Launderers
Association.
 |
