Alexander Russell (CWA): “Investors are looking at the UK car wash market”
We speak to Alexander Russell, Director of Strategy at the UK’s Car Wash Association, about how the industry has overcome the unregulated hand car wash crisis, the current growth in the automatic wash segment and some of the biggest trends today.
Alexander Russell, Director of Strategy at the UK’s Car Wash Association, has plenty of experience in the car wash industry with over 38 years in the industry. He’s the former Deputy Chairman of IMO Car Wash Group, the world’s largest independent conveyor car wash business, and current non-exec Director of the Petrol Retailers Association (PRA) and the Retail Motor Industry Federation (RMIF). The Car Wash Association was originally established in 2007 by wash operators and industry suppliers and is now officially incorporated as part of the RMIF.
Q. The British car wash industry has had a long running issue with unregulated hand car washes. How do things stand today after various efforts from the industry and the government to tackle this issue?
A .Between 2004 and 2007, with the accession of new Eastern European states to the European Union, we had a big influx of immigration and that's when the proliferation of unregulated hand car washes began. So it's quite a recent phenomenon. We went from having maybe 3,100 automated car washes to 20,000 hand car washes (around 2017). Almost overnight, they constituted 85% of the car wash locations in this country.
It was a very UK phenomenon explained by lax enforcement of regulations and big economic migration; characterized by poor working conditions and very low prices. Some locations were offering to wash outside and inside for £2.50 with five people working on your car – that's not a conceivably profitable economic model. There was grave concern regarding worker exploitation. Matthew Taylor, former Director of the Office for Labour Market Enforcement (OLME), described the whole sector as “endemically non compliant”: environmental planning, trading standards, fiscal evasion, health and safety measures, and various forms of criminal activity as well, such as money laundering and drug dealing. The non compliant models were only economically viable if they evaded tax and employment regulations.
Q. What are some of the initiatives that the CWA took to improve the situation?
A. Among other things, we have promoted an app called the Safe Car Wash developed by the Church of England’s Clewer Initiative. By answering five or six simple questions, it can tell you whether a car wash is safe to use. It enables the average motorist to recognize if a car wash is compliant or not. That has been very successful. And we are also founding members the Responsible Car Wash Scheme, which is a national auditing scheme that operators can volunteer to apply for.
Q. How have things changed over the last three years? And what impact is it having on the automated car wash sector?
A. It has changed a lot – the hand car wash industry is still (mostly) non- compliant with one of the notable exceptions being the Waves network , which operates 280 compliant sites on supermarket parking lots.
Household car wash budgets are going to be stretched due to the cost-of-living crisis. I think we may see a growing trend back towards automated car wash as it's quicker, cheaper and there's no Covid contact risk although the compliant networks such as Waves implement stringent hygiene precautions to reduce the risk of contagion. COVID has changed attitudes towards handling of cash. This preference, and the Government requiring many operators to shut down during lockdown, has driven many non-compliant hand car washes out of business. This coincided with Brexit regulations that saw much of the staff returning to their home countries and not coming back to the UK subsequently.
There may be as few as seven or eight thousand hand car washes in the country now, which is an enormous difference. They've also, in many cases, started becoming compliant because people don't want to pay in cash and they are now forced to accept credit cards (which provide a fiscal audit trail) or go out of business. As a result of these changes and the reduction in numbers of hand car washes, prices have now generally risen to £8 or £10 for an exterior wash only, which in turn has produced a reversal of the situation with the automated car wash sector now offering lower prices than hand car washes.
Q. We can see that the British car wash sector is currently going through a very positive phase. What other factors explain this development?
A. The 2020 pandemic lockdown saw a rise in convenience shopping at petrol stations. Customers preferred to stay local rather than drive to a supermarket. Many petrol retailers expanded their convenience shopping facilities dramatically. They are increasingly turning to new sources of revenue, such as selling fresh meat and vegetables, bakeries, fast food, mail order, click and collect depots, dry cleaning, and not forgetting a renewed interest in automated car washes. There’s a growing investment in these machines – manufacturers and suppliers of wash equipment in this country have all reported a very good year. Automated car washes are being reinstated in the wash bays that were originally built for them many years ago, which had been occupied by hand car washes for 5, 10 or even 15 years. The shortage of staff has also impacted them. So it's come full circle, but there’s room for both and demand for the service from an ageing population no longer willing to D-I-Y at home is healthy – the growing availability of law-abiding hand car washes has also helped.
Investors, some of them from as far as the USA, are now looking to establish themselves in the UK car wash market. They see this as a good, developed and competitively-priced market with an ageing population that washes their car at home less and less. There’s also a growing sense of ecological responsibility amongst customers aware of the potential pollution that a non-compliant car wash discharging large volumes of trade effluent directly into storm water drains can cause.
Q. Now that the sector is growing and investment is taking place, which wash systems are more popular among retailers and operators?
A. Most of the new equipment that is being installed are rollover washes. There's a ready-made slot for them on many petrol stations, as we mentioned, and they are more affordable than conveyors. Tunnel washes are a much bigger investment owing to the real estate required, namely a minimum of a quarter to a third of an acre. IMO Car Wash have 250 sites operating conveyors in the UK, apart from which there are only another eight or ten in the country. The Car Wash Association is also proud that we have compliant hand car washes as members, particularly in the form of the Waves nationwide network.
Q. Looking at other trends, we've seen subscriptions having great success in the US. Is that something that you're seeing in the UK?
A. It started a little sooner in Europe but it’s now also happening in the UK. With IMO Car Wash we entered the US market nearly six years ago and we were surprised to discover how willing customers were to pay for a subscription model. It eliminates much of the weather risk and can be economically attractive and convenient for the motorist while providing greater cash flow certainty for the operator, making it much easier to plan ahead financially.
Q. Through the pandemic we've seen an acceleration towards non-cash payments. How do things stand right now when it comes to the car wash market and payments? Are users demanding new solutions?
A. Both customers and retailers are keen for progress. So cashless, remote payment, mobile pay… all of those are on the up. The habit of paying by card and the aversion to handling cash during lockdown seems to have become permanent features of everyday life in this country. Another interesting quirk we discovered in the US is that by substituting a screen with an automated welcome message and wash menu for the attendant at the entrance of the conveyor customers were more likely to accept promotions of higher-priced wash options. . That way labour costs and sales tax are both reduced and in any case with the growth of on-line shopping, consumers have become very used to buying things from screens. We noticed that the sales of top programs went up as people don't mind an automated inanimate object upselling a customer’s programme choice
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