Why are many Laundry/Dry-cleaning companies shutting down?

In general here are some of the main reasons why many businesses are shutting down-

• Huge orders:

In olden days people used to shut down a business because of lack of orders, but now-a-days people are shutting down a business because of huge orders which they are unable to attend and hence losing customers faith.

• Unable to make a customer understand the worth of a Product/Service:

Example1: 

For a product/service-

C.P (Cost Price) is Rs.10 

S.P (Selling Price) is Rs.12 that implies

Profit Percentage is 20%

But in today’s businesses for the same product/service-

C.P (Cost Price) is Rs.10 

S.P (Selling Price) is Rs.7 that implies

Loss Percentage is 30%

In today’s terminology they are calling this Loss Percentage as the Customer Acquisition Cost

Once the funds/investments get dried up, the price of the product/service will shoot up and naturally the customers will look for another alternative. This implies that the businesses start losing customers and ultimately they will come to a point of shutting down the business

Example2: 

Tinmen a Hyderabad based food tech startup has shut down its operations recently. The reason from closed sources being, they were unable to raise capital necessary for sustained growth. Startups now-a-days are looking for huge inflow of funds from their investors but not keen on developing a sustainable model. For every spending they should look at their investors and take decisions. I don’t say it is wrong but a company should be built on strong foundation and not on discounting models.

Coming to Laundry and Dry-Cleaning (LDC) business:

In general people get into this business without knowing the real picture. A person should know the nuts and bolts before entering into a LDC business. 

It is a man power intensive business. People still compare professional laundry service with local dhobis. Business owners should deal with uneducated people. People mainly shutdown the laundry business due to lack of patience. They will run for 1-2 years, but this business requires more than just 2 years. It is at this time when they start losing patience and shut down the business.

In my analysis I’ve observed that many Laundry and Dry-Cleaning(here after referred to as LDC) businesses are shutting down mainly because of the following reasons-

• 1^st order free
• Free pickup and delivery
• Pricing

1^st Order Free:

Off late this has become a trend. LDC service providers are not allowing the customer to get to know the worth of the service they are providing them. Have you ever seen a PULLA REDDY SWEETS or ALMOND HOUSE stores giving first order free for their customers? When companies have confidence in their product or service, then there is no requirement for such type of offers. The only aspect a LDC service provider should be aware of is the consistency of their service. If they maintain that, then there is no need to look back. 

Free pickup and delivery:

A LDC service provider cannot compare their selves with the food delivery service providers like Swiggy and Zomato. In the LDC business, a delivery executive should follow the following steps from pickup to delivery-

• Pickup garments from the customer place,
• Examine each of the garments, 
• Bring them back to the processing unit, 
• Just in case the delivery executive didn’t check the garments properly while picking up and they found one of the garment to be damaged, then they should call the customer and update about the damaged garment(if the customer doesn’t agree then the company should refund the money) 
• Process the garments
• Deliver the garments back to the customer

So, in a LDC business for a single order the delivery executive is going twice to the customer’s place.

Therefore when the companies are offering free pickup and delivery service, they think they are only forgoing the service cost but effectively they are losing twice on the logistics front as well.

Pricing:

The third and the most important point being pricing. For any business to succeed pricing should be perfect, otherwise they will keep losing money. Coming to the LDC business anybody who gets into this business will look at the competitors prices and price their services in the same range or with a tolerance of +/- 20% which doesn’t actually make sense.

Generally any business should have a SOP s(Standard Operating Procedures) on how they are running and what are the costs they are incurring, based on these SOP s they should price their services.

The SOP s include-

• Manpower cost
• Power cost
• Chemicals cost
• Marketing cost
• Miscellaneous cost
• Profit percentage

Without analyzing these, pricing a service is very difficult and that is where many LDC businesses are losing. Apart from these a person entering this business should know which type of machinery he/she should purchase, the type of target audience they are going to target and accordingly they should set the pricing. Once they have these parameters in mind then it is a walk in the park!

Because of the above reasons many LDC businesses are shutting down. If the above points are followed diligently then the business can flourish.

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