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Wal Mart Nation, aka snow removal is overhead (long)

Discussion in 'Commercial Snow Removal' started by LoneCowboy, Jan 3, 2008.

  1. LoneCowboy

    LoneCowboy PlowSite.com Addict
    Messages: 1,760

    I've been thinking on this for a few weeks and I just wanted to put my thoughts down. We live in a Wal Mart nation, the ONLY thing that matters to 90% of the people is price. (we've all seen it, and surely there are some exceptions, but basically it's price, true in retail, cars, stuff, food, everything, there's a reason Wal Mart's are everywhere).

    Snow Removal for any property owner is overhead. Complete and total hit on their bottom line profits. If any owner could move their building/house to the south where it doesn't snow, they would do it in a heartbeat. Thus, once again, price matters, it's a direct hit on the bottom line to have snow removed. Sure, it's a necessity, but any good owner would rather save that money.

    There are no barriers to entry to snowplowing. Any schmuck with 5 to 10 grand can buy a truck, a plow, a shovel and some insurance. It doesn't take any specialized training and really no experience to start up a new plowing company. A couple free/low cost ads, and now you have a competitor. Companies in business's that have no barriers to entry (i.e. no moat) are very price sensitive because there are always new people entering the business. Now, this goes away on very large properties (shopping malls, airports, county roads), because it takes significant capital to acquire those types of machines (big loaders, big trucks) and that is a barrier to entry. But on the normal scale, there are basically no barriers.

    While you can certainly promise (and provide) better service, you can only price at the high end of the "accepted" range. Pricing over and above that will just get you ignored. Once you have a property, you can raise it into the higher areas, because for the customer there are switching costs to dropping you and finding another. But once your higher price exceeds their switching cost, they will switch. That's capitalism and the free market in action. There is also the situation where everyone is too high and they choose to do it themselves. There is not enough added value in the utility anyone provides for them to pay to have the work done. (look at the huge expansion of the DIY industry)

    Perhaps you have or can find a niche. A niche where your competitors are fewer (ex. high end medical buildings), or where you can differentiate yourself (ex. you run skid steers instead of trucks), or where there are barriers to entry (high capital costs for really large properties).

    The ONLY way to make money in such an environment that we have today and is going to get worse is to either have lower operating costs or do it faster than others (thus doing more with the same equipment/time). There are a limited amount of high-end willing to pay anything customers, and even they are looking for the lowest price within their confines of their service agreements.

    All of this is in a good economy, what happens when many people are out of work/money and need more? You get a huge influx of competition and prices go down. A perfect example is Michigan. Any Michigan guy on here will tell you prices have gone down, and their prices are very low, maybe just above break even. So, you must lower your costs to make money at that price point. It's going to happen in more and more places, that's what capitalism does. Look at lawn care, have prices gone up or down in the last 20 years? Down, even though costs have increased. Why? because there is no barrier to entry, it's all overhead for the property owner and all they care about is price. Plowing prices have barely budged (overall) in the last 20 years, even though again, costs have increased.

    You should take a look and decide how you are going to compete. Because if you can only make money at $100 per storm and someone else can make money at $60 per storm, you are going to be out of business soon. Certainly, there are levels at which someone cannot make money, say $30 per storm, and these people come and go as they go out of business. But you must take a real hard look at your business and figure out how to get your price point down BEFORE it's forced on you by your competition moving faster and cheaper than you.

    This is all basic economics and it's application to the snow removal industry. And it's my opinion, but it seems pretty obvious to me what is happening with the industry. If you are not constantly driving yourself and your business to lower it's costs of operation and thus make money at the lower price points, you should rethink that approach. Because hard times are coming, and prices for service are only going down. It is, after all, a Wal Mart nation.
  2. scottL

    scottL PlowSite.com Addict
    Messages: 1,613

    Hmmm. Are you thinking unionize??? Wouldn't that be interesting :rolleyes:
  3. Mark Oomkes

    Mark Oomkes PlowSite Fanatic
    Messages: 13,237

    That's one of the most intelligent posts I've seen on PS in a long time. Maybe there is hope yet.

    LoneCowboy's that is. I'll just let the other one die a peaceful death as it's been discussed ad nauseum previously.
    Last edited: Jan 3, 2008
  4. scottL

    scottL PlowSite.com Addict
    Messages: 1,613

    Awe come 'on ... we can join the writers strike ( BWahahaahhaaha )
  5. montanag

    montanag Member
    Messages: 53

    I agree Mark, that was a long, insightful post. I have some stats on WalMart to dispute some of this, but I'm not all that interested in doing so. I just want to be a bit more optimistic. WalMart services a segment of the population, but I suggest that if you look around you, and the habits of many people in your own community, you will find that a non WalMart nation is thriving as well. Many people loathe the idea of the Biggest box store of all in their communities, and understand that the lowest, happiest smiley face low price on everything sometimes comes with a human cost (loss of those few businesses that are swallowed up, the lives of those manufacturing goods for WalMart, the corporate culture and how its employees are treated). Many people pay a premium, little or great, for any service you can think of, and snow plowing is no exception (many people even feel like they're getting something better than others if they pay more for it). Maybe the pressures exerted by a surplus of providers affects the price you can charge some accounts who troll the bottoms of the market annually. But you're telling me there are not profitable lots or residential neighborhoods for clients? I hope that you have a steady list of good paying accounts, and I would hope they have been your best revenue generators, along with the good work you do. If Michigan is that tough to make it in, the beauty of the "WalMart Nation" is the mobility of our workforce. Get online, research where plow operators are happy with the revenue, and move there!! Just don't come to Montana :gunsfiring: Hope it's a good season for everyone

    Last edited by a moderator: Jan 3, 2008
  6. Mark Oomkes

    Mark Oomkes PlowSite Fanatic
    Messages: 13,237

    Greg, still trying to talk my wife into moving into one of the last, best places. ;) We were out your way this past summer, I love Wyoming\Montana\Colorado area. Absolutely gorgeous.
  7. big acres

    big acres Senior Member
    Messages: 653

    Great post. While I am a staunch opponent of what Walmart has done to many small towns, it is a part of unbridled capitalism. I could go on, but I also agree that Walmart services a segment of the population. When I need cheap plastic crap or disposable tool kits for trucks that are going to dissappear anyhow -I go to Walmart. When I am going to invest a signifacant amount of money on a product with which it's reliability is vital to business, like a snowblower -I go elswhere for qaulity.

    I think the single biggest contributor to falling price thresholds in our industry is definetly a low-barrier to entry. It is not that the new guys charging 40% less have found some new magical and efficient way to make a profit at that price, it's the lack of experience to realize their true costs and they lose money every time they deploy without even realizing it.

    Then their are the dispicable businesses that ***** up the market by lowballing with the single motivation of raising those prices and picking and choosing which accounts they wish to continue servicing. Sure they can be successful this way, but are they actually proud of it?
  8. montanag

    montanag Member
    Messages: 53

    I love and hate Grand Rapids Mark. Every Father's Day from 1991-94 I was riding my bike in the 24 hour National Challenge. I think of that every time I have been plowing for days on end with little sleep. They had to peel me off my bike each year. My hands worked a couple of days later. Beautiful rolling hills, lots of flowers in bloom, and the sound of bagpipes playing our death song at the beginning of the race. Good times.

  9. Mark Oomkes

    Mark Oomkes PlowSite Fanatic
    Messages: 13,237

    I've been in WalMart 3 times in my life. I hate their way of doing business, goes against everything that I believe is the right way to do business--quality, service, value. I do not beat on my vendors and require something to be lower priced the second year unless they change something. We all have to make a living.

    The first time I went in one, I'm pretty sure my family caused the IQ to quadruple. That would be my wife, 2 kids and me. :waving:
  10. montanag

    montanag Member
    Messages: 53

    I'll second that. They stand for all that is wrong about profit margins and economies of scale. I wish the corporation little luck. They try to squeeze the producers of goods and employees to reward the stockowner's, the executives, beyond what is in good taste. My $.02
  11. mnormington

    mnormington Senior Member
    Messages: 156

    What you are saying applies to every other line of business. Yes, what you are saying is true and not at all stupid, but it is nothing new. Everybody has to differentiate themselves to add value to their product. Big deal.
  12. ahoron

    ahoron Senior Member
    from here
    Messages: 422

    everyone hates walmart Why because they are so big? Walmart is so big for a reason people shop there. Saving money is key for most people.Snow removal is no different. People shop around for the best price. Single driveway or a large mall it's all the same. Some people think they can charge more for the same service. That if someone can do it cheaper they must not be paying taxes not have insurance not be a"professional" or they don't have the overhead.If you can't make money pushing snow then you are doing something wrong. I'll bet there are some on here that make a large portion of their income from plowing walmarts.Walmart gets the blame for the same thing every large retail chain does home depot lowes target etc. selling cheap crap to americans.
  13. Mark Witcher

    Mark Witcher Senior Member
    Messages: 605

    Everone is always bashing on Walmart in public. But they are all shopping there.If as many people profess to hating Walmart, it wouldnt exist. And the people on this site are no different. Half the threads on here are guys asking where they can buy their snowplows and or parts cheap. If Walmart was selling Western,Boss. Blizzard, Fisher plows, you all would be beating down the doors to get one of their discounted units.
  14. Mark Oomkes

    Mark Oomkes PlowSite Fanatic
    Messages: 13,237

    Wrong, for me at least. As I said, I have been in them 3 times, 2 were on vacation when I was dragged along by my wife. ;) And my wife very, very seldom does her shopping there without me. Probably 1% of her shopping is done at WalMart. So I do practice what I preach.

    But you are correct on the others.

    I do not beat on my vendors, I ask for their best price, just as my customers ask of me. In return, I expect good service and good products. I do not price shop equipment or fertilizer, I look at what I am getting for my money. If I want a WB mower or handheld equipment cheap, I can run down to a Chi-town to a place called Russo's and buy there, no sales tax unless I choose to report it. But when it comes to service, I'm screwed as they aren't going to be able to service me. Therefore I buy my equipment locally and willingly pay more for it so I can receive the service that I require. I bought a gas powered pressure washer a couple years ago. I was talking with the sales rep about it and he told me I could go get the same model at Home Cheapo for less money. I asked him why I would do that when I would be bringing it to them for service?
  15. MB3

    MB3 Senior Member
    Messages: 123

    Great Post

    Now I have something to think about on the long ride home. I am glad others think the sameway as I do.
  16. poncho62

    poncho62 Senior Member
    Messages: 431

    Sam Walton was an American..........poor boy makes good............That's the "American Way" isn't it..............???....McDonalds did the same thing....Why does no one fault them? Chrysler, Ford and GM are using more and more offshore parts in their cars..............You could go on and on about this, but it's not going to change anything....Good or bad, that's the way it is, and that's the way it's going to be.......

    BTW...I hate Walmart.......because crowds freak me out...............
  17. LoneCowboy

    LoneCowboy PlowSite.com Addict
    Messages: 1,760

    Ummm, some of you are missing the point.
    It's not about Wal Mart (which I too hate), it's about this nation we have of walmartiers. Even people who don't shop at Wal Mart (and it's a considerable chunk of the other side of my biz) are very price conscious. If you are thinking that someone capitalism and low price doesn't apply to you or your business, you might want to take a look.

    What is a profitable job? If my costs are less than yours Than I can do the job cheaper than you and still make the same profit. If I can do more jobs in the same amount of time (better equipment, different approach), for the same price, than I can make the same profit but on more sales. Unless you have a niche (and "better service" isn't a barrier to entry or a differentiating product), then you have to figure out how to make the same money at a lower price point. That's all Wal Mart does, and that is all that capitalism does.
  18. grandview

    grandview PlowSite Fanatic
    Messages: 14,609

    I read a story about something like this directed at Wals Mart.Basically what is happening is people are price shopping and the companies that compete against them have to cut cost. So these companies start to cut wages and now these workers need to shop at Wals Mart to save money. And what happening even Wals Mart can't grow because people are cutting back.

    PS Wals Mart prices are not that cheap for a lot of things. Next time check your local grocery store. Wals Mart has a lot of products made smaller to think your saving money. You need to check the unit price and compare.For ex. my wife tries and tells me 409 cleaner is cheaper at WM but the container is smaller there than at the other store so if you take the unit price and compare it cost less at the local store by volume.
  19. Duncan90si

    Duncan90si Senior Member
    Messages: 602

    Thats my thinking with everything I do business related. I'm not a "Walmartier", but who doesn't like to keep their operating costs and overhead to a minimum? I'm not the cheapest company around, but I'm not the most expensive either. Everything I own is paid for, no payments. People ask me, "why don't you have new trucks?" My answer, because I don't want them. My older trucks never let me down and are cheap to fix. I would like to have new trucks but I also would not like having the payments. I can guarantee that when compared to companies with similar rates locally, I net more than they do.

    I get my salt at a very good price for my area. I could get it a $1 cheaper per ton at a huge local trucking co., but I get mine from a guy who is self-employed with one triaxle. I would rather give him my money. He has never let us down, and is an excellent supplier.

    In my area its very hard to separate or differentiate yourself in my area. Most people are only concerned with the price. I've been lucky enough to have a great reputation locally so I usually get the "better" customers and accounts that actually care about the quality of the service instead of just the cost.
  20. montanag

    montanag Member
    Messages: 53

    Why do a lot of people think that Wal-Mart's business plan is the only path to success in a capitalist society??? I'm sorry, but hasn't anyone ever been told, "you're not the lowest bid I received, but I'm going with you because you seem to have addressed all my questions, and I have a good sense of who you are". My costs are not the highest (look at the age of my trucks), nor are they the lowest (I have newer plows and pay my drivers very well, all over $25 per hour on payroll), but I have been a proven deliverer of an important service. People have agreed to rate increases who have been with me over 10 years. New accounts added have been fine with high bids. When I am going to meet new clients, I have a contract in hand with all my credentials, look them in the eye and tell them they are in good hands. They have my cell phone number and can call it 24 hours a day (I may not always answer, but that's insignificant). Lots of companies have found success without driving costs down exceedingly.