Is Gas Cramping Your Style? Thoughts on the Impact of Gas Prices on Retail

– Don Capman, President,
J.D. Associates

Do you have a gas problem? Well, if you’re a retailer, it’s entirely possible that you do. The more I read, the more I see articles on how the price of a gallon of gasoline is affecting consumer spending. When we saw gas prices go through the roof over a year ago, the consumer at large thought this was an aberration that wouldn't last. Retail spending was not drastically reduced. This time is different. Consumer confidence is down significantly and retailers are feeling the impact. On a recent extended weekend to the New Hampshire Lakes Region, I read an article that heralded the return of tourists for the season. That’s the good news. Reading on, that same article went on to say that although the tourists were coming back, they were unlikely to eat out as often and spend as much on shopping. Most people just don’t have the money and are feeling the pinch.

In a recent article published by the National Retail Federation, entitled “Uncertainty About Gas Prices Taking Toll on Consumers, According to NRF Survey”, the research firm BIGresearch found that 40.2% of those surveyed planned to take fewer shopping trips, and 37.9% planned to shop closer to home. Additionally 30.7% of those surveyed are shopping for sales more often and 23.5% are using more coupons. This poll included 8,353 consumers and was conducted from May 2-9, 2007 with a margin of error of plus or minus 1%. This survey further noted that rising gas prices do not have the same impact on everyone. Wealthier Americans tend to absorb the price increase with little or no effect on their spending habits, but the majority of Americans are looking for ways to cut back on discretionary spending. According to surveys by the International Council of Shopping Centers-UBS Index conducted between May 17-20, 2007, it was found that the highest percentage of consumers since October 2005 were saying they have cut back on discretionary spending.

So what can you do to prosper in difficult times? A year ago in May, I wrote an article for the Point Of Saler newsletter entitled “Get Pumped” and made several suggestions on how retailers could combat the rising gas prices. One of the suggestions was to “beef up” your e-store. Although consumers are cutting back on spending, they will not stop shopping. The decision is where they will spend the extra money they have available. The beauty of an e-store is convenience and no gas required. If you can offer exciting products at great prices with promotions such as “free shipping,” you may have a winner. Considering that the overhead for an e-store should be significantly less than the overhead of “brick and mortar,” you should be able to offer great products at great prices. Another idea from the May 2006 newsletter included running promotions directly related to the gas problem by offering free gas cards with a minimum purchase.

Keeping in mind that consumer will not stop spending money but will be more discerning about where and what they buy, here are a few more ideas to help your store prosper in hard times.

• BUY RIGHT – Unless all of your customers are in the wealthy category, you will need to address the ever increasing need for consumers to find a bargain. In affluent times, when money seems to grow on trees, we can usually afford to make a couple of buying mistakes. In this climate, too many mistakes can prove fatal. Become an expert on your customer and their preferences. Analyze your best selling products and price points. Through reports available in your POS system, you can get this information accurately and efficiently.
• PROMOTE, PROMOTE, PROMOTE – Think of exciting ways to get people to come into your store. Organize several retailers in your area and come up with some cross promotions. For instance, you could consider teaming up with a restaurant and movie theater and offer a “cheap night on the town” promotion. This could be an event for the entire family and give the consumers a reason to shop your store and attend some entertainment at bargain prices. This type of cross promotion can be a win, win, win situation. It is important that the cooperative merchants be close enough so as not to require a lot of gas to drive from place to place. If you don’t have free parking, pay for the meter or garage when a purchase is made. Make every effort to offset the price of gas.
• WRITE A MONTHLY OR AT LEAST QUARTERLY NEWSLETTER – Remind your customers that you are still there and ready and willing to serve them. As mentioned in the previous statistics, more and more shoppers are looking for coupons. Try throwing some coupons in your newsletters with clear expiration dates. Make sure the coupons are for widely accepted merchandise that will have value to the largest segment of your customer base. Give a coupon with every purchase that will count for the next purchase. Most people hate to let coupons lapse. CVS Pharmacy realizes that very well.
• STOP COMPLAINING – Any successful business is difficult. Being unsuccessful is easy. Don’t talk gloom and doom to your customers. They will soon wonder what they are doing shopping in your store.
• HOLD COMPANY STRATEGY MEETINGS – Regularly schedule meetings with your employees to discuss new ideas on how to increase business. Reward your employees for their ideas. You may find a new burst of energy that will have very positive effects on the atmosphere of your store. Your store should be a place where shoppers want to be.

So, if you have gas problems, you can do something about it. You may even find that you enjoy coming up with some new ideas that will energize you and your business. Although today’s statistics can be depressing, if you view them as challenges, you may just succeed in making your business stronger in spite of the current world situation.