What Would You Do?

[mellofelow]

I somehow survived through this scenario somewhat. However, the new mat was much smaller, 1/2 of my size. My distributor/broker/seller did not disclose that info to me... ARGH!!!

Anyhow, further down a couple of cities away I studied a new big mat during construction and open its door a year ago. A few months into operation, it literally suck the life out of surrounding mats. One of which I pass by every day to/from my day job. This older mat was decent and approximately 2,400 sq ft in size. Assume out of desperation, I saw posted signs of 1/2 price wash or some type of ridiculous reduction. And then a few months later, I noticed activities of new machines being brought in. Still, even today, I'm guessing the new mat is doing double the volume (if not more) than the competing mat.

It's a tough situation really. No matter how you look at it, that piece of the pie is going to have to be sliced into distribution. The new mat is going to advertise and market its presence. And this is one area I'd suggest to outsmart and out execute the new player in town.

[Dr Phi11y]

Larry,

While I am still a potential investor in all this, I thought I'd speculate using my research as a guide.

I think from reading over the board that you have an attended store and if any of this is info that has already been covered in previous posts I apologize for the redundancy.

For those attended stores that do not use a card system to assist in creating a loyalty program, have you ever considered punch cards? I used to work for a retailer that used them and punched with special hole punchers that can't be bought at a typical office-supply store. This program might keep your current customers coming in and be a source of advertising for new ones. Of course, then your attendants would have to then give a free wash with XX amount of paid washes and it would take some time to train your customers to flag an attendant to add punches for each wash, but it would increase your attendants interaction with customers, which should always be a good thing.

I would also recommend (if you haven't), utilizing the most current Internet trends (Facebook, Twitter, Foursquare). As silly as it is, I love checking into places with Foursquare because when I become the "mayor" I get some free stuff usually. Why not run a promotion whereby people get a free wash for their first checkin at your place via Foursquare and let the mayor get 1 free wash each week? It would take a little effort to track, but I think it could also draw a different type of crowd into the store who may promote your business for you as well. All your customers have to do is show their smartphone to the attendant with Foursquare saying congratulations on your first checkin or that they are the mayor. Plus, you can add deals to your location on Foursquare and people who search can see what you are offering!

Phil

[DaveLevenson]

Originally Posted by Adamski

... So that brings up a new issue. When the new laundromat first opens, he has no customers for me to go after. So I guess I should wait until he gets some customers before I begin my heavy promotion program or whatever plan I have. Does that make sense to everyone?

It has been said before that it is easier to keep a customer than to win one. Waiting until a new competitor has drawn existing customers away and then attempting to entice them to return ought to be the second step, no? The first is to keep them from leaving, to the extent possible. I would begin the "heavy promotion" before the new shop opens.

[Adamski]

Originally Posted by silver56

Larry - what have you done in the past related to new competition? Sounds like you've done well to fend them off so do you really need to do more?

Robert,

For the past 3 or 4 decades, my plan has always been to keeping improving my laundromats year after year in an effort to discourage new competition. At the same time, I also tried to keep my vend prices relatively high compared to my competitors to promote their continued survival. I feel I need my competitors to help discourage new competition so I don't want them to fail due to the improvements I'm constantly making at my place.

This modus operendi has worked successfully for many years ... right up until 2005. Then a newbie built a new 2500 sf laundromat 4 miles from my place. The market pie was resliced and I lost some business but I reluctantly accepted it as a consequence of being in business. Then, in 2010, another newbie built a new 2400 sf laundromat roughly midway between my place and the other newbie's place. This 2010 laundromat is the one that failed in 2011. I've written an article titled "Death Of A Laundromat" detailing the events that quickly led to the demise of that 2010 laundromat. This article will be appearing in an upcoming issue of Planet Laundry magazine.

Frankly, I've grown tired of seeing my market pie resliced every 5 years and I'm not going to accept it anymore. From now on, anyone intent on building another laundromat in this declining market will find a competitive reaction beyond their wildest nightmare.

[Adamski]

Originally Posted by DaveLevenson

It has been said before that it is easier to keep a customer than to win one. Waiting until a new competitor has drawn existing customers away and then attempting to entice them to return ought to be the second step, no? The first is to keep them from leaving, to the extent possible. I would begin the "heavy promotion" before the new shop opens.

Dave,

What you've said makes perfect sense ... except it fails to consider one important factor. Here it is: If I react to the new laundromat with heavy advertising or a price decrease before the competitor has acquired many customers; then he has nothing to lose by duplicating my promotion. On the other hand, if my promotion is begun after the new laundromat has established a small customer base; he will think twice before discounting to his existing customers or increasing his promotional program. In other words, you want your new competitor to have some skin in the game before you begin your counter-attack.

What do you think about that theory?

[laundryboy2]

Larry has brought up a great topic, again. This senerio should be thought about by every operator, especially when there isn't a threat.

If you have a safe market, you need to think about increase your influence to other areas. There may be a target area somewhat out of your typical service area that have a need for something only you offer.

I've been think about the same thing, without trying to 'get' customers from my nearest competitor, I need to try and expand the pie. I happen to have lots of folding space and more large machines than most laundries in my metro area. My plan is to market to areas that are served by small laundries that are undersized on the capacity side. I'm targeting an area with large families that do A LOT of laundry at one time. These are great customers and for the convienience and price they should be able to justify the extra 5 minute drive.

In this fasion, I don't start a local price war. I'm able to maintain margins and increase turns (hopefully)! In a sense, this is globalization on a very small scale. Like JH posted - expanding another service he has to maintain OR increase profits.

[chad]

I dont do anything, or better yet I dont need to NEED to do anything. WHY? My stores are all clean, I hands down provide the best service in the area, my machines are not out of order, and ALL I care about is the bottom line. I dont care if my competitors are jam packed. It does not mean they are turning a higher profit then me.

Hek one moron down the st tried 70% for a few weeks and then went back to 50%... I still pull in my $30k gross in one store where I have had 5 new stores in 2yrs get built.

Now with my other store I got 3 new ppl coming in at one time. One I could have bought but did not want to deal with a 2500 sft store...What did this guy do... He jamed packed the place with so many machines that he has like 3 tables to fold cloths.

The other 2 our distributors that are still building them out and are asking $1.5mil lol.

I always like to see the competition see how they build there stores because most of the time its either a big store or a small store that is full of machines.

Here is LA we are seeing a ton of 6,000 7,000 sq ft stores getting built around smaller ones.

[chad]

Once my notes are paid off I will go free dry and screw around with these big new mega mats.

I on purpose bought new machines last yr and fixed up my store to gear my self when my notes are gone I can have some fun.

[MrMachine]

Originally Posted by DaveLevenson

It has been said before that it is easier to keep a customer than to win one. Waiting until a new competitor has drawn existing customers away and then attempting to entice them to return ought to be the second step, no? The first is to keep them from leaving, to the extent possible. I would begin the "heavy promotion" before the new shop opens.

Dave,

I think you're right.
In the past, I've dealt with new competitors by holding my fire and keeping my prices where they were in the vain attempt to coax the new mat from entering in a price war. After all, that's what the distributors always tell me and they should know...or do they?

4 or 5 new competitors later, I have changed my philosophy.
Now, it's "No more Mr Nice Guy".
You open up new near me and I will drop my prices faster than you can say Jack Sh%#.
After all, like you say Dave, I already have the customers....and the experience....and no debt....and great locations.
So I will do whatever is necessary to keep my customers, and I've found that yes, I'll lose some. Can't be avoided. But I won't lose nearly as much and I'll gain a lot of NEW customers.

Here in NY, so many new Mats have opened over the past 20 years that the average price is now the same as it was 26 years ago, despite massive increases in costs. The trick now is to keep your expenses as low as possible, so you can keep your prices as low as possible, so you can send your new competitors to bankruptcy court, licking their wounds.

I have another new mat that should open within a year near one of my stores. I've already started dropping my prices.

[jh]

Originally Posted by Adamski

Dave,

What you've said makes perfect sense ... except it fails to consider one important factor. Here it is: If I react to the new laundromat with heavy advertising or a price decrease before the competitor has acquired many customers; then he has nothing to lose by duplicating my promotion. On the other hand, if my promotion is begun after the new laundromat has established a small customer base; he will think twice before discounting to his existing customers or increasing his promotional program. In other words, you want your new competitor to have some skin in the game before you begin your counter-attack.

What do you think about that theory?

It is hard to judge which method is better. If possible, I would like to prevent customers from using the competitor's mat at all. If possible, I would like to prevent a new mat from being built at all. Yet, whatever you do, some day, the customer may stop by to use the competitor's mat just out of curiosity. Whatever you do, it takes one newbie to ruin years of effort to prevent a new mat from occurring in the market. I can see a few advantages of Larry's theory:

1) Take some time to observe, gather some inside information of the competitor then attack the weakness.
2) Maybe the competitor's vend prices and the promotion are fair. Don't rush to run your own promotion yet.
3) The newly built mat will be thirst for customers. It will run a heavier promotion than the existing one that a nearby mat offers as it is a necessary step to get potential customers' attention.

But again, there is no one answer for all cases. What if the competitor has a very deep pocket? What if the competitor is one tough fighter as you are? What if the competitor is just as smart as you are? At the end of the day, how do we know if one method is better without having both outcomes side by side to compare? If you spend $100,000 each year to finally drive the competitor out of business, do you claim it a victory? If your revenue drop by 20% because of the new mat, do you claim it a failure?

It is a great topic to think about. If we obtain a pool of theories here, maybe one day we will get to practice one of them that best suits the actual situation.