A portrait of 1 in 2 American consumers at the dawn of 2008: cash-strapped, bargain-hungry and fuel-fatigued.
So says research by The Nielsen Co., where 49% of U.S. consumers surveyed said they were slicing spending to compensate for rising gas prices. The high price of regular gas in December 2007 was $3.06 per gallon, and it has almost held steady or risen each month since: $3.11 in January, $3.04 in February and $3.28 in March.
If consumers’ purse strings only tighten in tandem with gas prices, retailers can expect more challenges in the months ahead.
"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 Nielsen’s Todd Hale, senior vice president of Consumer Shopping & Insights.
Of the 49% of consumers who said they planned to reduce spending in 2008, more than a third (18%) were reducing costs by a "great degree," while the remainder (31%) were scaling back to a "small degree."
Contrast that to June 2007, when the same study showed 45% were reducing spending. In June and July 2005, when the high price of regular gas reached $2.33, just 36% of consumers were cutting costs to counteract high gas prices.
For convenience stores, these trends aren’t harbingers of doom. Managed properly, some believe they could create new growth opportunities.
A February NACS study said consumers are increasingly willing to go inside a convenience store to shop if gas prices are higher at the pump, since they want to reduce the number of stops they make each day.
"They want no fat in their driving schedule," said Jeff Lenard, vice president of communications at NACS. "They may be looking at ways to further cut back and eliminate trips that previously seemed important but are now nonessential."
But c-stores, in fact, can fill in gaps left by industries whose customers are disappearing because of budget constraints.
"Were seeing (restaurants) taking a hit with the current economic conditions, and we’re seeing they’re losing business to the fast-casual eateries," Lenard said.
Expanded foodservice offerings such as unbranded or proprietary fare at a convenience store can provide consumers with products they don’t want to hunt for.
"If it’s a good experience, you’re probably going to stop at a convenience store and get that sandwich," Lenard said. "And that might not be a one-off experience; it may be a shift in behavior that’s permanent."
Case in point: Wawa’s foray into the third daypart last month, when it rolled out a new dinner deals campaign. "The timing couldn’t be more perfect for Wawa to get into this," Lenard said. "As people look for more affordable options to dinner, they’re looking to places like Wawa."
When it comes to trying to save a buck at the pumps and elsewhere, consumers have been resorting to tactics old and new to breathe life into their dying dollars. The Nielsen study confirmed that more than two-thirds (70%) were combining shopping trips and errands to counteract fuel prices, a 2% increase over June 2007 (68%).
Shoppers are also looking for bargains, even cutting coupons to save. In December 2007, Nielsen found that 25% of customers said they were using more coupons, while just six months before that (June 2007) 21% were using more coupons, the study said.
A notable change in spending habits came by way of the Internet. In December 2007, 15% of consumers were shopping on the Internet more often, up 6% from June 2007. Just two years earlier (June 2005), a mere 5% of consumers were online buying more products. Other ways shoppers have tried to save: Eating out less (41%), staying at home more often (39%), shopping at supercenters (27%) and buying less expensive groceries (23%).
About one in four consumers actively sought cheaper gas prices, the Nielsen study found. The same number (26%) said in both June 2007 and December 2007 they were trying to find lower-priced gas, a decrease from each of the two years prior, when 31% (June 2006) and 30% (June 2005) looked for cheaper gas.