Big Data and Laundromats

[Jordan Berry]

Hey guys! This post is a place to respond to The Laundromat Resource Podcast show 55 where I talk about the emergence of big data in the laundromat industry and the potential threat and the potential opportunity to laundromat owners who get ahead of the curve.

I want to hear what you think! Cooky conspiracy theory or legitimate concern? Share your thoughts here and let’s have a discussion!

[Brian]

Jordan – just got done listening to the podcast. Don’t know whether it ranks to the level of conspiracy theory – but definitely something people should be aware of as they run their business. I think your commentary blends 2 things — one is the consolidation of the self-service laundry value chain led by manufacturers/distributors acquisitions and their expansion into the operators/franchisor role and the other is the new challenges/threats and opportunities that data represents.
The former is happening w/ or w/o data – but — should create more opportunities to look at data in aggregate and will hopefully expose benchmarks and insights that can make all operators more effective.
Operators who lack data will lag behind in their ability to pursue new opportunities.
– Exit. Probably the biggest threat for those that don’t have the data – the exit becomes even more challenging if the consolidation in the industry expands to the store level. It’s easier to acquire than build a new store – so if I’m looking to exit and I can show the data I’m more attractive to companies looking to acquire and can likely sell at a better valuation.

– Marketing. You make a compelling case for the use of A/B testing but I don’t believe that many operators have the scale and are making the marketing investment to invest the add’l effort to learn quickly and iterate. But, for example, just as marketing agencies that focus on laundromats are already able to give us anecdotal insights on what messaging and tactics are working for their clients even w/o sharing data. I believe there are opportunities for operators to potentially create marketing co-ops to spread the cost of creative investments and share data on what is working and what is not.

– Operations. My data for my store is interesting – but it becomes immensely more interesting if I am able to look at an anonymized aggregate of what other operators are doing. By looking at those benchmarks I can see how effective I am being – especially when we are able to do so by common factors. E.g. what POS/WDF software, card-only/hybrid/coin, etc.
Operators who are using any kind of POS software, payment card, WDF service, etc. should definitely make sure they understand the terms of service so they understand customer data ownership and if/how the provider can use their data and to what extent it can be identified to their business. Maybe some sort of data bill-of-rights would be useful for the industry and likely would go a long way in addressing concerns of operators as their traditional partners expand their footprint in the value chain.
That’s my first take, looking forward to hearing from others.

[Jordan Berry]

Brian, very thoughtful response! I think you’re right on with all of your points! I particularly like your take on the exit. You’re dead on with that. That is already the case with simple data. Keep good books and your business is more likely to qualify for a loan for a buyer so it’s more valuable. But I think that will continue to expand.

I’m wondering if owners can organize to aggregate anonymized data for collective use and analysis… I know the CLA does this on a smaller scale, but I would be interested to see if there is a way to organize a database of info directly from owners, independent of the manufacturers…

[James Monroe]

Great episode Jordan! “Big data” is coming to laundromats whether we like it or not. My opinion.

[Jordan Berry]

Agreed!

[Emerson]

I listen to the podcasts and will listen to this as well.

In the meantime could someone give me brief summary ?

Is Big Data the name of a new pro wrestler ?

Will listen.

[Jordan Berry]

Haha, that’s an awesome wrestler name!

Quick summary: Manufacturers already have systems in place to collect information from owners that would give them an edge over individual owners in building laundromats. They are already starting to move into that space. Owners need to start using data more sophisticatedly to make better business decisions.

Hope that helps!

[Emerson]

I agree with Brian’s point about the commentary does blend 2 subjects.

However, I am going to attribute part of that because of your familiarity with the players, the companies involved and perhaps a possible reluctance to state a couple of items either on your mind, or on the mind of people around you.

First to the company that was referenced I have had a distributor / store owner tell me about push back or backlash related to the company because store owners have experienced them building a company owned store or another store right on top of them. (his description months ago ?). The take away was they are in or going into the company owned store model and operators did not like that ?

I really need to clear my thoughts and separate some of these topics.

If we are talking consolidation in the industry, I have very similar experience here as I have worked with the 600 lb gorilla that has forced consolidation in a different but similar industry. Involved in all aspects of the supply, distribution and operations chain. Have bought most of the major players in the industry. Won business and contracts that other smaller companies could not afford. Yet there are still companies that shine and do a better job in certain segments of the industry.

This includes taking or moving a mostly all cash business / industry from all cash to becoming the largest operator of card systems North America possibly the world.

[Stephen Dougherty]

Jordan,

Podcast Show 55 was great. I don’t think what you described is a conspiracy, it is a reality. Walking us through the rise of the internet giants by their use of data clearly shows the direction things are going.

From the website of one of the leading manufacturers. ” We seek to measure performance in every aspect of laundry.”

If they can measure how their machines are being used, then certainly they are doing it. And from their perspective if they didn’t use every tool available to make their franchised outlets successful they would be remiss in their responsibility to their own investors (who will get a percent of franchise revenues).

It’s not unlike the situation the companies that sell on Amazon are in. When Amazon sees a product that sells well, it then offers its own competing product. If an appliance manufacturer/franchiser can see which locations are doing well (machine turns and revenues would be easy to measure on a networked machine) that will certainly help them to suggest franchise store locations, and recommend machine selection and pricing.

My two cents,

Stephen

[Jordan Berry]

Exactly. That’s pretty scary to me. I think there will always be places for individual owners to survive and even thrive, but I worry that we may be relegated to smaller niches if we’re not on the forefront of making data-based decisions.

[Kalvin Sid]

Great episode Jordan. Some of that was over my head but it’s good to be aware of it. We’re in a very fragmented industry that will one day start to consolidate like the farming industry, and we want to stay ahead of that curve. That will eventually make things better for the end user as well as for those that know how to best analyze the data.

[WILLIAM ROGERSON]

Great episode, Jordan. Full disclosure – I got into the laundromat industry specifically for this reason. We are in the midst of a data analytics gold rush at the moment. Industries that have existed unchanged for decades are suddenly being transformed by the ability to capture and analyze data about customer behavior that was previously impossible. The advent of IoT (internet of things) devices which allows owners to collect data on everything from washer & dryer usage and performance, customer behavior, staff behavior, etc. This data can be analyzed using a variety of unsupervised machine learning techniques to find patterns of customer behavior that would be undetectable to even the most seasoned analyst (similar to your Grand Master of chess example).

Additionally, this data can be used to challenge some of the “conventional wisdom” in laundromats. There are a lot of truisms in any industry that people take for granted. For example, in the car industry, people believed that customers want to test drive a car before they purchase it and selling cars online at scale would not be possible. Carvana did research and the data told them the opposite. Today they are the second largest car retailer in the country. Finding holes in the “conventional wisdom” of your industry through data allows you to get a competitive advantage others.

Does this mean that all laundromat owners who don’t take this approach are doomed? Probably not. However, it does mean the industry is going to be getting more competitive and the longer owners hold off on this type of analysis, the more likely it is the laundromat down the street is going to be eating your lunch.

I’ve also heard some people express ethical concerns about this approach to business. I don’t particularly have an issue with it so long as it is resulting in a better experience for customers. A classic example is Uber. They decimated the cab industry because they were able to provide a significantly better customer experience than the antiquated business model that taxis operated on (there is a bit more to this story, but at a high level). If you are using data to improve your customer-centric business model, great.

As a basic example, I own a coin-operated store and don’t have access to details about when my machines are being used. However, through the electric company I was able to obtain daily power usage. Combining that with the my daily collections, I was able to create a regression model showing the relationship between daily collections and power usage. Furthermore, power usage explained 95% of the variance in collection amount (in short, power usage and revenue were very tightly correlated). Knowing that, I was able to get hour by hour data from the power company and build out a heat map to help me understand how much I’m making at each time of the day and when it would be most important to have an attendant available to assist customers.

Being able to leverage this type of data to create improve customer experience will eventually become a non-negotiable for owners, but we aren’t quite there yet. In the meanwhile, it likely be in your best interest to start getting comfortable with that part of the business. Feel free to ask if you have any questions and thanks for coming to my Ted Talk!

[Matt Silverstone]

William, Great episode #57! My background is in marketing and data for large fortune 500 brands so I live and breath by telling “stories” through big data. I’m excited to apply this knowledge to laundromats like you’ve done already on yours.

1st Party Data is HUGE for both the reporting of a laundromat on the machine usage but also owning your customer data – William, you said it best in episode #57. There’s so many ways to capture customer data so it’s important to pick wisely and not inundate your customer being intrusive. 3rd Party Data is also key and can be used in combination of 1st party data to pack a 1-2 punch!

Searching for my first laundromat in SoCal that fits my criteria, but excited to jump into the biz!

PS – no animosity but BEARDOWN… from a fellow U of A alum… 🙂

[WILLIAM ROGERSON]

Hey Matt,

Thanks! Glad you enjoyed the episode and good luck on your laundromat search! At my current organization, we use third-party data extensively for marketing purposes and have also thought about the possibility of a leveraging it down the road. Not a high priority at the moment, but as we continue to grow, especially around services like wash and fold, I see third-party data playing a critical role.

P.S. My wife is a U of A alum, so I’ve learned to deal with it. Plus, I’m more beholden to my undergrad, Hanover College, so as long as you didn’t attend Franklin College, we should be good.

[Author]

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