Smelling an Opportunity
MASON, Ohio — For more than a decade, some of the nation’s shrewdest marketers have tried to muscle in on the neighborhood dry cleaner, only to give up after years of labor and millions of dollars in investments.
Undeterred, Procter & Gamble is taking a shot at it, again. Having persuaded Americans to buy synthetic laundry detergent, fluorinated toothpaste and disposable diapers, P.& G. believes it has finally cracked the code on the dry cleaning business, too.
Where other dry cleaning entrepreneurs have tried to come up with clever business models for dry cleaning, P.& G.’s primary innovation is in the brand name itself:Tide Dry Cleaners, named after its best-selling laundry detergent.
With more than 800,000 Facebook fans and legions of loyal customers, Tide will draw people into the franchise stores, and superior service — which includes drive-through service, 24-hour pickup and environmentally benign cleaning methods — will keep them coming back, company officials predict.
“The power of our brands represents disruptive innovation in these industries,” said Nathan Estruth, vice president for FutureWorks, P.& G.’s entrepreneurial arm. “Imagine getting to start my new business with the power of Tide.”
And the lure of its fragrance. P.& G. plans to infuse the stores and its dry cleaning fluids with the scent of the brand that’s been cozily familiar to generations of households.
Among the Tide believers is Rick DeAngelis, a 40-year-old who is planning to open a franchise in suburban Cincinnati next year.
“It’s been a trusted name in laundry for 60 years,” he said. “It’s almost synonymous with laundry.”
Already, some local dry cleaners are complaining about the new gorilla on the block, backed by a corporation with roughly $80 billion in annual net sales.
Robert Tran, who owns Monroe Dry Cleaning here in Mason, said his business was off more than 50 percent since a new Tide store opened down the street at the end of October. Customers are being drawn to the Tide store by discounts and giveaways, like P.& G. products and gift cards, he said.
“There is no way I can afford that,” he said. “All my customers just left without giving me a chance to say, ‘Hey, check the quality.’ ”
But for Tide to become synonymous with dry cleaning too, P.& G. will have to overcome problems that have undone other upstarts. The dry cleaning industry has been roiled by unemployment and economic woes, and hurt by a continuing trend toward more casual work clothes.
Competition is fierce, and customers can be prickly: woe to the dry cleaner that ruins a favorite dress, even if it was cheaply made and bought decades ago.
Sanjiv Mehra, who oversaw a short-lived effort by Unilever to break into the dry cleaning business about a decade ago, said the key to success was figuring out a way to do it cheaper or significantly better than the mom-and-pop stores that dominate the industry. At the end of the day, Unilever decided that it couldn’t do either.
“It comes back to, are you fundamentally changing the economics of the business?” he said, adding that P.& G.’s marketing muscle could be the difference. “That’s where they will make a lot of money if they do this right.”
Payam Zamani, co-founder of Autoweb.com, a site for car buyers, who later founded PurpleTie dry cleaners, said he tried to do for dry cleaning what Blockbuster did for video stores, offering efficient and better quality than neighborhood dry cleaners. He said it was hard for his stores to compete with owner-operated stores with little overhead and low-wage employees.
“People were more interested in cheaper service, not better service,” Mr. Zamani said.
P.& G. has dabbled in dry cleaning before. In the late 1990s it introduced Dryel, an at-home dry cleaning product that rattled local dry cleaners, who feared they would lose business. But Dryel was considered a disappointment, and P.& G. sold it in 2008.
In 2000, it opened several stores in suburban Atlanta, called Juvian, that offered at-home pickup and delivery of laundry and dry cleaning. The stores were eventually closed.
The idea for Tide Dry Cleaners came from P.& G.’s FutureWorks, a unit that comes up with ways to expand famous brands like Pampers, Oil of Olay and Crest.
Many of those brands are experiencing robust growth in developing markets, but finding new ways to increase revenue in saturated markets like the United States is more challenging.
Four years ago, FutureWorks began considering franchise opportunities, looking for industries where ownership was fragmented and consumers weren’t satisfied. It came up with a three-inch binder of ideas.
The first one to get a green light? Car washes festooned with Mr. Clean, P.& G.’s popular cleaning product. There are now 16 Mr. Clean Car Washes, including one here in Mason that includes Wi-Fi, televisions and spray guns that children can aim at cars passing through the wash. Of course, Mr. Clean products are for sale too.
Dry cleaning, a roughly $8 billion-a-year industry, was second. Research showed that consumers thought the quality of dry cleaners was inconsistent, hours were inconvenient and prices rarely displayed. Plus, many dry cleaner stores were dingy, stifling hot and smelled of chemicals, not unlike a sweatshop, officials said.
Mr. Estruth said his team studied the failed efforts of others as it devised a business plan for Tide Dry Cleaners. The early results are promising: a pilot store in Kansas, outside Kansas City, generated more than $1 million in annual sales, roughly four times the industry average. There are now four Tide Dry Cleaners outlets with plans to expand in a dozen or so more markets.
“If we don’t have compelling unit-level economics, it doesn’t matter how strong the brand is,” said William M. Van Epps, a former Papa John’s Pizza executive who was hired to run P.& G.’s franchises. In a tour of a newly opened store in Mason, P.& G. officials explained why they believed they had resolved the dry cleaning issues that make consumers so unhappy.
At 3,000 square feet, the store is larger than most dry cleaners, and it is painted in Tide’s distinctive orange hue. Cleaning is done on the premises, with Tide being used on garments that are laundered. Silicon-based detergents are used to dry-clean garments, though Tide’s fragrance is added in the process.
Huge vents suck out heat and odors, keeping the store cool and smelling like — what else? — Tide.
The store is staffed with 15 to 18 employees, wearing Tide golf shirts. Lockers near the entrance allow customers to pick up and drop off clothes around the clock. Prices are displayed above the counter (a laundered shirt is $2.25; a dry-cleaned suit is $13, about average in the industry).
During a recent weekday, a steady stream of customers seemed willing to give the Tide store a try. In a positive omen for P.& G., several swooned over Tide.
“It smelled really good in there,” said Harlan Smith, 42, who was on a business trip and dropped off some pants. “When I think of Tide, I have so many good feelings. I’m surprised they didn’t think of it sooner.”
Elena Hickman, 69, said she was lured to the store by a coupon.
“I wanted to see how and why they are doing it and compare it to my local store, which I have been visiting for 10, 11 years,” she said. “I like the drive-in and I like the service. It’s very convenient if it’s raining. The girls were very friendly. And I like the coupons, to be honest.”
Todd Krasnow, a former Staples executive, remembers the heady days when he opened his own dry cleaning chain in 1998. Called Zoots, it offered 24-hour pickup, drive-through service and environmentally friendly detergents, and it eventually grew to 70 stores.
But, as the economy soured, so did demand for dry cleaning, putting downward pressure on prices, he said. Consumers would take their business elsewhere or demand a refund if something was damaged, even if Zoots wasn’t to blame.
“We underestimated what made it a truly challenging business,” Mr. Krasnow said. “Even if you did a really good job, there are plenty of problems.” Zoots was eventually sold in 2008.
Mr. Krasnow, now a venture capitalist, said he still got a few calls a month from investors or recent business school graduates who believed they had found a way to make a killing in dry cleaning. He wishes them luck.
“People think it is easier to do it better,” he said. “And it’s very, very difficult."