SAN FRANCISCO — Are you facing the dilemma of how to most efficiently grow your business? Do you want more sales but don’t want to invest in additional locations? Do you want to minimize the risk of expanding your geographical coverage? If these challenges apply to you and you are not already in the route business, consider it. If you are already in the route business, the same considerations apply to expansionary deliberations.
REDUCE COST OF EXPANSION INTO NEW LOCATIONS
Depending on a dry cleaner’s success at negotiating tenant improvements with its lease, a new physical location can involve significant expense. Small businesses have a distinct disadvantage in negotiating with landlords on the price per foot, on the amount of footage leased, and on the various other “non-standard” items that can be negotiated by large tenants. Since the large tenants that drive traffic to centers must be wooed into the location with major concessions (in some cases they are actually paid to open their stores and have negative rent), the small tenants are the source of profitable operations for the landlord.
Between the security on the lease, the store design, the build-out and fixture costs, the promotional efforts, and the time the owners and team are diverted from the core business, a new store opening can be extremely expensive. That expense is just the beginning, because the counter must be staffed with well-trained customer sales reps for the full posted business hours.
Additionally, the ongoing expense of the lease, the common area maintenance (CAM) fees, the phone, security, computer, the supplies and the myriad of other expenses that arise must be funded out of pocket until the store becomes a profitable enterprise, assuming that it ever does become profitable.
By comparison, the start-up costs on a route, although substantial, are more controllable and with the exception of the investment in a vehicle, need be funded only as the route business grows.
For example, the single largest expense in the drycleaning business is labor. Whereas a store must be staffed continuously or must be fitted with a 24/7 kiosk, a new route can be staffed by a part-time driver whose hours devoted to the route can grow with the sales volume. The vehicle expense can be reduced by using the shuttle van initially until the sales warrant another van.
Another benefit of routes is there is no old inventory—orders are continually delivered upon completion.
DESIGN GEOGRAPHY AS YOU GO
Unlike a store, if the research on the location is incorrect and the sales do not materialize as planned, a route can be easily moved to a new neighborhood. The geography can be tested and tweaked with minimal expense and no physical store lease obligation. As the route gains momentum, adjacent area can be added and the promotional efforts can snowball with the van and service gaining visibility driving to and from the targeted district.
SCHEDULE TO MEET DEMAND
Route service (either to residential developments or to businesses) eliminates the necessity to match customer-preferred hours. The more flexible the route alternatives, the broader the customer appeal, but a cleaner must acknowledge that flexibility also adds expense. For example, “on-call” customers are more expensive to service than clients on a standard, pre-set route schedule.
THE SALES CHALLENGE
The most difficult and the most profitable aspects of the route business are the same: The key is sales. Many owners who “couldn’t find the right salesman” have rejected or abandoned the pick-up and delivery concept.
The best sales solution is probably not full-time and probably not a single individual. Some of the most successful route salespeople are part-time and/or work in teams.
Part-timers are more likely to work on a pay-per-performance basis as well because they have other sources of primary income. This is critical to minimizing the risk of a new route service venture.
Also, part-time teams are more likely to be willing to match their sales effort timing to the most appropriate access to prospects, which is often evenings and weekends for residences.
The easiest route sale is the conversion of existing “counter customers.” It is essential to recognize that historically “taking customers off the counter”:
- Has not reduced the sales in the given store;
- Has often dramatically increased the sales to that same customer;
- Has been resisted by the counter staff, so those employees may need a commission to convert “their” customers.
DRIVER VS. SALES
Although there may be disagreement on this point, experience has shown that the best sales people are needed to sell the route and the best route servicers are needed to maintain the business and retain happy customers. Psychological research will show that these two personality types differ greatly. The almost diametrically opposed traits of these two groups, and the consistency of observation of their success, suggests that the two functions should be separated.
That is not to say that one unique person is incapable of both skills, but the separation has been more consistently successful in drycleaning operations studied.
A dry cleaner, using standard psychological testing, may wish to test its top sales people and its top service people and compare the results. Using this information, the business can then try to “clone” the best when hiring for either position.
Another commonly held belief is that the route person must be male. But there are certainly successful routes being sold and/or serviced by women. One reason may be that people are less reluctant to allow them into their homes to make a sales presentation or to service the account.
Check back Thursday for the conclusion!