This industry's forecast relates to the impact of a further year of more subdued economic growth in 2009-10. This is expected to lead to a tough operating environment for all industry segments. But the industrial laundries segment will still benefit from the continuing of services in the aged and health care, as well as from prisons and educational institutions.
IBISWorld estimates that over the five years to 2013-14, industry revenue will increase at an average annual real rate of 2.1%, due to continuing strong growth in the outsourcing of laundry and uniform rental services.
Low growth in carpet cleaning services is expected, with continuing replacement of carpets by other flooring, but with an increase in other services (ie. duct cleaning, tile and grout cleaning services) by the major operators. IBISWorld expects that this industry will continue to remain very price competitive over the outlook period.
The laundry services component industry is expected to undergo further rationalisation, through mergers and acquisitions by major companies to increase both revenue and profitability.
Environmental factors will be of increasing importance over the outlook period, particularly regarding chemical, water and energy use. The longer-term outlook for the laundry component depends on overall employment growth, particularly in the services industries. Also significant is growth in the food service and travel and tourism industries.
Key success factors for operators in the industry:
- Provision of superior after sales service. A high commitment to quality and customer service to ensure repeat custom.
- Production of premium goods/services. A high commitment to quality and customer service to ensure repeat custom.
- Having marketing expertise. A marketing 'pitch' or focus must exist, for example, on a particular socio-economic class or garment-type specialisation to distinguish one shop from others.
- Having a good technical knowledge of the product. An understanding of garments and fabrics, stains and chemicals and the effective and appropriate 'spotting' of garments prior to cleaning is necessary to ensure quality cleaning is provided.
- Market research and understanding. Good knowledge of local area and customer needs to provide services in need/demand.
- Having a good reputation. Good word-of-mouth recommendation to be exploited, to ensure new and repeat customers.
- Ability to franchise operations. Having an agency system for collection of clothes for cleaning, but with an appropriate legal agreement covering aspects such as liability for lost or damaged garments from any act, neglect or default or fraud by or of the agent.
- Effective product promotion. Local advertising needs to be effective and targetted to reach required markets/customers.
- Proximity to key markets. Need for a convenient, high-traffic location, to generate customer traffic, in particular, for dry-cleaning at regional shopping centres, shopping arcades, railway concourses, certain strip shopping centres and CBD locations.
- Provision of a related range of goods/services ("one stop shop"). Possibly examining new areas such as uniform rental and dust control to generate new revenue sources.
- Use of production techniques that add value to base product(s). Production of extra 'value-added' services such as mending, water proofing, shoe repair, tailoring, express bags and wet cleaning to generate more revenue.
- Having a diverse range of clients. To have a diverse client/contract base in the industrial, commercial and hospitality industries to ensure any fluctuations in demand from clients is not too drastic on revenue.
- Having an extensive distribution/collection network. To have an efficient pick-up and delivery system to ensure quality client service.
- Automation - reduces costs, particularly those associated with labour. To have an efficient plant lay-out and automated materials handling equipment to operate at lowest cost.
- Ability to control stock on hand. To have an efficient stock control and identification system to ensure quality client service and for record keeping and invoicing purposes.
- Ability to compete on tender. To have experience in the tendering process and in preparing tenders for large outsourced contracts, if relevant.
- Ability to quickly adopt new technology. To increase the use of new technology, particularly in water use and recycling.
- Must comply with Government regulations. To meet all Government environmental and health regulations, particularly for any chemical use and storage.
- Level of competition existing in the market. To try to move away from price-based contracts and competition and more towards quality and value-added services, at a higher price.
Robert Bryant is the general manager of business information firm IBISWorld.
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