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Getting The Drop

Howard Scott |

With affluent customers and 24/7 automation, a tiny location in a retirement village is rewriting the rules for drop stores.
When Paul Ceccarelli was asked to put a drop store in a retirement community, at first he said, “You gotta be kidding!” Ceccarelli, president of The Cleanist in Plymouth, Mass., was playing golf with Mike Bibina, commercial development manager of Pine Hills, a planned-retirement development in South Plymouth.
The obvious reasons flashed through his mind: Retirees don’t work. Their per-family drycleaning use is less than the working population’s. And when he heard that rentals would cost $25 to $34 per square foot, the answer was “No.”
“This is a real opportunity,” Bibina kept repeating while Pine Hills was built. “If you don’t take it, another drycleaner will. We’re not just building houses. We’re planning a community.” Tom Wallace, a fellow developer and longtime friend of Ceccarelli’s, agreed. Finally, Ceccarelli and The Cleanist’s general manager, David Grippi, looked into the “unbelievable” opportunity.
With a plant in North Plymouth, five drop stores located strategically in and around town, and a busy valet service, he was worried that another drycleaner would upset his near-monopoly in the growing community. “My thinking was it might be worth the effort to stop a competitor from getting a foothold in the market,” Ceccarelli says.
He liked the concept. Pine Hills’ developers had bought 2,000 acres from several landowners and planned to build a retirement community of 2,800 homes. They were creating a commercial center that included a bank, post office, liquor store and coffee shop — one of five planned “village greens.” Amenities included four 18-hole golf courses, and tennis and gym facilities.
A major factor in his decision is that the people buying such high-priced ($600,000 to more than $1 million) homes are affluent, and one household member often still works. The population consists of well-tailored executives, lawyers and the like, rather than a sweatshirt-and-chino crowd.
Ceccarelli initially contemplated a store of 1,100 square feet, but balked when he realized that occupancy alone would cost more than $3,000 a month. That and the potential 7:00 a.m to 7:00 p.m. labor costs would squeeze profitability. He and Grippi decided to minimize costs. “We focused on the question: How much could we afford to lose and still keep out the competition?” Ceccarelli says.
Turning their attention to corner units, they found a 540-square-foot space. With the help of an automatic garment-handling system and 24-hour window, they could operate out of the tiny space. It would allow them to maintain reduced hours — perhaps just mornings and afternoons, they thought — and the valet route could handle any client overload, if necessary.
It wouldn’t be hard to convert the community’s drop-store customers, because The Cleanist already operated there, making pickups and deliveries twice a week. Even if it meant a new truck, it would still be cheaper than renting a standard-sized facility.
If volume started off slow, the Cleanist would minimize costs with a smaller store. Occupancy costs would be $1,500 to $2,000 per month, Ceccarelli and Grippi found, depending on volume.
More and more, they were convinced that the Pine Hills proposition was indeed different from anything else in the marketplace. Many residents who live there are still working. It is certainly affluent, and customers probably wouldn’t complain about prices. Moreover, the complex’ motif of restrained elegance — a village green with a gazebo — suited management’s tastes.
Areas around Pine Hills are also developing, which could add even more traffic. And Plymouth itself is growing — its population has gone from 25,000 in 1990 to more than 60,000 in 2006.
The final consideration was a five-year lease. If volume didn’t materialize, Ceccarelli could approach the landlord to sublet the property or reduce his rent. Pine Hills wouldn’t stand for a vacant store — not in the main village green. Another part of the lease proviso was that The Cleanist would be given exclusivity in the community; this made the proposition irresistible.
Ceccarelli had seen a Metalprogetti system in action in Los Angeles, and decided it would be perfect for his operation. The unit allows a customer to key in a telephone number, pick up their order, use a credit card to pay, and get a receipt, as well as drop off orders. The 24/7 service would help ameliorate the store’s limited open hours.
Ceccarelli signed the lease and opened the new store in September 2005. Management had to iron out a few kinks with the Metalprogetti system, which would periodically stop working at first. “The problem was not with the machine,” Grippi says.  The problem was with the electronic interface at Pine Hills — merchants and homeowners alike were having problems.
“When I went down to their station, a tech-support person suggested I switch to Verizon, which uses fiber optics,” Grippi says. “I told him I couldn’t, because the company wasn’t equipped to go into this area. But we worked with the software interfacers, they modified their system, and now we have almost no outages.”
The computer system needed some fine-tuning, and management also tinkered with operating hours. The initial 7:00 to 10:00 a.m. and 3:00 to 7:00 p.m. schedule wasn’t quite right — retirees made the lunch hours the busiest. Ceccarelli tried different combinations, finally settling on 9:00 a.m. to 5:00 p.m Monday through Saturday.
“This place isn’t like the usual locations,” he says. “From 7:00 to 8:00, there were only one or two customers. We could convert these individuals to the Metalprogetti or valet service. Unlike most drop stores, 11:00 a.m. to 2:00 p.m. were our busiest hours.”
Early on, a Pine Hill resident who had moved from New York wanted to work at the store. She now works four or five days a week, Ceccarelli says, and is a great asset. For the remaining hours, management rotates staffers from other locations.
A year after opening, management is extremely happy with the results. The store is breaking even or earning a small profit. Revenue is increasing steadily. One recent week’s sales were $1,600 above the same week last year. And Pine Hills is still only one-third built — about 150 more houses were occupied in 2007 alone.
Better still, about 20% of the store’s volume comes from outside Pine Hills. Because there isn’t a drycleaner in the area, South Plymouth residents drive there to drop off and pick up their drycleaning.
Ceccarelli has also noted surprisingly high per-family drycleaning use at Pine Hills. He and Grippi attribute this to  several factors: residents’ affluence, the proportion who still work (30% to 40%), the fact that they do a lot of traveling, and their preference for high-end leisurewear.
One great bonus is that Pine Hills takes care of all advertising and promotions. This includes a Cleanist packet for new homeowners that offers a discount on their initial orders. The Pine Hills store incurs no additional advertising expense.
Space limitations could pose problems in the future, however. The shop is already busy, and could take on 50% more volume. The developers offered Ceccarelli a 900-square-foot space nearby, but he passed. It would up the “nut,” he thought, and he’d just spent $75,000 on this location, including the Metalprogetti 24/7 unit. It didn’t make sense to spend so much to remodel.
Management can cope with increasing volume by switching the store’s top 5% of customers to valet service. Another option is to manage inventory more aggressively, or rent the basement space below and have the Metalprogetti store orders there.
For now, however, Ceccarelli is delighted that the Pine Hills drop store is doing so well. “I move steadily, but carefully,” he says. “Perhaps that’s why we’ve been here for 82 years, employ 35 people, and I’m the third-generation family owner. But if you told me I’d put a store in a retirement community four years ago, I would have said you were crazy.”
 

About the author

Howard Scott

H&R Block

Industry Writer, Drycleaning Consultant, and H&R Block Tax Preparer

Howard Scott is a longtime industry writer and drycleaning consultant, and an H&R Block tax preparer specializing in small businesses. He welcomes questions and comments, and can be reached by writing Howard Scott, Dancing Hill, Pembroke, MA 02359.

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