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When The Going Gets Tough

Everett Childers |

If you want to continue earning a living in the textile-cleaning industry, now’s the time to do something about it.
Several members of the industry have called recently to tell me what’s happening. The calls were mostly from distributors telling me how their business is down. One representative told me that cleaners are cutting supply costs and that it’s affecting their business.
The typical drycleaner’s sales are down, along with their piececounts. This is likely because customers are feeling tightness in the economy and have either lost their jobs or seen their buying power shrink.
The cost of food, insurance, gasoline, utilities and other necessary expenses have all taken a big jump, while consumer incomes have stayed the same. They have had to quit driving so much, eat cheaper food, turn off the lights and lower the thermostats. They won’t be using the air conditioner so much this summer.
Drycleaners are facing the same pressures, with increases in utilities, rent, insurance, supplies and equipment costs. Prices will continue to increase and won’t be going down soon — if ever.
For years, I’ve begged cleaners to upgrade their equipment in every area where economies can be realized—cleaning, pressing, finishing, bagging, boilers, lighting, etc. I’m sure readers think that I sell equipment or supplies, but I don’t — and I don’t make recommendations. I’ve pointed these things out because the future was becoming apparent; now it’s here.
Two of the largest variable expenses — areas in which you can make the most reductions and save the most money — are utilities and payroll. With business down, it doesn’t take much to consider a four-day workweek. A four-day workweek can cut utility and labor costs 20% if you normally have a five-day production schedule. And, you can manage workflow better without inconveniencing customers.
It would be benevolent to continue paying full wages during a downturn, but it’s better to be able to offer a place of employment for those who help you cope in the lean times. You may hold off on hiring summer help or avoid replacing an employee to allow stable employees to maintain their hours.
While we’re on the cost-cutting topic, I’ve mentioned over and over that plants should install energy-efficient lighting to save on utilities, add tensioning equipment to increase productivity, and inspect boilers to keep them at peak efficiency. If you’ve done all that and still have a hard time making a profit, it’s time to check your prices and adjust them to reflect increased costs.  
Can you name one thing that you buy that hasn’t increased in price lately? Dow Chemical Co. increased prices 20% across the board recently, and a month later raised them 25% again — an increase of 50% in just over a month. And gas has gone from $1.20 per gallon to more than $4.00 per gallon in just a few years.
A leading equipment distributor says that the cost of equipment from Italy is up 60% since the turn of the century, thanks to the dollar’s lower value and increased costs for steel, components and labor. In the past six months, the price of finishing equipment has increased 20%.
Supply companies are consolidating territories, meaning more range for salespeople and less quality time with individual cleaners. Reps are being laid off or are moving to other industries that aren’t so depressed. Suppliers are lowering prices rather than lose their clients altogether before their bills are paid. Business can only sustain so much of this desperation.
Joe Bays of Pacific Equipment Co. in Washington state is seeing more coin laundry installations, as often occurs during tough economic times. He says that the business hasn’t felt as big a decline in the Pacific Northwest as in other parts of the country. Leather business is down, while discount cleaners are increasing in customer counts and volume.
Ron Herson of Herson Supply in Gaithersburg, Md., reports that sales and piececounts are down for most cleaners. Some have raised prices to compensate for higher costs, but the majority haven’t updated pricelists to maintain profit margins.
People tend to wear drycleaned garments an extra before getting them cleaned again, he adds. But shirt volume has stayed up because it’s hard to wear a shirt twice and consumers still don’t want to iron.
Herson says that two kinds of cleaners are doing well: the big-box drycleaner with low prices and the ultraprofessional cleaner who caters to the more affluent customer. Three major business indicators — sales of poly, hangers and solvent—are down. Drapery and household hanger sales are down dramatically, meaning that customers don’t see cleaning these items as a necessity when money is tight.
The supply business may be down 20% in the U.S., but the recession’s challenges aren’t limited to our shores. Marty Brucato, of Paris, France, reports that his business is down, too. Increasing costs are forcing some cleaners to sell their leases as soon as the space is worth more than a faltering plant.
My advice for the last decade has been to learn the business and its technical aspects; replace old, inefficient equipment; keep the place clean; economize on labor and utilities; install fuel-efficient boilers and heat-recovery equipment; pipe plants so they can be “zoned” for use; and find a good distributor. Now, I must amend my suggestions slightly due to budgets’ tightness and higher equipment prices.
• Reduce your total production hours and consider going to a four-day week. Wednesday is a good day to stop production.
• Reduce utility use by replacing lights with more efficient bulbs; check with your electric company for grants and tax credits.
• Insulate steam pipes and recover as much hot water as possible. Turn off the steam to areas that aren’t in production.
• When make-up and cooling water is evaporated, it shouldn’t be added to the sewer bill. Contact the water company to make sure you don’t pay when the water  coming in never goes down the drain.
• Contact your gas company and ask them to check your boiler for efficiency.
• Examine routes for the most economical delivery paths. They might be combined to reduce labor. Have the vans tuned up for efficient operation.
• Don’t try to save money by skimping on detergent, sizing or distillation. You can save money by using a water emulsion as an additive to greatly spotting and reruns.
• Raise your prices immediately, if you haven’t already done so.
• Consider replacing inefficient finishing equipment with newer tensioning units and ironing tables. This can also result in lower labor and training costs.
• Try to run larger loads in order to reduce the total number of loads.
• Strive to pay your bills on time; once you get behind, it’s very hard to catch up.
• Make sure your call office is clean, freshly painted and comfortable, and has no odors of any kind.
• Consider providing customer-service representatives with clean, pressed and color-coordinated uniforms.
• Set up a database-marketing program to keep track of who spends money with you and who may be able to spend more. The business that excels in customer service is the one that attracts new business and keeps current customers.
• Consider hiring a qualified consultant in plant and business operations to help guide you through difficult times. A good consultant will analyze your business efficiently and have recommendations for ways to weather the storm. They can also tell you when it is going to be difficult for you to remain in business.
These are things that should have been done long ago to help you maintain your profits and realize a return on investment. The business has changed considerably in the last eight years; if you haven’t changed with it, you may not be long for it.
The consensus among consultants and suppliers is that the middle two-thirds of the industry is going to have a hard time staying in business. The top tier—established cleaners with impeccable reputations — will do well as they serve people with an abundance of money and value cleanliness and quality. The other segment set for growth will be large discount cleaners who have designed their buildings and layouts to produce lots of garments with little effort and cost.
A successful variation might be a dry store that sends its cleaning and spotting to a wholesaler and has a small boiler and tensioning equipment to finish their customer’s garments. This arrangement would require fewer utilities, supplies, equipment, insurance and labor while delivering a professionally cleaned and finished product.
There is also a niche market that has gone unfulfilled: The all-tensioning small plant in a high-traffic area that shows off its professionalism and cleanliness. The few plants like this do above-average work and have a great following.
Nobody has an accurate crystal ball to look into and get the right answers to today’s climate. But it’s obvious that costs will have to come down and prices go up to profit from our services. The time for procrastination is over.
 

About the author

Everett Childers

Childers & Associates

Industry Consultant and Educator

Longtime industry consultant and educator Everett Childers is the author of the Master Drycleaners Notebook.

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