Jonathan Marek

Gas Prices Could Mean Trouble for Retail

March 9, 2010

FROM RETAILWIRE:
Gas prices are on the rise, and the question becomes, how high will they go and how will it affect consumer purchasing in other areas? Are you concerned that gas prices will rise to the point this summer that it will affect consumer purchases at retail?      [more...]

Ah, it's the time of year for worrying about gas prices. This article did have the good sense to point out that gas prices always go up in the spring (something many major newspapers ignore as they plaster the rising prices all over their front pages every April!).

The interesting thing is that retailers have the data to figure out exactly how gas prices effect their business. Gas prices for several major markets are publicly available through the US government. All others can be purchased.

If you link that data up to a retailer's sales, and analyze it the right way (elasticity analysis using differential changes across markets), you can measure the effect quite precisely, including understanding how that effect changes by product category, under different macro-economic conditions, and in different demographic and competitive environments. The very best retailers can then make that actionable, testing support programs in the most at-risk markets as prices change.