Things to think about for 2013
It is January 2013 and yet it seems only yesterday that we were celebrating the start of a new century.
On the other hand, you can sit down and complain about falling sales and falling profits.
Remember the following statement that I learned many years ago. “An excuse only satisfies the person who gives it.” Think about that expression the next time somebody starts making excuses for their behavior or anything else.
A new location?
I received a phone call from somebody who wants to expand his business. A shopping center’s owner contacted him and offered an empty store. Previously there was a drycleaner in the location, but that company went out of business.
This drycleaner had bought and sold a couple of drycleaning companies in the past, but this would be the first time he would start from scratch.
The first thing I asked about is the amount of rent. That number will be the basis of sales needed to make the rent affordable.
An ideal target is 10 percent of gross sales. Because he is overpaying in his other locations, he is accustomed to a 15 percent rent factor.
That is almost double the rent I was paying prior to the sale of my company, so I told him I thought he was wrong. However, he was satisfied with a 15 percent factor, so we moved on to the next discussion.
Crazy Cleanerz became the topic because of Crazy Cleanerz pricing. If you are not familiar with Crazy Cleanerz and their business model, it can be a huge learning experience. The company is located near Memphis, TN, in Cordova.
I urge you to check out Crazy Cleanerz website. It is very well done.
What the owners have done is maximize automation. This has permitted Crazy Cleanerz to charge low prices and still be highly profitable. Anyone with industry experience who has visited their operation has given them huge kudos.
The drycleaner who wants to open the new store has other locations that are full-price operations. Doing discount work would be foreign to him. Because he is considering operating a discount plant, I urged the man to call and/or visit Crazy Cleanerz and talk to the owners.
If you are thinking about entering the discount part of the market, due to current economic conditions, you might as well learn from the best. He was not eager to do this.
My next suggestion made him think. I suggested that he open at the same price level he is at in the other locations that he owns, and discount the heck out of those prices.
By using 40 percent or 50 percent off coupons, he would be pricing like a discount cleaners. As you well know, not all customers will bring in coupons.
The next order of business was to discuss his production. He was thinking he could get the same production he was getting at the full-price plants and charge 50 percent less if he opened as a discount cleaner.
This sounds like the formula, “I know I will lose money, but I will make it up with volume.”
Does that ring a bell in your head? It rang a fire alarm in mine.
He could not envision getting double the 35-piece-per-hour production he is currently experiencing at his full-price operations.
I then explained he was more than doubling his labor cost if he operates as a discount cleaner with pricing that was more than 50 percent lower than what he charged at his other locations.
The example I provided was that he is currently getting $6 for a pair of pants and is getting 35 pants pressed per hour.
That means the pants presser is turning out $210 in gross sales every hour. If he charges $2.75 for pants and still gets 35 pants per hour, he will be getting $96.25 in gross sales per hour from the presser.
The presser at $10 dollars per hour in the first example costs 4.76 percent of gross dollars produced; in the second example, the presser costs 10.39 percent of gross dollars produced.
Unfortunately, this cleaner never thought about the ramifications of changing his business model.
I hate to keep repeating myself, but it is extremely important that you sit down and pencil out the numbers. Learn how to use an Excel spreadsheet. That spreadsheet will facilitate your ability to compare apples with apples or oranges.
At this time, the store rental is on hold until a business plan is written and a budget determined. I will let you know what the outcome is in a future article.
Reaching potential customers
The next question I received dealt with emailing potential customers. “Have you tried email to acquire new customers?”
Some potential customers will find emails are an invasion of their inbox and, in other cases, the email is directed to the spam folder. With chat board participation, advertisements, jokes and other trivia, the number of emails I receive daily can easily be over 100.
I suggested that as an alternative to sending email for new customer acquisition, he check out these websites: BeFrugal.com and Fatwallet.com. Consumers use these websites to look for bargains.
Your main interest is to get the new customer to make that first visit, and then enter that new customer into your database.
After the customer is entered in your database, you can market to the person any way you wish. That is much better than a shotgun approach.
You might consider these kinds of websites equivalent to Money Mailer, Val Pak, and other direct mail advertisers, except the people who shop on the internet are buyers looking for a deal.
The people who receive advertisements in their snail-mail mailboxes might simply throw the envelope away. You want buyers. Cyber Monday is proof of the behavior change by consumers.
The websites I mentioned incentivize customers with a cash back program. The websites get a percentage from the vendor and part of that money is returned to the consumer. Consumers love to get rebates.
Check out www.frugalgurl.blogspot.com to learn about these programs.
Next, think about all the mail-in rebates you see offered. Are you brave enough to try this form of marketing?
We all hope and pray that 2013 will be a better year for our loved ones, the economy and us. If the government starts making excuses, think about the first paragraph that I wrote for this article. Have a great 2013. Be prosperous, and stay healthy.
Harvey Gershenson operates Sterling Drycleaning Consulting and is a former owner of Sterling Dry Cleaners. A second-generation drycleaner, he has been in the industry since he was in high school. He has served as president of the Cleaners and Dyers Guild of Los Angeles and has served on the boards of directors of the Drycleaning and Laundry Institute and the California Cleaners Association. He is also a guest lecturer for the California Department of Corrections. He can be reached by e-mail at email@example.com or phone at (310) 261-2623. His web site is drycleanerconsulting.com.