The dry cleaning industry has been coping with falling demands for their services for a number of years. Part of this is due to the increased levels of competition that are giving consumers more choices. From coin-operated laundromats providing dry cleaning to household products that can let consumers do their own work, this competition has caused stagnation within the $9 billion US dry cleaning industry.
In the 5 year period starting in 2010, the annual growth rate experienced by the dry cleaning industry has been -0.2%.
Poor economic conditions have certainly contributed to the declines. Consumers have had less disposable income available to them, so they have focused on purchasing low-maintenance clothing which doesn’t require dry cleaning services. This has resulted in a decline of revenues being experienced and these declines are only expected to accelerate in the next 5 years.
Facts About the Dry Cleaning Industry
- The average dry cleaning business in the United States has about 800 customers for whom they provide services per location.
- About 100,000 garments are processed every year by one dry cleaning facility, which translates into about $300,000 in total revenues per location per year.
- Around half of all dry cleaners in North America are family businesses who hire no other employees.
- More than 140,000 people are employed full-time within the US dry cleaning industry.
- According to the International Fabricare Institute, 2 out of every 3 customers in the dry cleaning industry are women and 65% of them are married.
- 37% of dry cleaning customers will choose a service provider that is located within 1 mile of their home or business.
- 57% of dry cleaning customers say that they would change providers if there was a discount or coupon offered to them. More than half of all customers say that discounts are influential in their decision to use dry cleaning services in the first place.
- The average dry cleaning cost ranges from $1-$5 depending on what services are being provided.
- According to Statistics Brain, the average household in the US brings 1-3 garments to their local dry cleaner, spending just $3 per month on outside laundry or dry cleaning needs.
- Premiums for dry cleaning insurance policies typically cost $2,000 to $10,000 per year for $1 million to $2 million of coverage, with a typical deductible of $10,000 to $50,000.
What drives the dry cleaning industry? The need for clean clothing so that specific consumer needs can be met. Most of the clothing options available to men today are low-maintenance wear, which is why a majority of customers are women in this industry. There may be some crossover as some women may bring men’s clothing to a dry cleaner with their own and vice-versa, but in general, the services are targeted to women. By knowing these facts about the dry cleaning industry and how little each household is spending on services, each business owner has the opportunity to adjust their business plan to meet the evolving needs that are being seen today. In doing so, they will have a chance to do more than just survive. They can thrive.
How Consolidation Can Help Change the Industry
- Most of the companies which provide dry cleaning in the United States are owned by small business owners. These family businesses, of which there are more than 34,000 in the US, have created a fragmented industry.
- Franchising offers an opportunity for these family businesses to begin developing a more dominant share of the industry. One example: Certified Restoration Drycleaning Network has franchises bringing in about $100 million in revenues per year.
- Growth must occur from the inside out because of the maturity of this market. This means developing new products or services that are contained within the industry.
- Specialty services that are provided to wedding venues, restaurants, and nonprofit organizations may also be consolidated to help provide a greater market share in some local regions.
- The issue is that households typically generate most of the revenues experienced by this industry. This means any trends that affect consumer spending or disposable income will have a direct impact on industry revenues.
- Other services may need to be added to the dry cleaning market. Coin-operated laundromats have done this by adding dry cleaning services, cafes, and other services while consumers wait. The dry cleaning industry could innovate and do the same at some locations.
The issue which the dry cleaning industry will always face is the amount of income a family has. Since wages have been stagnant for middle class families in the United States for the past 30 years, this has created stagnation within this industry as well. Every niche in the overall laundry arena is struggling as consumers look to save money and purchase low-maintenance clothing that can be cleaned at home. By offering more services and searching for new cleaning opportunities, such as through disaster relief that is paid for by insurance carriers, the industry may be able to find a way to eliminate the contractions they have been experiencing in the past 5 years.
Why Franchising Could be the Future of Dry Cleaning
- The US dry cleaning industry hasn’t changed in years, which means the average person can go to the average dry cleaning store and receive the same services across the industry.
- Franchising offers new owners who are interested in the dry cleaning industry to expand their service offerings and grow faster than a family business that is attempting to establish its own brand.
- Franchising also offers people who are unfamiliar with the dry cleaning industry a chance to learn best practices in a training setting before opening their store so they can learn a new skill while owning their own business. This could attract entrepreneurs who are looking to get involved in a mature, fairly stable industry.
- Franchising also allows new business owners the opportunity to learn the ins and outs of the dry cleaning business before getting involved, allowing them to understand their value proposition so they can start growing their business from the moment of their grand opening.
- Franchising also gives established family businesses the chance to evolve toward using eco-friendly cleaners for their services instead of the potentially toxic chemicals that have been used by the industry in the past.
There have been several innovations already experienced by the dry cleaning industry thanks to the franchising efforts by a few entrepreneurs. From Bizzie, which offers customers a metal locker with a key for their clothing so they don’t have to worry about the traditional ticketing process to the disaster relief dry cleaning that is being provided by CRDN, a franchise is better able to exploit a niche within the industry when compared to the traditional family business. This may ultimately start to consolidate the industry somewhat, but it may also help reverse the contractions that have been experienced across 34,000+ different dry cleaning providers.
How Customer Retention Changes Everything
- Efficiency and location are imperative to the success of a dry cleaning company. These are neighborhood businesses providing local services, which means customer retention must be a top priority.
- Pricing will drive the demand within the industry, which means equipment costs and other factors which affect the bottom line of each business will directly influence retention efforts.
- Federal regulations in the US also affect the customer experience as emissions and disposal requirements may have costs that may need to be passed along to consumers.
- Companies that are able to process dry cleaning orders at a centralized location may be able to lower consumer costs, which would potentially give them an advantage in future customer retention efforts.
- Equipment costs are often the primary issue facing businesses within the dry cleaning industry, which means outdated equipment may be being used and putting consumer clothing at risk.
- An expansion of convenience services, such as at-home pickups of dry cleaning, may help small independent operators to be able to compete with franchises that may attempt to consolidate the industry.
The challenge which the dry cleaning industry faces is one of value. The value proposition offered by companies of any size must outweigh the value of a consumer doing the dry cleaning work they need to do at home. There’s also the fact that some customer demographics may not like the idea of solvents and chemicals being used to clean the clothing that they wear. Laundry will never be one of those industries that is filled with glitz and glamor, but it is an essential service that everyone at least considers. If a focus is placed on customer retention through pricing and convenience, the industry has a good chance to survive the storms caused by recent economic downturns.
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