The effect of rising gas prices will have an impact on retailers, but not necessarily a negative one. People will still need to purchase food and related items. Now, however, rather than drive from one store to another, they will aggregate their spending with one or perhaps fewer stores than they did previously (for those that are severely impacted by the rising cost of fuel). For those that are perhaps more accustomed to shopping at stores that emphasize variety and higher prices – they may start to do more shopping at stores that are traditionally known for price values (Dollar Stores/Clubs/etc.). For those that make frequent trips and buy smaller or medium sized products, they will likely now purchase larger sized items and reduce shopping trips. Will retail be impacted? Sure. It has to be. However, it will more likely slide from one channel to another or one retailer to another and not really be a tremendous net gain or loss at the industry level. At the consumer level, the “have-nots” will clearly not be… Read more »

If rising gas prices tighten budgets and obviate the demand for cheap plastic junk from China sold by dollar stores, perhaps it’s for the best. Plus, petroleum is the main ingredient in plastics from anywhere, not just China. The good news is that China may purchase less oil to supply their plastics factories. Or not, given the appetite in our country for cheap plastic junk. Summer is coming, and the petroleum companies are poised to foist their unbelievable reasons for higher prices on the gullible public once again. Here in California, today’s Sacramento Bee blamed the elimination of MBTE from the gasoline recipes of Eastern states for rising prices here. You see, California eliminated MBTE some time ago because it contaminates ground water. Now, Eastern states from which we purchase a small amount of gas are undergoing the same process, leading to higher prices there due to this changeover. Logic would indicate that their recipe becoming more like ours would reduce prices. But no. As always, the petroleum companies are relying on the cluelessness of… Read more »

I don’t think that higher gas prices will have much of an effect on anyone. We are a nation blessed with arbitrary disposable income. Even the poor go to the movies, have cell phones, cable TV, etc. Priorities may shift minimally but likely will remain pretty much the same. I am sure the media will be able to find two or three stories about Daddy spending money on gas instead of food for the family (thousands of these stories already exist but the expenditure is on alcohol or drugs, not gas). We are, for the most part, adaptable and smart enough to make the best of a situation. I know this will surprise most of our politicians who seem to increasingly feel like they have to do all our thinking for us.

This notion of applying the cost of one product to the entire retail segment is a fallacy. The basket of monies available to lower income consumers is much more complex than just leveraging the impact of gasoline alone. For example, the number of unemployment applications just fell to a multi-year low, yet employment certainly has an impact on spending. So does the fact that many states are raising their minimum wage. Also important is the fact that the price of mass transit does not rise and fall with the price of gas. Many low-income people take mass transit. The price of many vegetables changes with each week, as they approach the zenith of their local season (and available supply increases). Because I get 2 ears of corn for $1 today and 6 ears of corn for $1 in August has no relationship to the price of fuel, the minimum wage or the price of housing, let alone an entire chain’s retail business. Why is it that more people go to the movies during bad times… Read more »

The ingredient so often lost in these discussions is the impact of an unstable economy on the small operation, 25 employees or less. We are the first in retail to be impacted by the lack of discretionary spending by consumers…and we feel it. With fuel prices soaring, spending $10-$15 a week on comfort drinks/foods all of a sudden becomes a big deal. We, too, still feel the effects of the recession and 9/11.

Any increased interest in online shopping may be offset by higher shipping charges due to rising fuel costs. Other than generally making life more difficult for those already stretched thin, I think the most noticeable effect may be as David Zahn notes above–consolidating purchases as much as possible to avoid driving all over town in stop-and-go, gas guzzling mode.

One perspective not mentioned is how the increase in gas prices affects manufacturers that service retailers. A recent initiative by Wal-Mart’s to reduce inventories, by requiring manufacturers to reduce order quantities but increase frequency, will increase the cost to serve Wal-Mart. Can other retailers partner better with manufacturers to minimize increases in gas prices or will they push the costs back to their vendor community like Wal-Mart?

Since 1992, gasoline sales have averaged 9.9% of retail sales, ex auto. In February, gas sales were 12.2% of total retail sales, ex auto. May not sound like much of a difference, but it translates to $6.3 billion that was spent at the pump rather than the mall in February. Over the last 12 months, we spent $74 billion more at the pump than what we have grown accustom to. The housing market windfall may have delayed the pain for many retailers, but a pull-back in consumer spending is coming.

The impact will be little to none. The cost of home heating has doubled each year for two years running and hasn’t had an impact that can be solely linked to any reduction in retail. This cost on a monthly basis is likely greater per month than the increase in gasoline. For example, if gasoline goes up as predicted at least another .25 cents per gallon for the summer, consider the increase in dollars by comparison to home heating. If the average consumer used 30 gallons per week, their increase would be $7.50, or monthly that would be (7.5 x 4.2) $31.50. If it cost $150.00 per month (up over $75.00 per month 2 years ago) to heat your home, then this year, based on average increases of 40%-60%, you’d be paying about an additional $225.00 per month. This is far more substantial to the household budget, yet can you link this increase solely to any change in retail sales for the previous 4 months? As I recall, I have seen some rather high comp… Read more »

Consumption habits die hard. I think recent experience shows that high gas prices have only a minor effect on the daily spending habits of most Americans. However, we may anticipate fewer or shorter road trips this summer and some belt-tightening among the lowest income groups as gas tops $3.

It is clear to me that high energy costs are inflationary in nature. But the pain they inflict will also spur innovation and change in our economy, which may be a necessary trauma. When the likes of Wal-Mart start experimenting with energy-efficient retail stores (see Wal-Mart Facts), we may anticipate a ripple effect that may lead us toward greater energy independence and security.

David’s spin on this is wonderful; nothing like looking for the silver lining. While I don’t necessarily agree (now there’s a surprise), I don’t honestly think that high gas prices will have much of an effect overall. We shop because we want/have to. Maybe some people will shop differently, nearer to home, less frequently etc but if that causes too much inconvenience, patterns will revert sooner or later. This week I visited (several times) a large new branch of my favourite supermarket in a London suburb. In order to get their planning permission, they had to agree to promote green transport and public transportation. They have a big sign up (next to the ATM) telling everyone about the nearest buses and the FREE bike trailers available to take purchases home. I didn’t see anyone arriving or leaving by bike and from the anecdotal evidence I gathered, and what I could see of the parking lot, none of the customers were influenced to change their habits in any way. No matter what time of day I… Read more »

All producers are getting squeezed by higher energy, packaging and shipping costs, but many, such as those that make products from petroleum-based materials like PVC and polyester, will see their material costs increase disproportionately. This will eventually lead to higher retail prices on items ranging from commodity to luxury, and limit discretionary income. Non-necessities, particularly those being purchased by low-income consumers, will be negatively affected.

One of the less obvious effects of the last round of gasoline price increases was a significant uptick in packaging costs, and a shortage of raw materials for packaging needs as more raw petroleum was diverted to support absurdly profitable fuel supplies.

Packaging cost increases tend to drive price increases that remain permanent – so we will see an additional round of inflation in prices even after the summer drive time period is over.

What about the affect it may have on online shopping? Historically, rising gas prices have not clearly shown a bump in shopping online, but more shoppers are hopping on their computers to buy consumables than ever before.

Rising fuel costs also play a part in the support of local small business. The consumer who may travel ten miles to the Wal-Mart Super Center for deep discounted milk, bread and a 1/2 shopping cart of impulse purchases, may be more likely to go to the local SuperValu (who caters to the small community store) and pick up their needs.

Chiming in from Orlando, where gas stations near the parks are already charging $3.20 per gallon. Away from the parks, the price is $.35 to $.40 lower, but that top price was still a shocker. Someone filling up as he is about to enter a theme park where he has to pay $9 for parking and more than $200 admission fees for a family of four is going to think twice about the amount of money he is going to spend on souvenirs.

Let’s not forget that if all fuel prices (including diesel) go up, the price of everything goes up automatically. There is a breaking point where lower middle class and below shoppers literally run out of money and whether this gets us there or not, it certainly moves us closer.

In the next few months, retail sales for low and middle income shoppers will be hit by (1) higher fuel prices (2) higher interest rates and (3) job growth concentration in low wage service industries. Many retailers will achieve their comp sales targets by reducing their margins, a terrible tradeoff. Sears is willing to forego sales if those sales are achieved via lower margins. Very few other retailers take that stand. Winning retailers have distinctive positionings (unique private label merchandise, for example) that take them out away from the horrible tradeoff of margin versus sales. Of course, if Delphi is struck, or GM goes Chapter 11, retailers will be hit even harder.

I’m sure rising prices of anything we use makes us change our behavior. But eventually we get used to them. Does having to spend an extra $1,000 a year on gas make us change our shopping habits any different than if we have to spend an extra $1,000 on health insurance or deductibles? Then when we do go shopping the prices are higher because the makers of those products also face the same dilema. There may be some long term benefits because it will force retailers to offer a more compelling shopping experience in order to get shoppers consume precious fuel in order to get to their stores.

A consistent buzz I’ve been hearing at industry gatherings focuses on what retailers and manufacturers will do about transportation and logistics if gasoline prices get out of control. A couple manufacturers I know are working out plans for what to do if gasoline hits $4+ per gallon by late summer, which they see as a real possibility. They’re concerned, naturally, about how it will affect their own cost of goods, and how hard it might be to pass down the increases to retailers and consumers. They don’t have any real answers yet, they tell me, but they’re trying to be as ready as possible.

My own retail shopping will not be effected; I own a 60 mpg Honda Insight. With all the dubious press, performance-wise and economically, it’s more than one would ever expect. If the oiligopoly hikes prices too much, Honda and Toyota will stop privishing and start marketing.

End the “crisis” in a year or so. But I’ve seen so much superstition about energy from you PR pros (which will be reflected in the masses you influence) that I had to vote gas prices would be a slight problem. Will take some time for reality to catch up with story.