Why oversaturated markets are squeezing car wash profits

The economic principle of diminishing returns, where each additional unit of input delivers less benefit than the last, may help explain why many car wash markets are generating lower profits per location, according to a column from industry consultant Robert Roman published by Auto Laundry News. The analysis warns that as investors continue to flood markets with express locations, returns on new builds could keep falling.

Roman uses a familiar example to illustrate the concept: a single set of air dryers might get a car 70 percent dry, a second set pushes that to 90 percent, and a third reaches only about 97 percent. Each additional dryer removes less water than the one before it. The same pattern, he argues, applies across the industry's growth story.

A maturing adoption curve

Drawing on data assembled from the International Carwash Association, other sources, and some estimates, Roman points to an adoption curve for consumers who most often use a professional car wash. The curve shows early rapid growth followed by slowing gains as the market matures. He suggests the easiest customers have already been converted and that reaching the rest will get harder, with a possible natural ceiling around 80 percent.

The same dynamic can show up inside wash plan programs, according to the column. Membership often sees fast early adoption and strong retention, followed by recurring revenue growth. But in very successful programs, membership growth eventually slows while marketing costs rise. At extremely busy sites, capacity problems can push wait times up and satisfaction down, comparable to drivers who leave a crowded gas station when every pump is occupied.

Shifting generations

Roman also ties diminishing returns to changing demographics. In 2006, Baby Boomers made up roughly 30 percent of the population and brought brand loyalty, a willingness to pay for detailing and extra services, and an appreciation for human interaction. Today Boomers account for about 20 percent, while Generation X and Millennials together make up 43 percent.

Generation X customers are described as less loyal and motivated by convenience, speed, membership, and value, treating a wash largely as a time saver. Millennials are somewhat more loyal but lean heavily on social media reviews, digital experiences, mobile payments, and subscriptions, and they tend to view washing as a chore rather than paying for detailing. As Boomers age over the next decade, Roman expects the value they bring to the industry to fade.

Why it matters for operators

The column is a reminder that market share and membership growth are not infinite. Operators planning new sites in crowded markets should model the likelihood that per location profits decline as competition thickens and the pool of unconverted customers shrinks. Existing operators should watch for the warning signs of maturity: slowing membership growth paired with climbing marketing spend, which signals the program is working harder to win each new customer.

Capacity is another practical concern. A site that looks busy enough to raise satisfaction scores can tip into congestion that drives customers away, so throughput and wait times deserve ongoing attention. Finally, the demographic shift argues for aligning the offer with how younger drivers actually buy: fast, convenient, membership based, mobile friendly, and backed by strong online reviews. Detailing upsells that worked on Boomers may deliver thinner returns with Gen X and Millennial customers.