Demographic and Competitive Analyses are Time-Consuming and Maybe a Bit Boring – But They Can Be Critical to Finding a Winning Store Site
Demographic and competitive analyses can be useful tools for assessing whether or not a location has the potential to be a profitable self-service laundry. However, before these tools can be useful, it’s important to have at least a rough estimate of what your minimum gross revenue requirements will be.Also, although it’s quite possible to perform these analyses on your own, I strongly recommend working with a reputable local distributor. What’s more, it’s important to note that, when performing these analyses, the data and results are to be used to indicate the volume of self-service business – this is because wash-dry-fold is dependent on the quality of the process and the service and, thus, is more difficult to predict how successful it might become.As a distributor, I do my best to approach potential locations with an open mind. It’s easy to get carried away in the excitement of building a new store and gloss over possible negatives – so I ask a lot of questions during this process. Of course, it would take far too much space that we have here to walk through a realistic sample analysis step by step, so for this overview, I will only be asking the questions, not answering them.Demographic Analysis
A demographic analysis should be tailored to the market. In rural areas, customers typically are willing to travel much farther distances for a laundromat than they would be in dense, urban areas. Most of the self-service laundries I build are in suburban areas, and I generally use one-, two- and three-mile radii for those demographic studies.
No matter what source provides the raw demographic data, there is always too much information. Avoid getting mired in unimportant data and focus on the most important numbers: total population, total number of households, number of renter households and number of households in your target income range. Any trends you try to track or predict using other demographic data are going to complicate issues. Keep in mind that numbers can be manipulated to show any result you want – so sticking to these key data points will reduce the opportunities for you or anyone else to “massage the numbers.”Once you’ve gathered this data, you can calculate approximately how much money people are spending each month on laundry in your target area. This is where having the help of a local distributor will be important, because your distributor should know what percentage of each of these categories regularly uses laundromats in your target market, as well as how much money the average customer spends on laundry each month. Once you have this “available sales volume,” you can compare it to your desired gross income and see if there is at least that much revenue potential.If so, it’s time to proceed to a competitive analysis. If not, you should not put any more time into researching that particular location, unless you’re willing to change your plans to suit the available sales volume.Competitive AnalysisWhatever you set the maximum target radius at for your store, you need to double it for your competitive analysis to be sure you know what stores may share your target customer base. Take the time to drive throughout this area, and don’t hesitate to pay a visit to the local businesses and ask where the vended laundries are – you can glean some extremely valuable information this way, such as: “There’s a laundromat at the corner of 1st and Main, but the nicer one is over on 10th.”Take detailed notes on every laundry you can find: square footage, number of washers, number of dryers, condition of equipment, parking, attended or unattended, and so on. Also, note where any apartment complexes are located, as well as whether or not they have laundry connections available within each unit.How many stores are in your target area? Be sure to calculate your target location as one of them. By number of stores, what percentage of the market will you capture? Can your target location survive on that percentage of the available sales volume?Add up the square footage of each competing store, plus the square footage of the location you are considering. Next, divide the target location square footage by the total to get your target location’s percentage of the total. By square footage, what percentage of the market will you have? Is this number in line with your market share percentage calculated, based on the number of competing stores?If you have a larger market share based on square footage, is it possible that you will be overbuilding in this location? If you have a smaller market share based on square footage, are you building a store large enough to compete with existing laundromats?How many washers does each store have? Be sure to include your projections for your target location. What percentage of washers in your target area will be in your store? Is this number in line with your other two market share calculations? If it is higher, make sure you aren’t cramming too much equipment into your location; it also could be lower because other stores are underbuilt and have room for expansion, which could drastically change the competitive landscape. If it is lower, are you planning a sufficient number of machines for your location?It can be very useful to organize this information in a spreadsheet for quick reference and comparison. The more comfortable you are with numbers, the easier this will be – and this is another area where an experienced distributor can be a tremendous asset. Looking at these numbers and deciding that a location isn’t viable is common. It’s rare that a customer brings me a home run location on his or her first try. A good, experienced distributor will always be honest as to whether or not a location is viable. Unfortunately, it’s not always clear from this data; I call those “lukewarm locations,” and they require a bit more work before a decision can be made.If you find yourself with a lukewarm location, the absolute first step is to decide if you want to put more effort into determining whether or not it can be viable. At this point in the process, you will be drifting away from hard facts and relying more on your gut. This is where your more detailed research into the target market will be useful, because if you want to continue evaluating this location then it is time for a SWOT analysis.SWOT AnalysisSWOT stands for “strengths, weaknesses, opportunities and threats,” and my preferred method for organizing this information is within a grid.Approach each location, including your target location, as if you owned and operated it. Go back to each store with a load of laundry and experience it from a customer’s point of view. Go online and check out store reviews on sites like Google, Yelp and Facebook. Most importantly, do not conduct more than one SWOT analysis at a time. If it takes several days to get one analysis finished, that’s fine. If you try to have more than one going at a time, you will get to the end and realize that they all look exactly the same.Review your SWOT for each competing store, and compile a master list for each category. Look for common traits across the competition.Common strengths mean that you will have to focus on developing the same strength. Common weaknesses are things you should be looking to exploit. Common opportunities are a little more difficult to nail down. If all of your competitors are overlooking the same opportunity, perhaps there is some underlying issue making this “opportunity” not as realistic as it may seem. This category is the one that needs the most careful study, because if you build your laundry based on opportunities that are not actually there, your revenues might never reach your goal. Common threats are things that likely will threaten you as well, so you should have a plan in place for how to deal with them.Spend as much time as you need with your SWOT analysis, and don’t be afraid to go back and reexamine each location if you need more data. Once you have built your store, it will be time to focus inward on your business, so the planning phase is the most appropriate time to pick apart your competition.If at the end of your SWOT analysis you still aren’t sure about a location, it’s time to move on to another target. By this stage, you likely have invested weeks of your time into a particular location that still doesn’t get you excited. If the location does indeed get you excited, then it’s time to make a move and lock it down before someone else jumps in front of you. Either way, once you have completed your SWOT it’s time to make a decision and move forward.Don’t be discouraged if you run through several poor locations before you find a good one. I cannot stress enough that engaging the help of a reputable local distributor will help this process. It’s likely that your distributor may even have potential locations in mind that they have already analyzed and determined to be viable. Be sure to verify the analysis yourself; you may not need to go through every single step a second time, but you do want to be certain that the information you’re being given hasn’t changed in the time since the analysis was performed.While these analyses can be time-consuming and maybe even a little bit dry and boring, they are incredible tools that should not be ignored or rushed. Location is one of the most important factors for any business, and in the laundromat business it isn’t an easy factor to change. Take your time, be thorough and, hopefully, you’ll find the perfect location for your first (or next) self-service laundry.
