CHICAGO — As business owners, there are many challenges coin laundry store owners and operators face on a day-to-day basis.
When problems arise, many store owners and operators should have a plan of attack in place—from effectively handling customer concerns or complaints, to having a protocol to follow for when a key piece of equipment goes out of commission.
But what is a store owner to do when a new competitor sets up shop across town?
What are the ways in which that established store can size up this new player, and what strategies should they have in their battle plan for when it comes time to face their new competitor?
American Coin-Op reached out to various industry experts for tips on how to effectively answer the competition, and to provide strategies for store owners to ensure they don’t lose their footing when they become involved in a proverbial tug of war with a new competitor.
SIZING UP THE COMPETITION
Michael Finkelstein, president of Associated Services Corp., a distributor and chain of Laundromats in the mid-South marketplace, has had extensive experience when it comes to facing competition.
Finkelstein, who has been the owner of the Danville, Va.-based operation for 10 years, says the first step an established store owner should take when sizing up their new competitor is to consider where the store is relative to their operation, and what type of Laundromat the new store is trying to be.
“You really have to determine what type of store it’s trying to serve and then see if in fact it’s serving some more customers of yours,” says Finkelstein, who adds that store owners should take notice of things, like how large the store is going to be, and the new store’s equipment mix.
“I have no problem going into my competitor’s store and introducing myself, and walking around [and making] a casual observation,” he says. “You’re not going to be, in essence, taking pictures, or anything like that, but you could obviously see what they’re doing and how they’re doing it, and form your own judgment as to what kind of an operation it is.”
Joel Jorgensen, vice president of sales and customer services, Continental Girbau, also stresses the importance of “[knowing] your competition,” and “[understanding] how they size up.” He suggests a similar tactic when scouting a new competitor.
“Visit the competition at different times of the day and days of the week,” advises Jorgensen. “What services, staffing, hours of operation, amenities and equipment do they have? Look at their pricing structure, specials and marketing strategies.”
For Chris Brick, regional sales manager, Maytag Commercial Laundry, taking stock of equipment condition and efficiency should be the first step store owners take upon learning of new competition.
“Equipment is oftentimes the differentiator among stores and a review of current equipment is a must,” says Brick. “If the units are not in great working condition, this needs to be amended, as this factor is imperative to long-term success when a new competitor joins the market.”
When it comes to observing competition, Brick also advises established store owners to make a visit.
“An owner should visit the new store—there’s nothing wrong with a healthy, competitive business relationship,” he says. “While at the store, the owner should analyze the capacity of the equipment, price per vend for washer and dryers, additional products and/or services offered and if the store is attended or unattended. If the store is attended, rate the quality of its staff.”
Conducting a SWOT analysis—strengths, weaknesses, opportunities and threats—of a new competitor is a strategy Kathryn Q. Rowen, North American sales manager, Huebsch, advises store owners to use when analyzing competition.
“What amenities do they offer compared to you? Is it an attended laundry? Do they offer drop-off service? What are their hours of operation? What kind of capacity can the facility do? How safe and clean is the store kept and what reassurances are there that it will continue to stay that way?” asks Rowen.
GEARING UP FOR A PRICE WAR
Perhaps one reaction an established store owner may consider in response to a new competitor is to lower prices to match the new store’s grand-opening promotions.
Despite the prospect of possibly attracting customers, John Olsen, vice president of vended products, Laundrylux, explains the pitfalls of entering into a price war with a competitor.
“A new store will typically run a pricing promotion to attract customers to try their store, but this is usually only done in the beginning,” says Olsen. “If you hold your prices, the new store will typically raise prices after the promotion period and stay within the same range as others within the market.”
“Entering into a price war will squeeze your profit and make it difficult for you to maintain a high level of service,” he adds.
Rowen agrees, saying, “Once prices are reduced, it’s very difficult to raise them. If you decide to reduce price, it should be done so on a ‘promotional’ or ‘special offer’ basis. Ultimately, it may be better to sell less at a higher profit margin, than more at a lower margin.”
“Getting into a price war with a competing store is frowned upon—it’s bad for both stores’ bottom lines, as well as the industry,” says Brick. “If a store’s prices remain fair and the equipment and store are clean and inviting, most customers will remain loyal to their current store.”
“Many times a new competitor will have a much higher debt load than an existing laundry. This might drive the competitor to lower prices in order to entice customers and/or to promote a grand opening,” adds Jorgensen. “Most often, this will only be temporary. You don’t necessarily have to follow suit.”
As a rule of thumb, from his own experience, store owners should not be more than 25 cents off from a competitor if it’s the same “apples-to-apples” kind of operation, according to Finkelstein.
“If he’s operating it partially attended … and you’re partially attended … you should be within a quarter of that price structure,” he says.
“If they’re opening the store and thinking of putting you out of business, and just doing promotions—in essence, free dry, or really cutting their prices to pick up all of your business—you should respond,” adds Finkelstein.
Check back Wednesday for Part 2!
Have a question or comment? E-mail our editor Bruce Beggs at [email protected].