CHICAGO — Many dry cleaners hold the belief that raising prices is a last resort, and there are many reasons they give for holding onto this mindset.
Without passing on these rising costs — and those costs have been rising in past few months — these cleaners are sacrificing their profitability, and potentially their future.
American Drycleaner is examining the myths that keep prices low as part of a three-part series. In this, the conclusion of this installment, we’re looking at Myth No. 2: “I Don’t NEED to Raise My Prices.” In Part 1, we gave an overview of this myth, and in Part 2, we examined how to count the real cost of doing business. Today, we’ll finish by looking at how much value to put on the competition’s pricing.
The Place of Profitability
In the past, Randy Parham, CEO of Acme Cleaners, based in Orlando, Florida, has increased prices about 1% a year, rounding up or down slightly to make the prices convenient for the customer and his staff. With the current global supply chain issues and increasing labor costs, however, his overhead is rising, and he is keeping pace with his own incremental pricing increases.
“We’ve got manufacturers calling us and sending us emails saying, ‘Hey, get ready. Your prices are going to be going through the roof,’” he says. “To stay profitable, I can’t just eat those costs. I may be able to do that for a certain period, but I can’t do it all the time.”
Parham prefers to get this bad news from suppliers via email.
“I can print them out and have something to show to customers in case they have an issue.” He points out, however, that his customers have been understanding — he hasn’t had to produce the emails to explain the rate increases. “I’ve found that, as long as you give an answer with confidence, people are OK with it. They just want to know that there is a reason.”
Part of the overhead Parham factors into his expenses is the training and the above-minimum-wage salaries his staff receives. While he could skimp in this area, he says that it would be a huge mistake.
“We are in a time where everyone’s OK with people making a living, so why not your employees, as well?” he asks rhetorically. “Customers tell me all the time that we have the best customer-service people, and that doesn’t happen overnight. It takes time to find and train the right people, and that’s a cost. Is that cost factored into your pricing? There are a lot of hidden costs that people don’t think about.”
Parham believes that the service he provides to his customers and the training he gives his staff makes each customer’s experience positive and provides value to his clients. Because of this, although he checks in on the competition, he doesn’t worry about what other cleaners in his area are charging their own clients.
“I think you want to be aware of it,” he says. “If they’re half the price, you need to figure out why. Is it some sort of competitive advantage that they have over me? Or are they just severely underpriced? If that’s the case, they’re going to burn through their own money — and my philosophy is that I’m OK with that. Them losing money every month doesn’t bother me one bit.”
Parham says that keeping his prices competitive, but also high enough to provide profitability, gives him something that many dry cleaners have been yearning for: peace of mind.
“I know that every single dry cleaner over the past year and a half has been on the verge of heart attack more than once,” he says. “If your prices are set right, though, you're going to have a higher cash flow, which is going to put you at ease to be able to pay for repairs and higher hanger prices. You're less stressed, and you're not working as hard, but you're making more than you were before. When you're sitting around watching your bank account, and you’ve got to hold checks for this or that reason, it's not fun. And it doesn't take much to really improve your bottom line.”
For Part 1 of this installment, click HERE. For Part 2, click HERE.
Have a question or comment? E-mail our editor Dave Davis at [email protected].