opinion

The Gas Crunch - Bad News or Good?

Joe D


Higher Gas Prices Mean Less Spending, RIGHT?

I’ve found that new research from The Nielsen Company finds that half (49 percent) of U.S. consumers are reducing their spending to compensate for rising gas prices, up four points from June 2007. Consumers are also battling high gas prices by combining shopping trips and errands (70 percent), eating out less (41 percent) and staying home more often (39 percent) – so I set out to accumulate the most stats I could to see if we can determine the effects on online e-commerce.

“Our research shows consumers are adjusting their spending to a significant degree in order to counterbalance rising gas prices,” said Todd Hale, senior vice president of Consumer Shopping & Insights, Nielsen Consumer Panel Services.

“Large numbers of consumers eating out less and staying home more often signal a tough year for some restaurants, but there may be an opportunity for consumer packaged goods (CPG) manufacturers and retailers to find continued growth in healthy, at-home meal solutions and at-work meals.” It may actually bode well for the adult online industry as people confined to their homes and still with broadband access will change what they view as entertainment. Results in the short time will likely be favorable.

Nielsen’s survey finds that record-high gas prices likely contributed to 2007’s less-than-stellar holiday sales season. Sixty percent of consumers surveyed said they had less money to spend during the holidays due to increased gas prices, and 44 percent of consumers reported they planned on spending less money on holiday gifts in 2007 as compared to the year prior.

“Unlike 2005 and 2006, gas prices didn’t drop in the fourth quarter of 2007 to enable consumers to do their typical holiday binge buying,” said Hale.

“That said, our research showed a jump in consumers shopping on the Internet as a way to deal with high gas prices. This should be a wake-up call for manufacturers and retailers alike to step up their ‘direct-to-consumer’ efforts and utilize the Internet to communicate directly with consumers in 2008, emphasizing value, variety and convenience.”

Nielsen finds that gas prices are impacting where consumers shop, with 27 percent of consumers reacting to gas prices by shopping more at supercenters, or megastores and big-box stores, where more items needed are in one store. And I don’t think this will be limited to necessary shopping, entertainment preferences and choices will also change, and online entertainment, gaming and networking sites will surely benefit.

“Discretionary spending in 2008 is likely to be a challenge for most low- and middle-income shoppers, the core supercenter shoppers,” said Hale.

“Although recent store expansions mean that supercenters are closer to more shoppers, nearly a third of households still travel 11 miles or more to a supercenter, and high gas prices will likely reduce the number of quick trips these households make. Supercenter retailers will need to entice shoppers with stronger earning power who are less vulnerable to high gas prices.”

Increased fuel prices are resulting in more coupon clipping, with 25 percent of consumers using coupons to save money, up from 20 percent in June 2007. Twenty-three percent of consumers indicate they will buy less expensive grocery brands to deal with higher gas prices, signaling a possible boost for private label or store-brand products and lower-priced branded products.

“2008 will likely be a challenging year for U.S. consumers and the economy as a whole as we grapple with growing inflation, credit card debt, declining house values - - as well as expectations for gasoline to hit $3.40 by spring,” said Hale.

“Manufacturers and retailers need to be alert to the fact that consumers are looking to save by altering where they shop, how they shop and what products and brands they buy. Value, convenience and competitive pricing will be more important than ever in the year ahead.”


GAS PRICES


GAS PRICES


GAS PRICES

Results are based on Nielsen Homescan survey responses from nearly 26,000 U.S. consumers, geographically and demographically representative of the total U.S. population. The survey was conducted in December 2007, when regular gas averaged $3.06. The full report is available in PDF format at: US Consumers and High Gas Prices.


I am the Chief Marketing Officer of Webbilling.com, offering real EU direct debit [EDD] services in Spain, Austria, The Netherlands, Germany and the UK – with pin call and further security available in these markets, and ‘direct pay’ services in 40 additional countries. The UK includes England, Scotland, Wales, N. Ireland, the Isle of Man, and the Channel Islands. No debit card needed - just a valid bank account, address and phone. Add a solution that augments your current offerings, not one that cannibalizes what you have already built. The billing client should always be in control. Contact ecommerce and industry resource JoeD for further insight into the alternative billing arena. MAIL JoeD!

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