Are Times Changing?

By Deborah Rechnitz CMA CMC

The answer seems obvious.  Times are always changing.  You know that change is occurring faster than ever before.  The key is determining which changes to track.  Decide which changes may influence you and your business, what type of affect it may be, and how you can react to or anticipate these events in order to improve your lot in life. 

Global Changes.  It's hard to believe that global changes will impact the local drycleaner.  After all, the economic activities in Japan, the rest of Southeast Asia, and now Latin America seem worlds away from your day to day activities of cleaning and pressing clothes.  Certainly these activities affected the United States stock market, but that only impacts those investing in the market  right?  Maybe it's a little closer to home when we find out that Microsoft has closed its regional office in Japan and opened it in Singapore.  Interesting, but doesn't impact your business  right?  It will only affect you directly when sales and the employment base in your neighborhood is impacted.

Local Impact.  Demand for American made goods has been exceptional over the last several years throughout the world and much of the world could afford these goods.  American jeans, American golf clubs, not to forget our world famous hamburgers, have experienced phenomenal growth over the last 10 years.  Now what do we see?  Levi Strauss is closing manufacturing plants in the United States.  Callaway Golf Center has laid off 700 employees.  McDonalds Corporation is downsizing.  Local communities, impacted by these particular companies, may feel the impact more quickly, but it is a snowball effect and grows as it runs down the hill.  As one community is impacted, it impacts others.  Vendors of each of the businesses from textile imports to potato farmers see their sales fall.  Does all of this mean dire news for American drycleaners?  Probably not.  Could it mean slower growth than you've been experiencing over the last several years?  Very possibly.

Global conditions do affect local communities although the impacts are not evenly spread out.  Some are harder hit than others.  These issues combined with the continuing casual wear trend is impacting communities and, specifically, drycleaners.  The offsetting news, in this economic environment, is that in slower economic times, dress codes frequently become more conservative.  Time will tell.

Develop a plan.  Many successful companies create plans that reflect their ``wildest dreams", their ``best guess", and their ``worst nightmare".  Put another way, it is prudent to create a plan that can accommodate significant and continuing growth and a plan that addresses your business risk in case the growth doesn't occur.  Reality is often somewhere in between and is reflected in your ``best guess".  The uncertainty of day to day business forces many of these plans to be quite general, but they should still exist  if only in your head.

Today's perspective is on the downside plan.  Your ``best guess" or ``wildest dreams" may be failing to emerge.  Forces far beyond your control can be causing these problems.  In this case you have several choices  do nothing and hope that business turns around, try to reinitiate your plans with some quick start strategies, or implement your own ``fall back" position. 

A do nothing strategy can be good or bad.  It's good to not jump to conclusions too quickly.  A few weeks of downward sales don't necessarily mean that the entire market has shifted direction.  It could be weather related.  It could be that last year, this same week, was an unusually successful period.  It is sometimes good to wait, but not too long.  As quickly as possible, you must determine if a recent sales downturn is a blip on the screen that can be corrected, or the beginning of a trend.

The Fall Back Position.  The current or near term future business environment may include:

loss of piece count in laundry, drycleaning, or both,

strong price sensitivity in the market place with customers demanding more and more price reductions to maintain loyalty,

wage pressures because of increased demand for quality workers until the rest of your market experiences the economic slowdown, and

lower productivity with increasingly difficult garments to clean and press.

A reduction in piece count leads many operators to consider shrinking the business.  Selling or closing marginally profitable locations, and eliminating delivery expenses might be profitable, but not too frequently.   It is difficult to eliminate more overhead than the marginally profitable business has been contributing to cash flow.  On the opposite side, you can add marginally profitable work such as hotel valet, shoe repair, and agency work.  Each dollar may add only .25¢ to your profits instead of the normal .50¢, but it will help to pay your debts, rents, and other fixed expenses, including your salary.  Mergers, acquisitions, and consolidations are also natural events in this type of environment.

Restructuring fixed labor costs can be the single biggest boost in a slower economy, but also requires the most creativity.  To combat wage pressures, some operators are adding self-service lines.  Customers complete their own invoices to reduce added staff at the counters.  In other cases, customers access their own finished garments through computer controlled systems and eliminate all employee contact.

There will be constant downward pressure on the price of the product.  In general, the American drycleaning public can not differentiate the quality produced by most drycleaning operations.  The $1.25 drycleaner frequently produces work that is close, if not identical to the $4.50 pants price of the ``middle of the road" cleaner.  Each will claim there are differences, but if the consumer doesn't perceive the differences, there aren't any. 

Under any economic conditions, other than pure, unconditional market growth that exceeds the growth of new competitors in the marketplace, each company must create a unique niche for their customers.  Otherwise such downward price and volume pressures, combined with increasing wage pressures will constantly occur.  This is the long-term challenge.  In addition to developing your ``worst case scenario" give some thought to your long-term strengths.

Article appeared in American Drycleaner's Magazine, January 1999

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