Buying a Dry Cleaning Business - Industry Highlights and Trends
The dry cleaning industry is highly fragmented with the largest sector being small family-owned retail dry cleaning locations. Operations are typically lean and nimble, with a small staff carrying out everything from waiting on customers, to alterations and cleaning. Changes in market conditions and consumer behavior have had an impact on the dry cleaning business over the last 20 years. Yet, many owners have managed to adapt and learn new ways to be successful.
Is there a strong demand for dry cleaners?
The dry cleaning industry has experienced slow growth in recent years and in some markets revenue has declined. Demand is tied to local area consumer income and tends to grow more in areas with high population growth. As the economy grows and employment rises, demand for dry cleaning services increases. At the same time, changes in consumer behavior and market conditions also affect demand.
- Clothing trends dictate revenue. Seasonal habits and trends in fabrics will affect demand in dry cleaning services. Many corporate offices have reduced demand for “business casual” dress, meaning dry cleaning of suits and ties have lessened. The rise of synthetics and other types of fabrics that do not require dry cleaning have affected sales, as well.
- Increase in “at home” dry cleaning products. These DIY products offer consumers who frequently need dry cleaning services an alternative to dropping off their clothing at a retail location. These products are less versatile, so they have made little impact. However, as this technology improves, professional dry cleaners may need to worry.
- Areas with high employment see the most demand. Places in which there are many industries or companies that require a certain dress code will see more demand. This is typically found in urban locations and those with low unemployment numbers.
- Seasons can cause a downturn in demand. Dry cleaners may see business slow down during the summer months as vacations increase and more employees are wearing more casual clothing.
- Demand from corporate customers remains steady. Since the 2008 recession, many organizations such as hotels and hospitals have shifted to outsourcing their cleaning. Dry cleaners than can handle large orders receive steady orders for items such as tablecloths, drapes and staff uniforms.
Where is the biggest market for dry cleaning businesses?
Dry cleaning services are primarily for white collar workers and corporations, yet the industry’s local market concentration is influenced by a combination of income as well as population. Most retail customers tend to patronize dry cleaners close to their home or work.
- High population areas experience the most demand. States with the highest population growth in recent years are Arizona, California, Florida, Texas and Washington. Areas that have a dense urban population such as New York also have one of the biggest markets. Retail dry cleaners tend to do best when closely situated to dense residential and corporate locations, as customers value convenience and tend to go to dry cleaners within two miles of their home or office.
- The Southeast region has the most dry cleaners. Almost a quarter of dry cleaners in the U.S. are located this area which is the same as the region’s total population growth. The Southeast also accounts for more than a quarter of revenue for the dry cleaning industry.
How do dry cleaning businesses generate most of their revenue?
The largest market served by the dry cleaning industry is individual consumers, which makes up around 85 percent of industry revenue. Yet, a decline in demand has dry cleaners adding on additional services and looking to provide services to corporations, who are able to offer more steady business.
- Increase in corporate clients outsourcing cleaning. Since the 2008 recession, many corporations have cut back on operation costs. Rather than use in-house staff and machines, many are now outsourcing. Commercial laundry services account for about 15 percent of industry revenue.
- Retail dry cleaning makes up the bulk of revenue. Most individual customers prefer to have their work clothing, coats, drapes and rugs dry cleaned.
- Dry cleaners have added on additional services to stay competitive. Many dry cleaning businesses have started adding drop off laundry service and alterations in order to maintain or increase profit.
What types of services do dry cleaners provide?
- Dry cleaning services. Most dry cleaning businesses take clothing, drapes and rugs and put them through various cleaning machines and techniques.
- Laundry services. Some businesses offer full service laundry, including clean and fold services for patrons.
- Alternations. Though this makes up for a small percentage of sales, some places offer tailoring services, such as hemming and clothing repair.
- Other value-add services. In an effort to maintain business, some dry cleaners are delivering dry cleaned clothes to customers and offering mail order services.
With unemployment rates decreasing and less stringent guidelines in work attire, the dry cleaning industry is expected to adjusting to changing conditions, in some markets sustaining while in other seeing a decline. At the same time, increases in state regulated dry cleaning site remediation programs are expected to put pressure on profitability. To combat lower margins, more businesses are looking for creative way to maintain customer loyalty and boost demand by adding a wider range of services.
To continue on the path towards being an entrepreneur, browse through available dry cleaning businesses for sale.
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