On the surface, the commercial cleaning services market appears to be in relatively robust health. In fact, the sector is expected to be worth $74.3 million globally by 2022. Why is it, then, that few managers of the 54,000+ independent building service contractors (BSCs) in the U.S. will be celebrating? Why are so few of the key customers of janitorial and housekeeping products banking on growth in the years ahead?
The harsh truth is that commercial cleaning is one of the most competitive outsource markets of all. In times of economic uncertainty the janitorial industry feels the full force of tightened belts. In a sector populated by a small number of multi-service contractors and powerful franchises, the independent BSC has a fight on its hands. These economic challenges can in turn impact the commercial cleaning and janitorial distributors that support BSC businesses by supplying everything from cleaning solutions to tools to the disposable gloves that protect workers’ hands.
In order to stay ahead of potential pitfalls, wholesale distributors need to stay up to date on their customers’ challenges and the ways they can help mitigate them.
The commercial cleaning sector at a glance
The Scott-Macon Janitorial Industry Review estimates that there were 829,522 cleaning and janitorial service businesses in the U.S. in 2016. The four biggest companies account for less than 10% of the market, in stark contrast to food services, retail, or nearly any other mature sector where a handful of giants typically commandeer the bulk of the revenue. Independent BSCs comprise approximately 30% of the market, while there are also more than 44,000 franchises and counting.
Typically, commercial cleaning covers residential, commercial/office, specialist, and laundry services, with competition brutal across all sectors. Competition is sufficiently fierce that a single poor performance can be enough to lose an entire contract. The average cleaning services business experiences more than 50% customer churn each year because of poor service.
This customer churn can cause problems for janitorial and sanitation distributors who supply products to these commercial cleaning businesses. Supply orders may vary week to week and prohibit regular supplier revenue. There are traditional and future economic challenges that contribute to the turbulent nature of this industry. Every challenge that impacts the BSCs’ business in turn impacts the revenue of wholesale distributors.
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When the economy is buoyant, businesses feel empowered to outsource commercial cleaning services to independent contractors. As soon as the bubble bursts, however, janitorial distributors can find themselves one of the first services to feel the cut.
When budgets are trimmed, businesses will either take their janitorial services in house, cut back on frequency, or find themselves forced to vacate the premises altogether. This was a consistent feature of the 2009 crash, which put an end to several years of BSC growth. Residential cleaning followed the same pattern, too. Where cleaning services were concerned, there was clearly no lipstick effect—clients cut back swiftly on non-essential expenditures, leaving many cleaning companies with dwindling bookings.
When cleaning companies struggle to book clients, they use fewer supplies and therefore negatively impact the business of wholesale distributors.
The battle of the future, however, will not be fought over familiar ground. Commercial cleaning service operators face the following challenges:
- Shrinking profit margins—The average net profit margin among top cleaning companies stands at just 4%. With so much pressure on the bottom line, managers can drive efficiencies to liberate revenue. But most report that they’re as lean and efficient as possible. Should the cost of materials and equipment rise, operators have very little wiggle room left to protect already slim margins without compromising quality. This results in tense supplier relationships when profit margin is on the line.
- Labor issues—The U.S. commercial cleaning sector employs 3.26 million workers. As long as the sector draws heavily on migrant worker sources at minimum wage, commercial cleaning will be characterized by high turnover, inadequate training, and low morale. These issues make it hard for managers to share ownership of business growth and performance targets with staff. Part of worker dissatisfaction can be attributed to low-quality supplies such as thin and inadequate disposable gloves. When workers feel they do not have the tools they need to do their job safely and effectively, it impacts morale and turnover.
- Legislation and compliance—Health and safety compliance requires all staff to be trained which saps time and resources when turnover is high. The organization itself will need to be CIMS-certified, while OSHA, HCAPHPS, and ISO certification are all potentially on the To Do list. Part of adhering to those regulations is safe supply sourcing. Workers are frequently required to wear disposable gloves in order to protect against harsh chemicals. Distributors can step in with expert advice and safe products to make compliance easy for businesses.
- Green cleaning—The big buzzword in the commercial cleaning sector, Green or eco-friendly cleaning is set to graduate from niche to mainstream within the industry. The term covers the use of eco-friendly chemicals and the implementation of sustainable practices, and promotes a greater understanding of the effects of cleaning products and practices on both the environment and employees. To get on board the Green bandwagon, businesses need to train employees to GS-42 standards and source Green Seal-certified chemicals. Janitorial and sanitation distributors will need to add Green products to their lineup to keep up with the demand.
- Automation—Robots and AI technology have already started to make their presence felt within the commercial cleaning sector. The advantages (on paper) are evident: low cost, high consistency, zero problems with ICE or the IRS. Yet anxiety remains high where AI is concerned. How can managers turn AI to their advantage? Robots can be an asset, not a threat. Let them take care of the repetitive tasks and liberate humans for customer-facing or skilled activity. As the industry moves towards AI and IoT (internet-of-things) solutions, wholesale distributors will need to keep up.
- Marketing—Commercial cleaning is at its core a traditional industry, often from family-run roots. It still puts stock in the cold-call and customer relations. That might not be enough anymore. Building managers are increasingly likely to search for contractors online, to check their ratings and testimonials, and to look for a social media profile as proof of pedigree. The same is true for janitorial and sanitation distributors. Digital channels continue to grow as a primary source of information for those researching new business partnerships. As commercial cleaning businesses digitize, so too will their purchasing decision-makers.
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Commercial cleaning operators, and their distribution partners, can meet these new challenges head-on with the following strategies:
- Focus on value-added services—Opportunities for conventional growth are limited, particularly when there are no more cuts to be made on the staff or materials side. But janitorial businesses can differentiate by offering niche services or specialized personnel. They can stand out against the competition when it comes to contract renewal by offering training, reporting, resource management, waste removal or tracking services on top of their existing capability. The right distribution partner can support janitorial businesses in sourcing high-quality products at a fair price as well as diversifying their niche offerings. If wholesale distributors recognize the pain points their customers face, they can step in with actionable solutions.
- Employee training—The enduring perception is that commercial cleaning is not skilled work. As a result, turnover can be high, and companies find themselves allocating vital resources to a cycle of ongoing training without necessarily increasing the overall skill portfolio of the company. But by taking a more proactive approach to training, business managers can focus on the skill areas that will deliver the most ROI. At the same time, a staff that is better equipped to handle a variety of tasks will enhance customer satisfaction and boost the business brand. It’s a simple formula, but too often overlooked: staff perform better when they feel valued—and the investment required rarely fails to reap dividends. Part of that investment is ensuring staff have the right supplies to do their jobs adequately. This is the perfect opportunity for distributors to come forward with high-quality barrier protection products and cleaning supplies.
- Cost control—The logistics of running a building service contractor business can be so complicated and intense that managers frequently find themselves too short of time to stand back and analyze the operational costs. They end up sticking to what they know and experience a level of decision paralysis when it comes to innovation.
A simple way to lighten the load is to partner with a distributor to source cleaning chemicals, disposables, equipment, and technology. These distributors have a business obligation to know the sector inside out—from its challenges to its emerging trends. They generate more revenue by passing on cost-saving expertise or operational experience, and they help cut operating costs for the commercial cleaning service by concentrating a wide range of products in a single delivery.
In an industry rife with changes and challenges, solid business relationships can be beneficial for both commercial cleaning businesses and the distributors who supply them. If you are a wholesale distributor struggling to develop a solid marketing strategy, AMMEX can help. We supply a range of disposable gloves for the janitorial industry. Our disposable gloves keep workers safe and happy in their day-to-day tasks, and when economic challenges make it difficult for commercial cleaning businesses to source products, we can step in with cost-effective solutions. Our streamlined digital ordering process eliminates stress on the supplier side so you can focus on your customers. Additionally, our business development solutions can help you to maximize the ROI of the products in your lineup. Ready to learn more? Contact us today.