The laundries and dry-cleaners industry comprises establishments that provide dry-cleaning, laundering, carpet cleaning and laundrette services.
IBISWorld estimates that laundering accounts for 63% of total industry revenue, with dry-cleaning constituting 24%. Employment trends in client industries are important in influencing service demand. The industry's clients include government, commercial industries and households.
Over the five years through 2011-12, industry revenue is estimated to grow an annualised 0.6%, including forecast growth of 2.6% in 2011-12 to reach $1.11 billion. Strong growth in 2010-11 and 2011-12 will result mainly from a stronger economy and greater demand for services, particularly for uniform hire and cleaning services. Price-based competition on supply contracts will remain fierce due to the nature and structure of this industry, which includes many small and medium-size operators.
Environmental factors will become increasingly important to this industry's future performance, particularly in the areas of chemical, water and energy use, and in relation to climate change factors and carbon emissions controls. In the five years through 2016-17, industry revenue is forecast to increase an annualised 1.8% to $1.21 billion
Industry outlook
Future industry growth is reliant on positive economic conditions and a favourable operating environment. The industrial laundries segment will particularly benefit from services in aged and health care, prisons and educational institutions. Environmental factors will be increasingly important for the industry over the next five years, particularly regarding all areas of chemical, water and energy use.
Forecast moderate growth
During the five years through 2016-17, industry revenue is forecast to increase an average annual rate of 1.8% due to solid growth in the outsourcing of laundry and uniform rental services, particularly in the health, medical, retail and hospitality sectors. Growth is expected to be strongest in the early years of the period, with a peak of 2.4% in 2012-13. Industry revenue growth is forecast to slow in the later years to 1.2% in 2016-17, as price competition intensifies and as the industry matures. By the end of 2016-17, industry revenue is forecast to total $1.21 billion.
Ongoing employment restructuring in the manufacturing sector will lead to further demand reductions from this market. There is also expected to be declining revenue in the dry-cleaning component, although the availability of wet-cleaning services may be an area of potential growth. Weak demand in carpet cleaning services will remain, as carpets continue to be replaced by other types of flooring.
Industry operators will diversify into newer services such as duct cleaning, tile cleaning and grout cleaning. Overall, significant price-based competition will remain for the industry over the next five years. IBISWorld expects that profit margins will remain under pressure from intense price competition, due to industry fragmentation. Industry employment is expected to average growth of about 0.4% a year to over 16,145 people by 2016-17. This relates to relatively sluggish or declining growth in industry revenue from dry-cleaning and carpet cleaning components, and some further industry consolidation, combined with a general rise in overall demand for other industry services.
From 2012-13, some industry segments are expected to benefit from improving economic growth. A better operating environment will result from improving business and consumer sentiment, increases in international and domestic travel and further outsourcing of laundering, textile and work clothes rental by both large and medium-size businesses.
Competition and technology
IBISWorld expects that the industry will continue to remain very price-competitive over the next five years. However, major operators will move towards providing quality service at a slightly higher price.
The laundry services segment is expected to undergo further rationalisation through mergers and acquisitions by major companies seeking to raise revenue growth potential and profitability. Acquisitions will include family-operated companies servicing the large linen market, such as hotels, motels, hospitals, cafes and restaurants. To ensure profitable operations, all companies in the industry will need to introduce more cost-effective work practices, plant layouts, modern technology and delivery modes to increase efficiencies.
The latest technology available to the laundry segment involves a move away from labour-intensive and energy-inefficient washer extractors, towards more economical continuous batch washing machines. This technology is now almost the norm for the industry. For larger operators, implementation of logistic solutions will also become important for servicing clients in the most efficient manner.
The longer-term prospects for the laundry segment depend on general employment growth, particularly in the service industries. Growth in the food service, and travel and tourism industries, and the continued outsourcing of laundry services by government-operated hospitals and prisons will also be significant. Private and public nursing homes, after-care homes and retirement villages will also be main sources of demand. IBISWorld expects growth in both linen and uniform rentals from these industries and growth in demand for new products servicing retail and other industries.
Industry structure changes
Restructuring pressures will continue to affect the dry-cleaning segment, particularly the small owner-operated establishments using outmoded technology. The industry's operations will be monitored, adversely affected by harsher government environmental and occupational health and safety regulations.
Small packaged dry-cleaning plants are available and favoured by small dry-cleaning operators. However, a reduction of operators is expected due to generally rising environmental concerns and associated tighter regulation. This will be driven by the substantial costs associated with upgrading equipment and using alternative chemicals. The industry will comprise a larger number of small outlets used mainly for the depositing of items for dry-cleaning at locations such as convenience stores and petrol stations. Larger central dry-cleaning plants that meet stringent environmental and health regulations will service these outlets.
Smaller operators may not be able to afford to replace their plant and equipment if modifications are made to government regulations for the use of carbon dioxide, ozone, hydrocarbons or if new technologies are enforced. Changes that will facilitate growth are the use of demographic data to identify the appropriate delivery systems for various target market sectors, such as home delivery versus convenient high-traffic, drive-in locations, and more efficient and customer-oriented systems.
Further growth will stem from specialist niche services. Operators will trade on providing quality and extended customer services. They will offer value-added services such as free pick-up and delivery for customers, and drive-in collection facilities. Due to extreme price competition, the industry will become more reliant on cost controls, particularly on dry-cleaning fluids and labour costs. Rising labour productivity associated with logistics, better organisation of the cleaning process, and new technological advances in cleaning equipment will be the focus of cost control. This will especially influence movement to new mini dry-cleaning plants. Wet cleaning is driving some revival in demand and the cleaning of clothes using ozone or carbon dioxide-related cleaners, or even microwave technology, may save the dry-cleaning industry segment from entering a downwards spiral.
In some countries, a low flat-rate dry-cleaning service has evolved among a few operators. The aim of this strategy is to rely on volume and upfront cash-only payments. Some dry-cleaners are locating themselves within very large car park area.
Dry-cleaning services are increasingly offered over the internet and provide a pick-up and delivery service. More efficient machinery with reduced emissions – using less perc (perchloroethylene) per cycle, reduced cycle times, less waste and more recycling of perc – are now available and will be installed and used more commonly. This will affect costs of materials and labour. These standards will increasingly be enforced under tighter environmental and health and safety regulations in the future. Production scheduling, workflow and customer satisfaction are other important areas for industry operators to improve profitability. Courses in dry-cleaning are increasingly being offered by TAFE institutions across Australia.
Key success factors
- 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, are necessary to ensure quality cleaning is provided.
- Proximity to key markets: Successful operators need a convenient, high-traffic location to generate customer traffic, particularly for dry-cleaning at regional shopping centres, shopping arcades, railway concourses, certain strip shopping centres and CBD locations.
- Having an extensive distribution/collection network: An efficient pick-up and delivery system ensures quality client service.
- Automation – reduces costs, particularly those associated with labour: An efficient plant layout and automated materials-handling equipment lowers operating costs.
- Ability to control stock on hand: An efficient stock control and identification system for record keeping and invoicing purposes ensures quality client service.
- Ability to quickly adopt new technology: It is advantageous to possess new technology, particularly in water use and recycling.
- Must comply with government regulations: Operators must meet all government environmental and health regulations, particularly for any chemical use and storage.
- Level of competition existing in the market: Moving away from price-based contracts and competition and more towards quality and value-added services can attract a higher price.
