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Making Good Use of Demographics

Paul Partyka |

Here’s the good news: “Demographics are vital to a new location,” says Bob Eisenberg, president of Qualclean Equipment, Blue Bell, Pa. “They help you understand a neighborhood.”Here’s the not-so-good news: “[Demographics] give you a lot, but not everything. They are just one piece of the puzzle. Seven pages of data doesn’t do you any good, unless you can interpret it.”Eisenberg has a long history dealing with demographics. “I own a demographic program, and run them all day long.” He offers several tips about how to get the most out of your demographic data.GATHERING DEMOGRAPHIC INFORMATION"There are sources for this data; companies will run them. The Coin Laundry Association (CLA) has demographic data for its members. The chances are that if your location is a rental property, the landlord has [the demographics].”Once you gather this data, the goal is to find someone to interpret it, and turn the numbers into dollars, Eisenberg says.NUTS AND BOLTSSeveral things jump out at Eisenberg when he pores over demographics. “I look at the number of households, not people. I look at renters compared to homeowners. The number of renters is really key. It’s also important to look at households with incomes of less than $25,000.”Eisenberg acknowledges that some of this data may “overlap” (some information may be referring to the same people). Potential store owners also need to be on the lookout for areas that have a lot of renters, but not a lot of low-income people. “This is really a red flag,” he warns.The minority base is important, he adds. “The number of African-Americans or hispanics in the area can give you a true feel for the neighborhood.”It’s crucial to define your trading area, he advises. “In Brooklyn, this might be two-tenths of a mile, walking trade. In Evanston (a lakefront Chicago suburb), this might be a half-mile. In Downers Grove (a western Chicago suburb), this could be 3 to 5 miles.”The next key question is: Are there enough customers in the area to support your business plan? “If you’re building a 10,000-square-foot store, and projecting $20,000 a week in business, is there $20,000 worth of business there?” Business plans can look good on paper, but you need the population base to support your plan, he says. You also have to remember that you aren’t going to get 100 percent of a market share.TACKLING PROBLEMSIf you start to focus on other aspects of opening a new business before you’re sure about the location, you’re playing with fire, Eisenberg warns. “The location for a Laundromat is probably more critical than any other business. There is no other business where you put $200,000 or $300,000 in the ground (utilities, etc.). You can’t recapture a bad investment like you can with a Hallmark store. If things go bad in that situation, all you have to do is take out some racks.”Make sure your distributor understands demographics. “There are many distributors who can deliver, install and service equipment. The reality is, you aren’t buying equipment, you’re building a business. Protecting your family’s wealth is key.”Can the demographics fool you at times? “Yes. For example, you can see a lot of apartments, but if they have washer and dryer hookups in each unit, they are really homeowners.”Don’t ignore competition. “If you need 50 percent of the business in a primary trading area, and there are two good stores nearby, this is probably not a battlefield for you.“You’re never going to get 100 percent of the market share, but you want a reasonable share. The challenge in the big cities is competition, not the economy. The old stores don’t scare me, they encourage me. Remember, there are going to be stores everywhere; you’re always going to have competition. If you’re a start-up guy, it’s always better to compete against old or run-down stores.”A BRIGHT FUTUREWhile some operators have recently struggled due to the recession, Eisenberg believes the demographics for the self-service laundry industry have gotten stronger during the last 40 years.“[The positive change] started in the 1970s with the shift from a manufacturing- to service-based economy. More people are working low-wage jobs, meaning there are more renters, which fuels our business. Plus, about 20 percent of the working population are working-poor; they are making less than $18,000 a year. This fuels the business. You also have immigration to fuel the business.”In this challenging economy, people can’t afford a new washer or dryer, he says. On the other hand, if you build your store right, you can attract people who have home equipment. “These people will come in once or twice with larger items. Two-income families, with two or three kids and one washer and a slow dryer, may come to your store to use several machines at once in order to save time.” 

About the author

Paul Partyka

American Coin-Op

Paul Partyka was editor of American Coin-Op from 1997 through May 2011.

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