Industry Experts Discuss Pricing Strategies for Self-Service Success
[This is the first of a two-part series on vend price strategies for today’s self-service laundry operations.]
It’s an art and a science. It requires an experimental attitude coupled with an intuitive feel for how you want your brand and, by extension, your service to be perceived.
It is, of course, vend pricing. And there are a number of factors to examine when considering a price adjustment – including revenue, store quality and the competitive landscape.
The first thing a store owner should do when considering a change in pricing is to get cozy with the numbers. Understanding the basic costs to operate a store and how that store’s total income stacks up to the revenue brought in by the washers and dryers will let you know whether or not a price adjustment is in order.
Next, does your store warrant a price increase? According to Coin Laundry Association research, the leading reasons laundry customers choose a location has more to do with the store’s operation – safety, cleanliness, customer service and machine availability – than vend prices. So, owners who keep up their stores and continually add value for their customers have no reason to shy away from increased vend prices.
It’s also important for most owners to be at least somewhat aware of their competitors’ pricing strategies. After all, if your laundry offers the highest quality equipment and amenities but your pricing is similar to competitors who may be offering a less attractive customer experience, then there’s definitely room for a price increase.
In fact, 65 percent of laundromat owners responding to CLA’s annual Laundry Industry Survey for 2022 indicated they planned to raise vend prices on both washers and dryers within the next 12 months – which is up from just 34 percent of operators in the previous year’s survey, and only 20 percent in 2019.
The survey also highlighted some geographical variances in pricing. For instance, 18- to 24-pound washers cost, on average, $3.07 nationwide – yet they average $3.35 out West and reach a low of $2.94 at laundries located in the South. Also, 35 percent of respondents in the Midwest have implemented full-cycle drying, while only 11 percent of owners in the South and West have done so.
Clearly, no matter what is decided – to raise prices or not – you should regularly monitor your business and its market conditions so that your pricing strategy is in line with the prevailing climate. Without all of the facts and careful consideration, your potential profits and the future of your laundromat could end up circling the drain.
This month, we asked some leading industry experts to share their thoughts and observations on this key component of a successful self-service laundry operation:
Alex Harris
Professional Laundry Systems
Commack, N.Y.
From what I’m seeing, most laundromat owners are more aware of the cost of increasing utilities and labor than ever before. With this being said, most have begun to adjust their prices accordingly.
Pricing strategies have changed from past business models. In the past, most store owners neglected the fact that rent increases and utility costs were digging into their bottom line, reacting slowly to increase their vend pricing. Today, I’m noticing a new, younger generation of owners who are carefully monitoring their costs and are not too shy to increase their vend prices.
Pricing Trends: In my markets, double-load washers are ranging from $2.75 to $4.25, with the majority at $3.25. Triple-loaders range from $3.75 to $4.75, with most at $4.25. The 40-pound machines range from $4.75 to $6.25, with most at $5.50. The 60-pounders are priced from $6 to $8, with the majority priced at $7.25. The 80-pound washers are at $8.50 to $11, with the majority charging $9.75. And the massive 120-pound washers typically start at $14.50 or work their way up to $19.75; however, this is based on a fairly small sample size.
In turn, dryer pricing for 30-pound units is at 25 cents to 40 cents for five minutes – while 50-pounder dryers go for 50 cents to 65 cents for eight minutes, and 80-pounders typically come in at 80 cents for eight minutes.
The way the industry is going, the price gap from highest to lowest vend prices seems to be increasing, depending on the specific marketplace. On smaller machines, there can be a $2 difference, and on the larger machines, it can range from $1 to $6, depending on machine size and location.
Full-cycle drying is a trend. However, owners implementing it must do their homework to ensure their dryers can dry the loads in the time that has been set. Also, they need to be sure the top-off pricing feature is set on the dryers, in case some customers require a little more drying time.
Free dry also is out there in the market, but of course nothing is free. The drying time must be built into the cost of the wash. And I’ve asked laundromat customers why they would be willing to pay more going to a store that offered free drying – and, interestingly, their common reply was: “I know exactly what it’s going to cost to wash and dry.” For instance, if the cost is $4.25 for a small machine with drying included, customers can more accurately budget for their weekly laundry task.
Payment Technology: Card systems are a necessity for the future in the laundromat business. Owners need the flexibility to adjust their prices as expenses rise, and the option to accept credit, debit, and EBT cards is becoming more important in today’s “cashless” society.
To me, the biggest value of a card system is that the owner is no longer locked into quarter-increment pricing, as well as the fact that the store owner can adjust pricing within seconds.
Common Mistakes to Avoid: The most common mistake in vend pricing is being slow to react to increases in expenses with price adjustments.
In addition:
- Never lower your prices when you get new competition in your area. In fact, this may be an opportunity to raise your prices. Most likely, the new owners are going to have massive expenses, and they will be on target with correct pricing.
- There’s no need to announce when you’re going to raise your prices. This gives customers a timeframe to look elsewhere. And never apologize for raising your prices. Today, it’s simply understood.
Brendan Ristaino
Yankee Equipment
Barrington, N.H.
Pricing strategies have changed. The cost of utilities, labor, supplies, and equipment has risen sharply. To help combat that, many laundromat owners have raised wages and, in turn, have raised their pricing – some for the first time in several years.
Many of the store-owner customers I speak with will look at their costs, determine the amounts in which they need to raise their pricing, and then place notifications throughout their laundromats regarding the price increase.
No doubt, the amount of these increases will depend on the rise in expenses, as well as if the laundry is coin- or card-operated. With coin laundries raising prices in 25-cent increments, most of the coin-operated stores I see are 25 cents to $1 more per vend.
Pricing Trends: In our markets, toploaders in some areas are vending for $2.50 on the low side, up to a high of $5.50. Meanwhile, 80-pound washers cost between $16 and $20.
The trend shifts a bit town to town and market to market – however, no owner wants to be the low-cost leader, and there is more reluctance these days to be the highest in a specific market.
Payment Technology: There are clear pricing benefits to accepting card- or app-based payment. First, those owners aren’t limited to a full 25-cent price increase or to vend prices based solely on quarter increments. Also, they enjoy more management flexibility with their stores. Additionally, if you charge $18 for an 80-pound washer, that’s 72 quarters – the coin box will fill up quickly, and you’ll be collecting relatively often. With the recent coin supply issues, I saw many store owners make the switch to either all-card or hybrid stores in order to help alleviate this. There are advantages to today’s non-quarter options.
Kevin Butorac
Triad Laundry Equipment
Copley, Ohio
Over the last couple of years, full-cycle dry has started to gain traction. It has been used for quite some time in the apartment/multi-housing setting, but more laundromats are beginning to take advantage of this. Personally, I think it’s a great way to earn more income on dryers, while also free up customers to not have to stand by the dryers to keep adding more money.
Although it may be difficult to figure out how much time is needed to fully dry an average load, it’s a much easier pricing structure for a customer to understand, and it takes the guesswork out of how many quarters are needed to dry a load.
We’re also seeing fewer new laundromats using a specific washer size as a “loss leader” – such as $1 for toploaders, for example.
In addition, owners and customers are taking advantage of the various options that today’s modern washers and dryers offer – from adding a sanitization cycle to including an extra wash/rinse. So, the pricing for a specific machine can be all over the map. Consumers love having options and being able to add or subtract exactly what they want. From an owner’s standpoint, this opens up various revenue sources, while enhancing the customer experience. It’s a win-win.
Pricing Trends: In our market, vend pricing is pretty evenly spaced out, given the machine size. There aren’t any extreme gaps for specific-sized machines.
However, many of the used machines we bring into our shop from across the country indicate a varied pricing structure. For example, we often get 20-pound washers priced at $1 and $2, while a 60-pounder from the same laundromat will be priced at $8.
I don’t think this is a healthy choice from an operator’s standpoint. First of all, is that owner making any money on that 20-pounder priced at $1 – after paying utilities? Additionally, does the income/turns per day outweigh the wear and tear/depreciation/maintenance? To me, it makes the most sense to offer competitive-yet-sensible pricing. After all, more turns doesn’t necessarily mean more profit.
Payment Technology: It has become easy to be able to charge for every option with all of the recent advances in payment systems. Just a few years ago, it was typical for most owners to charge one price for a washer – no matter what the cycle, water temperature, or wash options.
With apps, modern payment systems, and today’s advances in washer and dryer technology, pricing for a single washer can vary by as much as $2, depending on cycle type, temperature, and added features.
Moreover, these payment systems and modern equipment can track and report what customers are using and paying extra for, which allows owners to adapt accordingly in order to maximize profits. As a result, washer and dryer cycles are becoming more of an a la carte service, as opposed to “one option fits all.”
Best Practices: It’s important to be aware of your operation and how it compares to nearby laundromats. With that, it’s crucial to make sure you’re priced accordingly and to be sure you don’t under- or over-price yourself. I believe that it is ok to charge for your service/experience.
If you run a great operation with nice equipment, a variety of amenities and services, and have a beautiful store, there’s no reason you can’t charge more than a competitor who runs an average store.
However, be aware that there is a ceiling, and it’s important to be understand that ceiling and not over-price your business within your market.
Additionally, many operators immediately jump to raise their prices when costs of materials and/or utilities increase. I think this needs to be done with caution. Although it can be painful from an operator’s standpoint when costs increase, you should be careful that you’re not over-pricing yourself.
Karl Hinrichs
HK Laundry Equipment
Armonk, N.Y.
The way I’ve always adopted vend pricing strategy is based on four major costs: rent, utilities, labor, and debt service.
There are certain fundamentals. Rent shouldn’t be more than 25 percent of your gross sales. If you can do it for less than that, it’s more money in your pocket. If it starts to go above that, it’s a red flag and the economics starts to get a little wonky. It’s the same thing with utilities, which should be no more than 20 percent to 25 percent of your gross revenue.
Pricing Trends: In my markets, pricing is all over the map. In fact, I just did a study, and I had one owner who was vending 50-pound washes for $5.50, while most of the rest of the market is up around $8. That operator is clearly the low-price leader in the area, and he’s just treading water.
However, such tactics tend to screw up the market and play head games with other owners in the area. To some extent, many laundromat owners are just unwilling to or don’t have the confidence to set a good pricing strategy.
In addition, I believe full-cycle dry is going to be the wave of the future. For example, I recently did a price change for a customer who is down to four minutes on his 45-pound dryers. I told him he may want to consider simply charging $1.50 or $2 for 35 minutes of drying.
Payment Technology: Today’s technology certainly has made it a lot easier for laundromat owners. You can view exactly how much money is coming in – instantly seeing what your revenue is for the month, and then easily adding up all of your utility costs and figuring out your ratios. If you find that your utilities are costing your more than 25 percent of your gross, it’s time to raise prices. Keep it simple.
Of course, card systems allow you to raise prices in penny increments, so you can increase your 20-pounders, for instance, by 20 cents or 19 cents – or whatever your “sweet spot” may be.
Technology also enables you to make price changes quickly and easily, sitting in front of your computer. It’s almost like the gas station pricing strategy, where you can change prices weekly or potentially even daily. I haven’t seen any owners do that, but I know some of the better operators are looking at their prices at least quarterly.
Common Mistakes to Avoid: The biggest error I see is when owners just raise prices without notice. You have to realize that your regular self-service customers know exactly what they spend with you each week – and they will notice the change.
At our five stores, we’ll put up signage explaining any price increase right by the VTMs or bill changers. You don’t want to alienate your customers. Each customer is worth between $500 to $1,000 per year, so treat them with respect and let them know if there’s a price change.
The other mistake is waiting too long. At least once a year, check your numbers and make sure you’re in the sweet spot. Don’t wait for your accountant to give you bad news at the end of the year. If you see a huge change in the market – water rates or natural gas costs doubling or tripling – price accordingly.
You’ve invested a tremendous amount of upfront money in your business, and you are allowed to make a certain amount of profit. It’s just good common business sense to be proactive.
Customers want a nice, clean, beautiful setting in which to do their laundry, and they will pay for it. The fear of raising vend prices typically is much worse than the reality. It all comes down to basic numbers.
