By Andrew Alvarez
Demand for car wash services has been rising over the past decade due to its increased convenience and greater array of budget and luxury options, and with increasing environmental regulations prohibiting residential car washing, the industry’s customer base is expected to grow moving forward.
To appeal to consumers, operators in the car wash and auto detailing industry have started offering more products and services, including drying towels, vacuum cleaners, floor mats and air fresheners for self-service customers.
CAR WASH DETAILING
Furthermore, companies with conveyor car washes have begun offering Wi-Fi access and nicer waiting rooms for their customers, offering snack stations and beverages beyond traditional vending machine offerings.
Additionally, companies have introduced automated payment terminals and greater water-efficiency operations for eco-minded consumers.
As a result, revenue for the car wash and auto detailing industry is anticipated to have increased at an annualized rate of 2.4% to $10.5 billion over the past five years.
This news is bittersweet for operators in other industries that also provide automatic car wash services, particularly operators within the convenience store industry. While demand for car wash services has increased, these industry operators have experienced stiff competition on the basis of price, quality and location.
Furthermore, because of space limitations, convenience store operators typically serve consumers through in-bay automatic car washes, while only a portion of these operators are able to offer express tunnel washers like the car wash and auto detailing industry can. Most facilities in the car wash and auto detailing industry include both conveyor car wash and in-bay automatic car wash options.
Conveyor car washes, also known as tunnel car washes, are the most conventional and consistently used form of car washing provided by the industry. According to IBISWorld, conveyer car wash sales are expected to account for 49.7% of total industry revenue in 2017.
Typically, conveyor washes operate under three different models; that is, operators can offer full-serve, flex-serve or express conveyor washes to consumers. While full-serve tunnels generally require less space to operate, full-serve car washes require more labor to compensate for the services not performed by typical car wash machinery.
Flex-serve car washes primarily focus on cleaning the car’s exterior. However, should a customer want to clean the car’s interior as well, a section of the car wash is usually allocated for such services. Express tunnel washers provide exterior cleaning only and free access to vacuums after exiting the tunnel, and typically have a far shorter wait time compared with full-service tunnel washes.
Demand for this segment has increased significantly over the past five years, as rising per capita income levels enabled consumers to spend more on non-discretionary services like car washes, while time-poor consumers have capitalized on the time-saving benefits of express tunnel washers.
With in-bay automatic car washes, customers usually remain inside their automobile during the wash. The vehicle remains stationery and is washed using a rollover mechanism. These automatic car washes can be touchless or friction-based washes, or a combination of both.
The fully-automated system costs $7 per wash on average, and is usually triggered by a vending machine. These types of car washes are a relatively minor segment within the car wash and auto detailing industry; however, in the total car wash market they are more prominent. Players in the convenience store industry operate most of the estimated 40,000 in-bay, automatic car washes in the U.S.
Convenience stores are expected to experience increasing competition from traditional car wash operators over the coming years. However, industry operators will benefit from the added convenience of providing gasoline sales and convenience store items at the same location. In order to effectively compete with external competition, industry operators are expected to increase their food offerings, as well as lean into the industry’s advantages, such as longer operating hours and better locations.
The quick speed of transactions at convenience stores also proved to be valuable to busy consumers, as employment rose over the past five years. Positioning an establishment as a one-stop shop for gas and a car wash, as well as for extensive food offerings, including food prepared on-site, packaged meals and assorted beverages, is often a major deciding factor among consumers seeking convenience and variety.
Consumers have become particularly interested in healthful food that is available at the speed and ease of other items procured in a convenience store setting. Industry operators have responded to these trends by diversifying their product mix with various all-natural organic offerings and value-added products.
Consequently, the foodservice product segment is one of the fastest-growing segments within the c-store industry. According to IBISWorld data, nearly a quarter of sales will be derived from foodservice in 2017, up from its share of sales in 2012. Again, convenience is a driving factor behind the popularity of these items, as more consumers are pressed for time and benefit from speedy service.
Over the past five years, major players, such as 7-Eleven, have successfully expanded their food offerings to appeal to health-conscious consumers, which has bolstered profit margins while other product segments, such as tobacco sales, have stagnated. This nascent product segment is expected to remain lucrative for industry operators over the next five years. Adding a foodservice offering and a car wash program to your c-store can make your location especially appealing.
Since gas stations typically only offer in-bay automatic washes, which do not provide more thorough external and internal washing, operators can compete by offering a higher level of customer service and specialty options, which have higher profit margins.
Many operators have capitalized on this product segment by offering discount gasoline and car wash packages, in which a consumer purchases a car wash and is offered a discounted price on gasoline. Demand for this segment is expected to increase over the five years to 2017, as consumers increasingly use in-bay automatic car washes as an alternative to full-serve car washes.
Perceptions have begun to change regarding the efficacy of in-bay automatic car washes thanks to technological advancements that reduce friction on vehicles while cleaning. This change significantly contributed to this segment’s increased market share during the five-year period. Many consumers equate a rough car wash (i.e. aggressive friction from brushes that cause a car to sway during the wash) with unwanted wear and tear on their vehicles.
New in-bay automatic configurations, such as PDQ’s ProTouch system, appeal to consumers who prefer a wash with a softer amount of friction than conventional car washes. Consequently, revenue for the c-store industry is expected to increase at an annualized rate of 3% to reach $397.3 billion in 2022, boosted in part by these gains.
Andrew Alvarez is a lead analyst specializing in the service and retail sectors at IBISWorld, a business intelligence company specializing in industry market research and procurement and purchasing research reports. Learn more at www.ibisworld.com.