There’s a lesson in all this, I promise you
In a transitional part of Atlanta, there now stands a brand spankin’ new car wash. It used to be a Burger King, but that closed years ago… and after demolition, this lot sat vacant for several years.
Fast forward a few years, and a sign went up announcing the construction of the car wash. That sign was up for at least a year in advance of the car wash actually being built… so on this busy street – there was NO question that EVERYONE in the area knew a car wash was coming.
So a few weeks ago, they opened for business – all bright and shiny – and offered a grand opening special of $5.99 to wash a car. They had a guy holding the sign out at the street to make sure everyone knew they were open and that a car wash was only $5.99.
Then, the following week, the sign guy was still out on the street – waving the public in – but this time, his sign stated “$4.99” – instead of the previous week’s “$5.99”. Hmm… maybe they’re making it up on volume, who knows?
Another week goes by, and now the sign guy is holding a sign stating “$3.99”. Do you see a pattern here? Good. You’re paying attention. Because there is one.
The car wash still does not really have any customers that I can see. And I’d be willing to guess that the owners are starting to panic. After all, they probably spent a million dollars building this place.
So here’s my analysis and how it relates to real estate:
The car wash owners obviously realized that the market did not accept their initial price – no matter how much promotion they had done… and they responded with price adjustments.
Home sellers should take note of this market economics fundamental.
However, what the car wash owners have failed to realize is that two miles down the road is a well-established car wash that has been there for over ten years… and they have a $3.00 car wash. So – unless they add more value to their proposition – the public will continue to reject their offer.
And home sellers should not miss this message, either.
As long as your home does not compete in the marketplace, you will not get any takers. And why should you? There’s a ton of competition out there.
So it will be interesting to see what the car wash owners are going to do next. I am sure that they feel like they “need” to get a certain price (just like some home sellers) but whether or not the market agrees with that price is another thing.
So maybe the guy down at the car wash gets it…
Or maybe not.
.
Brian Wilson says:
Oh, would that all Burger Kings end up as car washes!
Brian Wilson, Zolve.com
November 6, 2007 — 11:17 am
Phil Hoover says:
Hiya Doug ~
Maybe he needs to come clean and drop his price to $3.00? 🙂
November 6, 2007 — 11:35 am
tony - vidlisting.com says:
Looks like one of three choices
– Keep wishing and stay at current pricing
– drop the price
– deliver more tangible value to justify a different price point
Lots of lessons in this story…even for vendors.
Tony
November 6, 2007 — 11:52 am
Doug Quance says:
>Brian: It would be a cleaner world, wouldn’t it?
>Phil: 😆 I think he better come clean, soon!
>Tony: Yep – there’s a lesson in there, for sure!
November 6, 2007 — 12:27 pm
Floor Protection says:
The guy at the car wash might get it but what about the car washes in the south east. With the drought what are they going to do. Good post.
November 6, 2007 — 12:33 pm
Phil Hoover says:
Then you also have to consider whether there’s enuf profit in a $3.00 price point to pay the overhead and make a profit.
Maybe the guy charging $3.00 isn’t making any money?
Kinda similar to taking 1% listings, isn’t it?
November 6, 2007 — 3:21 pm
Tara Jacobsen says:
It is amazing that they did not do a market analysis to find out what the going price for a car wash was in their area. This is such a great snapshot of what is happening in the market! Can I “borrow” it for our listing presentations when they tell me the price they need to get regardless of the data?
November 6, 2007 — 6:22 pm
DB says:
The new car wash may be offering services that the older one is not offering. That happened here a few years ago. At the old car wash, you can was your car for less than $2.50 whereas at the new one it costs at least 6.00. Where does everyone go? To the newer one. I am serious! They have better brushes, more options and a lot better service. It’s worth it.
Second, in places like NC and Georgia (pronounced Jaw-ja), we are currently experiencing a huge drought, so our car washes are losing money. Nearly every outdoor sign at our local car washes here has a saying or two about how they have been recycling their water for xx number of years. This drought has caused many people to conserve water and car washes are now having to lower their prices to attract what few customers they can get.
Now I do not know about your local car wash or how new it is, but here, it’s November. Not many people here are going to be washing their cars this time of the year. There is no demand for two reason.. the season and the drought. Prices are being lowered. A few months later, watch those prices jump as the demand grows.
November 6, 2007 — 9:00 pm
Doug Quance says:
>Floor: The car washes recycle their water. They only use a few gallons per wash in non-recoverable water as a result of evaporation.
>Phil: The first car wash might have been making it up on volume… but maybe with both of them at $3.00, it will no longer be profitable. Kinda like 1% listings…
>Tara: Of course you may use it. That’s why I posted it.
>Derek: The older car wash I mentioned has had this price for their basic wash for quite a while. Of course, you can pony up ten or eleven dollars if you want more of a full service deal…
On the other hand, I am sure the drought has made some people think twice about getting their car washed.
November 6, 2007 — 9:45 pm
DB says:
Getting away from the car wash stuff and back to real estate, if agents keep asking their sellers to lower their prices I am predicting a lot of agent are going to be trying to buy their client’s listings.
I am concerned about this as many agents will price the homes high at the beginning creating a misconception about the true value of the home when the sellers could come out on top working with a agent who prices the home accordingly from the start getting more showings and interest.
Back to the car wash.. I rarely wash my truck. The only time I wash it is on first dates. Muddy trucks are good things after you get past the initial date as going muddin’ can add quiet a bit of excitement to the date!
November 6, 2007 — 10:41 pm
Brian Brady says:
Price elasticity of demand explained far better than Professor Keintz.
November 6, 2007 — 11:54 pm
Brian Wilson says:
Doug: Definitely! Less greasy, too.
Brian Wilson, Zolve.com
November 7, 2007 — 9:52 am
Doug Quance says:
>Derek: I used to have a truck – I figured when it rained… it got washed… 😆
>Brian B: Just breaking it down into terms we all can understand.
>Brian W: It was a lousy Burger King, too. 😡
BTW, they might be sitting on this price for a while, as they have a permanent sign up on the pole with the $3.99 and up pricing displayed.
We’ll see if they found their price point.
November 8, 2007 — 8:48 pm
Giles says:
Well the old saying goes…”you want to be the first born, the second wife, and the third Realtor!!!”
haha
January 31, 2008 — 9:38 pm