CHICAGO — Raising prices is never comfortable, either for business owners or for their customers. When market forces require businesses to take steps to maintain profitability, however, the choice should be a simple one. Maintaining profitability is the only way to ensure that the business survives.
This is the overall response that American Drycleaner received from the drycleaning industry professionals interviewed for this three-part series. For the past few issues, we’ve examined myths that many cleaners have clung to in their reluctance to raise their rates. In this final installment, we’ll look at a myth that has been at the forefront of many dry cleaners’ minds over the past few months:
Myth No. 3: Never Raise Prices in a Tough Market
The thinking behind this myth is that, when customers are faced with rising prices in other sectors, dry cleaners should keep their prices consistent, for fear of being the straw that broke the camel’s budget.
While this mindset appears to keep the customer’s needs in mind, it does so at the expense of the cleaner’s profitability and, potentially, their survival. And, as their own supply and labor costs are increasing, this becomes an increasingly untenable position to take.
Tough Times Mean Tough Decisions
“You need to be monitoring your pricing, no matter what the times are,” says Kermit Engh, managing partner of the drycleaning consulting group Methods for Management and the owner of Fashion Cleaners in Omaha, Nebraska. “Does it make sense to hold your prices and go out of business? During tough times, things that we’re paying for that enable us to run our business go up. If it’s already tough, how can I absorb anymore? I can’t.”
When looking at the bigger picture, Joe Gagliostro, president of Muldoon Dry Cleaners in Auburn, New York, believes that the answer becomes clear when it comes to setting rates.
“If the prices go up, if your cost of operation goes up, you have two choices,” he says. “One, you raise your prices accordingly, which every other industry does. The gas station does. The grocery store does. The lumberyard does. Or, two, you eat that cost — and none of us are in a position right now to be able to do that.”
Although it might seem counterintuitive at first, customers are actually more likely to accept a rate hike at this point, says David Dawson, a longtime industry veteran and principal of the Clean Expertise consulting group.
“After more than a decade of modest annual inflation, on the order of 2-3% a year, it is now roughly double that and at its highest level in 13 years,” he says. “Consumers buy gas and groceries. They understand. I think that today, with all of the disruption of the normal order of things, the problems with availability and higher prices for a wide range of everyday items, most people will be more understanding than they might otherwise.”
Come back Thursday for Part 2, where we’ll explore just what a cleaner adds to his or her clients’ lives, and why that needs to be considered in setting prices.