National Clothesline

The economy slowed during the fourth quarter of 2007 and stumbled out of the gate in 2008, falling into what most analysts are now calling a recession. So where does that leave the drycleaning industry, which depends on consumers willing to spend disposable income to keep their wardrobes in tip-top condition?

About 60 cleaners and allied tradespeople gathered in New Orleans in February to assess the current state of the industry and share ideas for improving future prospects during the Drycleaning and Laundry Institute’s Five-Star Management Conference.

They heard from a variety of panelists, some who have survived many ups and downs in the industry over the decades and others whose companies are developing technologies to improve overall cleaning quality, productivity and customer service.

At the opening session on Friday, February 22, they also heard from Ray Keating, an economist with the Small Business & Entrepreneurship Council, who analyzed the current state of the U.S. economy and its impact on small business.

Keating painted a disturbing picture, at least for the near term.

“The outlook is glum for now,” said Keating. ”But entrepreneurs are resilient. It would be good for the government to encourage them.”

Statistics tell a story of a weak economy, Keating said. Growth in gross domestic product slowed dramatically last year, consumer spending has slowed, private domestic investment dropped dramatically in the fourth quarter, export growth slowed last year, and disposable income growth slowed to almost nothing in the last quarter.

And Keating is not impressed with the government’s response so far to the sagging economy. The Federal Reserve’s attempt to stimulate the economy by lowering interest rates runs the risk of firing up inflation, he said. “It’s hard to stop inflation once it starts,” Keating warned.

Keating is not enamored of the stimulus package passed by Congress and signed by President Bush in February, either. Tax rebates have been tried in the past, he said, and they haven’t worked. Offering rapid depreciation only shifts around the timing of investment, he said.

More substantive policy steps are needed, Keating said. The tax cuts adopted in 2003 should be made permanent. If not, when they expire taxes will increase and levels of taxation are already in the danger zone, he said. Corporate income tax rates are now higher in the United States than in Europe where those rates have been reduced.

”Business investment is the key to getting the economy going,” Keating said.

But, he added, he doubts anything will really happen before the November elections. In the meantime, uncertainty will persist concerning tax and trade policy, energy and health care.

Drycleaners seem to be a bit more optimistic. In a DLI survey included with materials distributed at the conference, three out of five said their sales were up last year and half expect them to be up again this year while a third expect sales to stay about the same. Most of those who saw rising sales last year attributed it to either a price increase or gaining more customers. Increased advertising and marketing and expansion of services were listed as reasons for an increase by some others.

Nearly half of the 23 percent of cleaners who said sales were down last year blamed the “bad economy.” A third said customers were bringing in fewer pieces and the rest said they simply had fewer customers.

Behind those three reasons for decline, there are several specific factors working against drycleaning sales. The continuing trend of casual wear and an increasing number of washable garments being sold have cut into the drycleaner’s bread and butter. David Dawson of R. R. Street & Co. Inc. said there are hopeful signs that professional dress style will return; necktie sales, for example, are up, he said in his overview and forecast of the state of the industry.

But he also noted that consumers who want to clean their clothes at home are benefiting from improved home laundering equipment. While the pocketbook and garment types are reasons some customers are washing clothes at home instead of going to the cleaner, Dawson cited another: social attitudes toward drycleaning.

“Consumers hear that drycleaning isn’t good for you,” Dawson said. While this message often comes from environmentalists through the media, the industry itself shares some of the blame. Negative advertising within the industry that depicts some cleaners as “environmentally safe” and others as hazardous can leave consumers confused and doubtful about all drycleaning.

“We haven’t done ourselves any favors,” Dawson said.

And while there is disagreement in the scientific community about the hazards of perc, the environmental activists “still don’t like us,” he said. While the activists have done a “terrific job” getting their views across “we as an industry didn’t do a very good job countering it.”

Drycleaners have also hurt themselves with poor quality cleaning and customer service, said Bill Fisher, CEO of DLI. When he said that DLI’s sampling of drycleaners has shown that “80 percent of the plants out there are crap,” the audience responded with applause.

Then, Fisher added, “That 80 percent is ruining the rest of the industry.”

Following Fisher’s remarks, John Tipps of Clean Concepts and a panelist for the discussion of the industry’s future, said he wasn’t sure he agreed with the 80 percent figure, but it’s generally true. He said high-end cleaners who are doing a good job are stable and growing. Discount cleaners that are well run have shown growth, too, Tipps said.

It is the mid-range cleaners, those with average quality and average prices, who are endangered. “They can’t compete on price and they can’t compete on quality,” he said. Tipps expects 30 percent of them will be closing.

Another panelist, consultant James Peuster of The Route Pro, noted that drycleaning is half luxury and half necessity. Offering the convenience of pick-up and delivery can stir new interest in drycleaning among those consumers who view it as a luxury.

“Convenience is a major factor for the 21st century drycleaning consumer,” Peuster said. “Everybody is delivering. A route customer is more likely to stay loyal.”

Cleaners who fail to offer this convenience are likely to see their sales slow, he said.

“If you’re not putting your customers on a route, your competitor will,” he warned.

Bringing historical perspective to the panel was Sid Tuchman of Tuchman Training Systems whose industry experience dates back to pre-World War II days.

“When polyesters came in (in the early 70s), I thought I was going to go broke,” Tuchman said. Then he got involved in the uniform rental business and things turned around for him.

“You must diversify,” Tuchman urged. “This could be a great business if you marry it with something else that lets you use some of the same equipment, the same technology, some of the same space.”

An underutilized piece of equipment for many drycleaners is the computer, Tuchman said. “The computer gives us wonderful ways to tell if we’re making money,” he said.

But beyond that, the computer can help drycleaners “do something extra” for their customers. All kinds of information about the customer can be made available quickly by the computer, even including a phonetic spelling of the customer’s name so the counter person can pronounce it correctly.

“The purpose of a business is to get and keep a customer and the computer gives us a magnificent opportunity to do that,” Tuchman said.

He also warned of a coming labor shortage. As the current generation of Baby Boomers retires, 78 million people will leave the workforce. The “Gen X” generation adds only 55 million to the workforce.

“If you think there is a labor shortage today, you ain’t seen nothing yet,” Tuchman declared.

Finding and keeping good employees is the first step to finding and keeping customers, he said.

“Just coasting along with middling profits and paying your people middling money doesn’t make you an employer of choice,” Tuchman said.

“The only way you can get good people is to pay them money to get them engaged so they enjoy working for your company. That’s how you satisfy your customers, he said.”

For cleaners looking for ways to improve their operations, the conference presented several speakers who told how their company's products can help.

The new Solvair cleaning system was explained by Street’s Beard during the opening session and at the end of the conference on Saturday attendees were invited to tour the newest Solvair installation in nearby Slidell, LA.

The Friday morning session also offered presentations by Lenny Gershater, vice president of sales for DCCS; Michael Euliss, the director of marketing and customer training for Phonetree; Mark Jones, vice president of technology for SPOT Business Systems; and Chad Boucher, who developed the PieceCounter.

Each explained their company’s products and how the innovations can be implemented in a drycleaner’s operation.

Saturday morning sessions featured presentations on how to make health insurance affordable and how to avoid the pitfalls of employment law.