Delivering the Goods

By Bob Nieman, CLA Member posted 26 days ago

  
The Key Elements to Making Pickup and Delivery Profitable for Your Laundry Business
CCCS_624x358px.jpgDespite last year’s abrupt exit of on-demand laundry giant Washio from the industry, the residential pickup and delivery business continues to grow, with more and more existing laundry owners and newcomers to the business jumping on the bandwagon.

The momentum is clearly aided by the booming “app economy,” which in relatively short order has generated scores of new service businesses, making outsourcing just about any mundane chore available to consumers at their fingertips.

In addition to these home delivery businesses, locker-based services are another “next generation” laundry business that continues to accelerate in popularity and sophistication. These services enable customers to drop off and pick up their laundry or drycleaning at secured lockers in convenient locations, such as their own apartment buildings.

The business models are many. Some operators of these new services are processing the laundry and drycleaning at their own facilities, while others are farming it out to self-service laundries. And still others are looking to sell their business models and software systems to existing laundry owners through licensing agreements, franchise contracts and so on.

The big question: Is home delivery or a locker-based model right for your particular laundry business?

Key Considerations

The advantages of adding a pickup and delivery element to your existing wash-dry-fold service are obvious – expanding your store’s reach, boosting your turns per day and increasing your revenue.

However, laundry owners need to understand that they are signing up for a huge learning curve and essentially going way past operating as a brick-and-mortar business that primarily attracts drive-by customers, according to Susan Becker of LaunderBot, an online laundry service based in northern California.

“Laundry pickup and delivery is complex, so it’s important to have the right pieces in place before you start,” said John MacKrell, a laundry owner and founder of Springboard, which markets laundry delivery software. “Do you have the right software to manage the process and help you grow your business efficiently? Do you have the right production, delivery and customer service team in place – or have you partnered with service providers that can assist with those functions? Have you thought about a marketing budget? Do you have access to high-value customers in cities and suburbs with favorable demographics and good density?

“First and foremost, because you’re selling a service not a product, you need to provide a great customer experience – which means, at a minimum, a professional, polished and mobile-friendly website. Beyond that, you need to have adequate capacity and secure storage space, a motivated team that you can trust, a branded delivery vehicle, a modest marketing budget, a little patience and a lot of hustle.”

 “Buying tech can take you a long way, but it won't create a strong brand for your laundromat or bring in new customers,” Becker added. “And if you don’t have the budget for buying tech, you’re going to have to do it all yourself – scheduling, invoicing and payment processing, pickup and delivery logistics, marketing and retention campaigns and programs, brand creation, social media, email marketing, customer data management, financial reporting and so on. And that list is just the beginning.”

For Dan Parsons, president of Chicago-based drycleaning and laundry service Dryv, quality control is everything in the pickup and delivery sector.

“Having a system in place that mitigates logistical issues is key,” he said. “The supply chain gets more complex when you introduce pickup and delivery to your wash-dry-fold process, so having checks and controls in place before your delivery volume spikes will help ensure growth and customer retention.”

Matt Simmons of Curbside Laundries noted that advertising is a critical consideration for any pickup and delivery operator.

“In today’s world, people use their smartphones to find the services and, to be visible to these customers, you need to advertise online,” said Simmons, whose company provides laundry owners with software to manage their wash-dry-fold businesses. “Your online advertising is the sign for your wash-dry-fold delivery service.

“At the very least, you need a professional website that invokes trust,” he continued. “People willingly give their credit card information to Amazon, because the website looks professional. If your website doesn’t conform to the industry standards for an online marketplace, people may question the safety of their personal information, as well as the quality of your service.

“Of course, there are a number of variables that may change as your delivery business grows. You may expand the territories you cover, offer additional routes and delivery days, and at some point, you may want to invest in a branded delivery vehicle.”

Dan Miller, the founder and CEO of Mulberrys, a San Francisco-based drycleaner and laundry service, suggested that there are three key areas for laundry owners to consider before pulling the trigger on a pickup and delivery service.

“Number one is the density of the region you’re in and the potential customers you have,” he said. “One of the things operators tend to break their sword on is trying to serve a huge route that goes all over the place; it takes up so much in terms of gas and driver time that the profit margin gets eaten away.

“Secondly, the technology piece is huge. Whatever you think it’s going to cost with regard to development time and cost, double or triple that – because it’s substantially more complicated than it seems at first.

“And, lastly, be sure your backend systems – the way you process clothing – is really tight. The process gets so much harder when you’ve got clothes coming from all different places with different types of customers. Plus, for instance, some of them may forget to put on their bag tags, so you’ll get bags with no names on them. There’s just way more opportunity for error than when you’ve got someone walking into your store and everything is all in one place.”

For WashClub President Rick Rome, the keys to a successful pickup and delivery service include a basic knowledge of the business, a willingness to learn about wash-dry-fold, a marketing initiative and the desire to grow the business.

“Over-analysis leads to paralysis,” warned Rome, whose Brooklyn-based online laundry service is now offered in more than 30 cities and 16 states across the U.S. “Most operators have 85 percent of what they need. They have a facility. The have a staff. They know how to deal with customers. Typically, what they don’t have is the knowledge of wash-dry-fold, a vehicle, a driver and the software.”

Chris Moreno of Laundry Locker suggested that those thinking about getting into the pickup and delivery business focus on what they do well, while outsourcing what may be their weaker areas.

“For instance, we were not drycleaners, so we outsourced that,” said Moreno, whose San Francisco-based company is one of the leaders in locker-based solutions. “We’re good at software and marketing, so we do those really well and outsource the other stuff.

“Also, for anyone looking at getting into on-demand or static delivery with homes or lockers, what distance can you cover? What does your facility look like? And, for things you’re not providing, who are the right outsource partners to work with? A drycleaner or a laundromat or another store in another area?”

Best Practices

With regard to best practices in this newly emerging laundry category, it’s all about customer service, convenience and execution, according to MacKrell.

“You need to make it easy for customers to sign up – to get them through the door initially,” he explained. “But, more importantly, you need to make it convenient for someone to become a regular customer. If customers need to reach out to you to schedule pickups, your repeat business is going to be very anemic. So put the tools in place that allow you to “touch” the customers consistently. With the right technology, you can make scheduling pickups nearly effortless for both you and your customers.”

When you look at all the pieces to this equation, you’ll find that getting a customer is the relatively easy part, MacKrell said.

“Keeping that customer takes effort,” he added. “That means consistently delivering a great product and exceeding the customers’ expectations. You need to establish good work flow and chain of custody procedures, and give your attendants and drivers the tools to do their jobs well. And, when problems arise, have policies in place that allow you to solve them quickly. People will be surprisingly forgiving if they see you making a good-faith effort to correct mistakes. In the age of social media, problems left to fester can quickly become very expensive.”

According to Simmons, the top goal for a pickup and delivery service is to be customer-centric.

“We live in an on-demand society, and wash-dry-fold is no exception,” he said. “Customers want their wash-and-fold delivery service when they need it. If you can’t help them when they need it, somebody else will. We watch TV on demand, we order Uber cars on demand, and we order pizza on demand. If customers have an option, they will go with the on-demand service.”

However, you have to make certain those customers have a consistently awesome experience as well, said Moreno, who related a conversation he had with Brian Chesky of Airbnb and LinkedIn co-founder Reid Hoffman.

“They asked me, ‘Would I rather have a million customers who kinda sorta like me, or 10,000 customers who absolutely love me?’” he recalled. “They said they’d rather have the 10,000 people – and the reason for that is because your first five customers are the most important customers you’ll ever have. The first five people who pay you for something and care about you when you’re just getting started are going to be your pipeline to tell you what you’re doing right and what you’re doing wrong.

“You have to make sure you have customers who absolutely love and adore you, because this is such a referral-based business. And if you do something wrong, they can find someone to replace you rather quickly.”

Along those same lines, Becker said a key factor is not just that you deliver, but what you deliver, and how.

“What ends up in the hands of your customers has to be amazing,” she stated. “Interactions with your company – your brand – should be consistent, professional and friendly. This service is not a utility. It’s not an oil change. It’s a source of delight, and this is a huge opportunity for operators, if they have the brand and process to take advantage of it.

“Also, many customers come to this with some hesitation: ‘Will my clothes be taken good care of? Will anything get lost? Will things get shrunk or damaged?’ These people will bolt at the first mistake, no matter how much you bend over backwards to remedy anything they are unhappy with. So flawless execution is key.”

To help with that flawless execution, Parsons offered three suggestions:

•    Implement a bag tracking system to reduce the risk of mix-ups upon mark-in and racking for delivery.

•    Focus on route organization. Having some sort of way to visualize and improve your routes over time will maximize profitability. Clearly, technology should play a role in this.

•    Create pickup and delivery times that match your target customer. For instance, perhaps consider night and weekend deliveries to accommodate your millennial customers.

For Miller, his leading three best practices are:

•    “Frequent communication with customers. To the extent possible, if you can send notes or email or text messages – saying you’ve picked up their orders or that their orders are complete – that type of communication goes a long way in terms of saving you headaches.”

•    “Order tracking and barcoding. For example, we barcode every garment or bag, and track it through the system. If you had an order with us right now, I could look it up and tell you where it is. Again, this is huge with regard to making sure you don’t lose items.”

•    “Monitoring route density, and being certain you’re serving a small enough geographical area.”

Mistakes to Avoid

Here’s a look at some of the common missteps to avoid when getting your pickup and delivery service off the ground:

Inefficient Pickup/Deliver Schedules.

“Don’t drink the ‘Uber for laundry’ Kool-Aid,” MacKrell said. “Unless you’re in a very dense urban market, we discovered that offering true ‘on-demand’ service, where the customers dictate your pickup and delivery schedules, is a very good way to kill your margins and lose money. Unless you’re doing a very high volume of business in a very compact area, you can be undone by inefficiencies.”

Rome explained that operators looking to start a pickup and delivery service should be located in an urban or suburban location, with a minimum marketplace population of approximately 25,000.

“The good news is that people don’t think of laundry as an impulse item,” MacKrell said. “It’s not so much an ‘I-need-it-right-now’ service as it is an ‘I’d-like-it-sometime-today’ service. That means you can build your service around routes that you define, and your customers will be OK with that. There’s nothing to prevent you from offering service five days a week to the same neighborhood, but you’ll quickly find that your Mondays and Tuesdays will be much busier than your Thursdays and Fridays. It’s unlikely that you’ll lose someone’s business because you can only pick up their clothes between 9:00 a.m. and 12:00 p.m. on a Thursday, rather than 30 minutes after they request a pickup on a Wednesday evening.”

Pricing Incorrectly.

You’re providing a premium service – and you should price it accordingly.

“You need to know your costs, your competition and have a target profit margin in order to back into the right price,” MacKrell suggested.

“I believe laundry owners should price low enough to be competitive with similar services and not too far above local drop-off wash-dry-fold prices,” Becker suggested. “LaunderBot offered a ‘pre-launch’ rate to test the waters, then raised prices twice. After two per-pound price increases, we found what seems to be a sweet spot that resonates equally across all of our primary categories. I think making an educated, informed stab at it at launch, making it clear that this is an introductory rate, and then monitoring and adjusting with the resulting data can lead laundry owners to their own sweet spots.”

Pricing is always a function of your products, your service and elasticity, Rome explained.

“You’ll get top price, as long as product and service are of high quality,” he said. “But a lot of operators need to keep elasticity in mind; it will come into play when the consumer doesn’t feel the service justifies the price. That’s why I like to be right in the middle with my pricing – not too high and not too low.”

Expanding Too Quickly.

You have to figure out what you can actually do and what your limitations are, Moreno advised.

“You may have only one van,” he said. “You may have only 25 washers. It’s not necessarily about getting as many customers as you can. It’s about getting profitable customers. And that’s one of the biggest mistakes I’ve seen with pickup and delivery services. Many owners have ballooned up and then run into trouble or go out of business, because they got so big. They were making a lot of revenue, but they weren’t making any money. It’s that old adage: we’re not making money, but we’ll make it up in volume. That doesn’t work.”

MacKrell shared his own tale of growing too quickly:

“Here’s a cautionary tale: When our service was in its infancy, we were fumbling around trying to figure out what worked and what didn’t when it came to acquiring customers. We knew we wanted more and we wanted them fast. So, we offered an extremely generous Groupon that flooded us with new customers. But we were so unprepared for the influx that we dropped balls left and right. Phone calls and emails went unanswered. Our attendants were overwhelmed. Laundry was mixed up and misdelivered. Did we get new customers? You bet. Were a lot of them one-time users? Absolutely. You get one chance to make a first impression but a negative post on social media lives forever.”

Failing to Budget for Marketing

“Just because you build it, doesn’t mean they will come,” Becker warned. “If you’re currently doing wash-dry-fold, you have a captive audience for your pickup and delivery service – but your increase in revenue will be negligible. To reach beyond those people, you must market creatively, regularly and across multiple channels.

“So, I think the biggest pitfall is thinking that all you have to add to your business is pickup and delivery. Unfortunately, you have to get into the internet business as well.”

Of course, you want an attractive, mobile-friendly website, but you’ll need to promote it. This means spending some money on Google AdWords, etc. – but it also means looking for traditional opportunities, which might include sponsoring local youth sports teams or partnering with other local service providers that target your demographic, such as lawn-care companies, fitness centers and grocery delivery services.

“If you want to grow your business and you’re not out there promoting it, who is?” asked Rome, who started WashClubBuzz, which is a marketing company focused on working with WashClub licensees and non-licensees alike on the digital advertising programs. “If you don’t have a salesperson, who is marketing it for you? Google? Facebook? Flyers? TV ads? That’s your sales team. Don’t think of marketing and advertising as a true expense; I view it as a function of growing your sales.

“Store owners give up on marketing way too soon. It requires, at a minimum, a six-month commitment, and it really should be longer than that. All research indicates that it takes seven exposures to get someone to try your product or service.”

Not Having a Branded Delivery Vehicle.

“Think of your truck or van as a rolling billboard,” MacKrell explained. “Get it wrapped and keep it spotless – and you’ll find that it’s one of your best, and certainly least expensive, promotional tools.”

Not Turning Around Orders Quickly Enough.

“We saw a significant uptick in business and customer satisfaction when we implemented a next-day return policy on wash-dry-fold orders,” MacKrell said.

Not Going “All In.”

“Sometimes operators think this is a part-time gig,” Rome said. “I don’t think laundry is a part-time gig, but that seems to be a common mistake, whether it’s with a self-service model or pick and delivery. Many owners think, ‘Oh, I’ll just go in every Sunday and get the quarters.’ We all know it doesn’t work like that.”

Adding an App

If you decide that pickup and delivery is a proper fit for your business and your marketplace, you’ve now got to figure out if it makes sense for you to take the next step – adding a mobile app to the equation.

“Laundry service is just that – a service,” Becker explained. “And the technology has to serve the service, not the other way around. Priority No. 1 for tech is software. However, Priority No. 1 for a laundry business – which, even with pickup and delivery, is a local business – is to nail the customer experience. It takes time and lessons learned the hard way to get to a quality product and a growing customer base.”

Miller explained that laundry owners looking to add an app component to their pickup and delivery business model have three options.

“The first option would be to develop your own, which is extremely difficult,” he said. “I would caution against that, at least in the short run. The second option is to purchase one of the white label, off-the-shelf solutions on the market; I think that’s a good option for owners who want to try the business but don’t necessarily want to put all of this huge capital into developing the software and technology. And the third option is to have a front-end partner – where they handle that part of the business, you do the laundry processing.”

“I think the first step is determining what type of pickup and delivery business model is right for you and your market,” MacKrell said. “If you’re in a high-density area like New York City or Los Angeles and feel you need to offer true on-demand pickup and delivery, you’ll want to look for a software provider whose tools are geared toward facilitating that type of service. On the other hand, if your territory is in a smaller metropolitan area – such as Boston, D.C. or any higher income suburbs, you may want to consider offering a route-based service. In that case, you’ll need to consider the different software packages that have been built for route-based applications.

“Regardless of which business model you decide upon, look for tools that help manage customer acquisition and retention, production, route optimization and, of course, billing.

Parsons agreed, noting that today’s laundry owners need to find just the right software partner.

“It’s important you find a product and team that meet your specific needs,” he said. “This could include things such as scalable parcel management, route organization, deep POS integrations and the ability to provide reliable long-term technical support with continued innovation. Also, the experience for the end-user needs to be on par with the other apps they’re using.”

To Rome, it’s the owners who are considering taking that next step and adding an app-based component who are “on the cusp of something great” in their markets.

“These operators are so prime for scale it’s unbelievable, because they have everything,” he said. “It’s just the software that they’re missing. They know how to do pickup and delivery. They know how to manage a staff. They know how to bag it and process it and get it ready for delivery.

“They have it all. The thing they don’t have is the time to figure out how to go from 25, 30 or 40 bags a day to 100 bags a day – that’s scalability, and that’s what software does.”

Laundry: The Next Generation

So, where does the laundry business go from here?

Becker sees the future of full-service laundry is in the hands of the laundry owners themselves.

“I truly believe that no one can do this better than a local laundry owner, whether they’ve got one store or 50,” she said. “I think the next step is more laundry owners moving into pickup and delivery, whether that's completely on their own or [with the help of vendor partners.]

“Don’t try to reinvent the wheel,” she added. “There are a lot of great wheels in the marketplace for laundry owners right now – to fit different levels of expertise, time, money, resources and goals. Lessons have been learned and solutions have been created – it’s never been a better, safer time to take the plunge. And I love this because, rather than the power and profit going to distant tech startups and venture capital firms, it stays with the folks who have been the core of this business all along – the laundry owners.”

Consumers are so time-strapped that they’re looking for convenience in every possible way to make their hectic lives that much easier, Rome said. And pickup and delivery laundry services are one of the solutions.

“I would tell operators to embrace technology,” he explained. “That will help them to scale and manage their businesses – and they’ll reach customers they never in a million years thought they’d have as customers.

“The pickup and delivery market is going to fly off the charts. It’s still in its infancy. This is just the beginning, as it will become further ingrained into mainstream America and around the world.”

The modern consumer is all about optionality, and they’re willing to pay for additional convenience when they need it, Parsons added.

“The future will be a mix of convenience and price variation, and as we’ve seen with other big industries, technology will certainly play a role in this,” he said. “This industry will be driven by the best operators using modern technology to provide users with all levels of convenience, service, and pricing.”

With regard to customer convenience, Simmons pointed out that many people soon will want their laundry and drycleaning picked up from their home simultaneously, and that laundry owners would be wise to consider offering pickup and delivery for both of these services.

“Drycleaners are moving into our business by offering wash-dry-fold to their delivery customers,” he said. “As laundry owners, we need to be first out of the gate, because whoever gets the order gets the money.”

“I think it’s all going more toward the apps and technology, and more toward shorter and shorter timeframes,” Miller said. “Everything we see that consumers are doing right now is about more and more delivery – and more expectations of things getting there faster. Look at Amazon – same-day groceries, same-day you name it. That’s the same thing that’s going to happen with laundry and drycleaning. You’re going to have people expecting they can tap an app and someone will be there in 15 minutes to pick up their laundry and return it the same day.”

Without a doubt, given the trend of busy families to offload repetitive household chores like housecleaning, lawn care and even dog walking, there’s a tremendous opportunity to build a whole new market with pickup and delivery

“We found that one of the biggest challenges we had when building up our brand was just letting customers know that the service existed – not our brand specifically, but the laundry pickup and delivery service as a category,” MacKrell said. “The entire industry is going to benefit from more customer service-focused providers entering the market, because it builds awareness among all consumers.

“If your laundromat suffers from the common affliction of slow midweek days, if you want to increase revenues without physically expanding and taking on the significant additional overhead required to open a new store, if there are suburbs with favorable demographics within 20 miles of your store, if you have a good team in place or are willing to build one, you should seriously consider pickup and delivery. While I like the laundromat business, I love the laundry delivery business!”
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