"The Economics of Everyday Things" a recent episode on Car Washes. Lots has happened to transform this industry.
- Growth - The industry is growing fast thanks, in part, to less "home production."
When we started in— back in 1996, more than half of people with cars in the U.S. reported that they most frequently wash their car themselves in the driveway. Our most recent survey, we’re approaching 80 percent now use a professional car wash.
- Bundling - New technology has allowed new pricing schemes more like subscription services or gym memberships that are likely to increase consumer surplus capture.
We fix a little RFID sticker in the bottom corner of your window. And it knows exactly what wash to get, how often you’ve washed and what vehicle you’re in, any contact information. It’s kind of like a barcode, if you will, for your vehicle. And when you pull up to the pay station the gate goes up immediately.
- Input Substitution - Increasing use of technology has reduced labor costs.
A modern car wash today can be run with three or fewer employees versus having, you know, 12 to 25 at some stores back in the day. In those days, car wash owners were almost like farmers. I mean, you’re always watching the weather. You’re always trying to anticipate what demand is going to be so you can manage that labor expense.
All these changes have manager implications. Growth often allows firms to exploit sale economies. Bundling is easier with multiple establishments run under the same brand. Fewer workers could mean more decision rights to each one suggesting more incentive compensation.
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