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Branching Out, Bundling Up

Branching Out, Bundling Up

February 11, 2020

5 minute Read

With the car wash industry enjoying fairly steady growth over the past few decades, one might expect the averageexecutive’s LinkedIn contacts to be bulging with a multitude of business-to-business partners. But inreality, B2B relationships are slowly becoming more exclusive in the car wash industry and the broader economy,with large companies buying smaller players to find new streams of revenue.

By expanding their product portfolios and packaging them together at a lower price, leading companies in manybusiness sectors are seeking to become a one-stop shop for their customers.

Back in May 2017, National Carwash Solutions, a manufacturer of car wash systems, equipment, cleaning solutionsand maintenance services based in Grimes, Iowa, partnered with a private equity firm, AEA Investors, to rapidlyexpand its business. NCS quickly acquired six regional equipment distributors – NuLook Car Care Inc.,Arizona Car Wash Systems, Hi-Performance Wash Systems, Auto Clean, Badger Land Car Wash Equipment and Suppliesand Complete Car Wash – and then sought to branch out.

In August 2018, NCS acquired TSS Car Wash Services, a provider of car wash consulting services, LED lighting,customized signage and systems, wash-package solutions and marketing services. This past March, NCS boughtVacutech Vacuum Systems, which manufactures vacuums for a variety of industrial applications, including carwashes.

“NCS is truly focused on giving our customers a total solution and making it possible for them to partnerwith one company for all of their car wash needs,” said Laura Edgmond, NCS’s associate brandmanager. “It’s about letting our customers deal with one source instead of having to kind ofhodgepodge something together.”

“We want to make sure that our customers are able to get whatever they need from NCS, either throughstrategic partnerships or acquisitions or through third-party vendors that we’ve partnered with closely.Even if we don’t own them, we still partner with them to make sure that our customers get the best deal.”

Tamarac, Fla.-based Sonny’s Enterprises, a top manufacturer of conveyorized car wash equipment, parts andsupplies, has taken a similar approach to expansion.

In June 2017, Sonny’s acquired the consulting firm Car Wash Services of the Southeast, which advisesoperators on site evaluation, system design, installation, maintenance, chemistry and marketing. That October,Sonny’s bought Diamond Shine, which provides cleaning chemicals to car washes.

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Then, in March 2018, Sonny’s acquired Mr. Foamer, a prominent supplier of car wash foaming applicators,marketing services and signage. That purchase allowed Sonny’s later that year to launch its OneWash Choicesubscription-based program for car wash operators. The comprehensive offering gives operators a single sourcefor equipment, parts, controls, vacuums, training, consulting and marketing.

Paul Fazio, Sonny’s chief executive officer, said last year that Mr. Foamer was “the final piece”needed for them to deliver their complete car wash suite, OneWash.

“We were pleasantly surprised and excited by the sheer number of people expressing interest in OneWashChoice at The Car Wash Show in Las Vegas [in 2018],” he said.

NCS offers a similar program called NCS 360.

“NCS 360 is a singular solution tailored to meet all of our customers’ car wash needs,” Edgmondsaid. “We’re able to give our customers bundled savings, volume discounts and an integrated solutionfrom a single-source partner.”

Edgmond said bundling services allows NCS to increase its revenue, find operational efficiencies to boostprofitability and cut down on lead time for customers. Major players in other industries have been using thesame playbook.

When Partnering
‘ Is Just a Natural Fit’

Sometimes, partnering seems like the most logical solution. For example, DRB Systems announced a partnership with Suds Creative in May 2019. DRB is a provider of technology-enabled devices and software solutions and Suds Creative (“Suds”) is a marketing agency.

“We know marketing is a success quotient to a thriving car wash and lube center, which is exactly why we are partnering with Suds,” said Dan Pittman, CEO of DRB. Jason Baumgartner, Co-founder and CEO of Suds, said, ““We’ve been working with DRB Systems for years, and this is just a natural fit.”

Keith Ferguson, assistant lecturer and entrepreneur in residence at the Florida State University College ofBusiness, said bundling on the business-to-consumer level has become ubiquitous. Just think of the cable TVcompanies that combine that service with phone and Internet, the fast-food restaurants offering extra-valuemeals and the travel websites packaging flights with car rentals and hotel reservations. The natural extensionof that trend was to see it become increasingly common on the business-to-business level.

Ferguson said bundling is an example of an economic concept called “consumer surplus,” which occurswhen the price that consumers pay for a product or service is less than the price they’re willing to pay.For example, if a consumer would pay $12 for a car wash and $20 for some express interior detailing at abusiness down the road, a car wash can create consumer surplus by bundling those services for $27. The car washcan then suggest that the customer spend the $5 in savings by adding wheel polishing to the bundle.

The result is that the customer spends considerably more in one place than he otherwise would, and because thepackaged deal comes at an attractive price point, the customer sees it as a good value and is more likely tocome back to that car wash. For the car wash operator, sure, the profit margin on each individual service withinthe package is reduced, but total revenue is greatly augmented.

“What it ultimately does is it drives customer loyalty, so that customer doesn’t look at yourcompetitors and keeps coming back to your business,” Ferguson said. “With all the competitors outthere now, bundling is a great strategy. Part of the thinking also is just offering something new and trying toinnovate. You have to keep switching it up and offering customers something new because if you don’timprove what you’re offering them, other businesses are going to do that, and it’s almost a racebetween companies to come up with the next great thing.”

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