‘Ugly, Ugly Time’: Work-From-Home Era Crushes U.S. Dry Cleaners

(Bloomberg) -- For a glimpse of how a city is faring in its reopening, look closely at its dry cleaners.

Take J’s Cleaners, with locations dotting Midtown and Upper Manhattan. Last month, business was up to as much as 40% of pre-pandemic levels as a small portion of New Yorkers returned to the office, said owner Albert Lee. Some locations were even back to half of what they made before Covid-19. With new business restrictions and schools closing again, Lee expects to fall back down to the low levels he’s seen back in April.

“If this thing keeps dragging, many small businesses will close. Maybe I could be one of them,” said Lee, 63, who plans to permanently shutter four of his 15 locations. He is losing $1,000 to $2,000 monthly per store.

Dry cleaners are hardly alone in struggling during the pandemic. But while airlines and restaurants eventually will rebound as vaccines ease worries for travelers and diners, dry cleaners confront a more fundamental shift: Working from home is here to stay, especially for white-collar employees. Companies from Facebook Inc. to Swiss bank UBS Group AG have said the switch could be permanent for some workers.

A post-Covid economy in which more people work in their sweatpants instead of freshly pressed dress slacks could be devastating for the roughly 30,000 businesses that relied on professionals such as salespeople, realtors and bankers for half of the garments getting dry cleaned before the pandemic.

One in six dry cleaners have closed or gone bankrupt in the U.S. already, and many won’t survive without more stimulus, according to the National Cleaners Association. Nationwide, the industry is likely booking only half the $7 billion in revenue it did pre-Covid-19, according to the NCA. More than 90% of owners aren’t taking a paycheck, and about half are paying employees out of their savings.

“It’s an ugly, ugly time,” said Nora Nealis, executive director at the trade group, which has more than 2,000 members. “Most of them are holding on with their fingernails in hope of help.”

The slump is particularly tough on Asian American entrepreneurs, as they own at least 40% of dry-cleaning businesses, according to NCA estimates. Concentration of Asian American workers in industries such as hospitality, retail and laundry service partly explained the disproportionately high level of job losses among them during the pandemic, according to research by Donald Mar of San Francisco State University and Paul Ong of University of California at Los Angeles.

Overall, the number of Asian American business owners was down 17% in September compared with February, according to data compiled by University of California at Santa Cruz economics professor Robert Fairlie. That was the worse among all races in the country.

Lee, who was born in South Korea and grew up in Argentina before immigrating to the U.S., entered the dry-cleaning business in 1985 by buying a store from his brother-in-law. Before that, he was a truck driver, delivering produces overnight.

He credits a $500,000 Paycheck Protection Program government relief loan and rent concessions from most of his landlords for his survival so far this year. Over the summer, some stores could make as little as $200 each day in sales, with essential workers like police officers, doormen and health-care staff as only customers, he said.

This winter will be tough, Lee said. He worries more people will get used to working from home and doing Zoom calls.

His concern is backed up by research. In late September, about 32% of working days in the U.S. were spent at home — down from 42% in May, according to surveys by Stanford University. The new work-from-home economy is likely to outlast the coronavirus that spawned it, said Nicholas Bloom, a professor of economics at Stanford. The share of working days spent at home is anticipated to rise to a quarter from 5% before the pandemic, he said.

While the plight of bar and gym owners has been in the spotlight, dry cleaners say they may have it as bad or even worse. Deemed essential businesses, cleaners weren’t force to shut down during the lockdowns. Their industry is nonetheless at risk for the foreseeable future.

“Businesses that serve primarily office workers are going to be tremendously impacted even in the long run,” Bloom said. “Sandwich shops, dry cleaners.”

Even before the pandemic, the dry-cleaning industry, which employs more than 120,000, was already struggling with declining demand for professional services and the growing adoption of business-casual attire in the office, according to research firm IBISWorld. They’re the epitome of a family business, with no company owning more than 5% of the market.

To survive, many dry cleaners have begun to offer pickup and delivery, alterations or wash-and-fold services. Others diversified into commercial laundry for hospitals, or are now willing to launder comforters and curtains for consumers, said Mary Scalco, chief executive officer at Drycleaning and Laundry Institute, another trade association.

Rhonda Eysel’s Master Kleen Dry Cleaners, with pickup locations in Georgia and Alabama, cut operations of its cleaning plant from five days a week to three, to reduce utility costs. Many of her 40 or so employees have had their schedules reduced to between 23 hours and 32 hours a week, she said.

“We are helping everyone to stay employed,” Eysel said. Her grandfather started the dry cleaners in the mid-1960s, and she’s been working there for 30-plus years, since she was 15.

“It’s a tough industry to be in right now,” Eysel said. “But it’s important that we keep going. It’s a learning process for sure.”

Data from Yelp Inc., which tracks lookups of business pages and review postings, shows that consumer interest for dry cleaners has improved since April — although it remains way below pre-covid levels in almost all states. Among the few bright spots in early October was Nevada, where Las Vegas casinos have reopened. Cleaners in places where people rushed to sit out the pandemic, such as the Hamptons, also have benefited.

Richard Bayliss, owner of the three-generation business Nu-Way Cleaners & Tailors in White Plains, New York, said his business is operating at about 45% of pre-pandemic levels. Now he is counting on companies to announce return-to-work plans early next year.

Meanwhile, he has a plea for corporate executives: institute a dress code for Zoom calls.

“To be there in sweat pants and sweat shirts, I wouldn’t accept that,” Bayliss said.

©2020 Bloomberg L.P.