Shocking prices at the gas pump jolt consumers into new shopping patterns
A look at the impact of current gas prices on consumer purchasing habits. Based on LJS National Poll data from Q2 of 2011.
Seven in ten consumers (71%) are now cutting back on driving to save gasoline, up nine points from first quarter (62%) and fourteen points from a year ago (57%).
Changes in driving behavior can change shopping behavior in surprising ways. In addition to doing more shopping at low-price stores, such as Walmart and dollar stores, consumers are also doing more shopping at supermarkets, drug stores, and gas station/convenience stores, where prices on comparable items may be quite high. These stores, which consumers frequently pass by and might have to visit anyway for groceries, prescriptions or gas, allow consumers to save gas money by eliminating trips to other stores. Many consumers are doing less shopping at department stores and shopping malls. Interestingly, Target does not appear to be benefitting as Walmart has from higher gas prices.
Besides gasoline, consumers are cutting back sharply on food, clothing, and even medical products/services.
Fewer consumers are in the market for TVs, furniture, appliances, and new cars this quarter than first quarter.
Buying plans are up from last year for computers and travel (air and lodging). Computers show increased shopping activity, but travel does not.
Home buying plans and active shopping remain low. More homeowners feel their home lost value during the past three months. Also, more consumers expect home values to slip in the next six months.
Consumer perception that prices are rising generally, not just for gasoline, continues to spread. This quarter, three-fourths (78%) report that prices have risen during the past month, compared to two-thirds (67%) last quarter, and one-half (51%) a year ago. This quarter, 43% of consumers expect prices to rise more rapidly in the next few months, compared to 26% just two quarters ago. Yet, we don’t see any increase in the proportion of consumers thinking about buying now to take advantage of current prices (24%).
Consumers continue to chip away at credit card debt. More saw their credit card debt decrease in the past month (24%) than increase (18%).
Consumers contributing to their savings in the past month tick down one point to 37% from 38% last quarter.
Although fewer consumers have experienced a layoff or loss of earnings in the past year, over half (57%) continue to feel it could happen to them in the coming months.
The number of consumers who say their financial situation is worse than a year ago continues to surpass those who say it is better by a two-to-one ratio (44% vs. 21%).
Fewer consumers this quarter are optimistic that their finances will be better a year from now (38% vs. 41% in the preceding quarter). Consumers who expect their finances to worsen during the coming year hold steady at 24%.
The overall dour sentiment about the economy continues to grow. Consumer expectations of the U.S. economy turn more negative for the second consecutive quarter. Currently, 49% feel the economy is worsening (up from 40% two quarters ago), while 29% feel it is improving (down from 36% two quarters ago).
Two in five Americans (41%) are pleased with the job President Obama is doing, which is essentially unchanged over the past four quarters. Over half of Americans (58%) now regard the country’s problems as greater than any President can solve; this opinion has steadily grown from 43% two years ago.
Automobile transportation is integral to our lifestyles and society as a whole, as we are reminded by the wide-ranging effects of higher gas prices. It’s not just about driving less. It also means shopping at different stores, seeing steeper prices there, and making some tough decisions about what to buy or not buy. The high cost of driving even takes a psychological toll on consumers, whose sense of security has been shaken already by recession with no light at the end of the tunnel in sight.
It remains to be seen whether the current spike in gas prices is a blip or the new “normal.” Either way, it creates business opportunities. Stores with small trading areas can strengthen relationships with their neighbors by serving more needs and becoming an even more efficient place to visit; consumers may even appreciate the store’s efforts to increase basket size. Customer loyalty programs can reinforce the current tendency to shop near home and make it permanent. Stores dependent on large trading areas need to offer greater immediate rewards for customers to invest gas in a visit, and it is vitally important for them to ensure that customers are not disappointed by the selection, service, or pricing when they do come. Companies can help to restore consumers’ sense of security, for example, through price stability, guarantees, and customer service that truly helps to make shopping trips successful.