HOME | ABOUT US | CONTACT US

The prospect of $4 a gallon gasoline was broached at a White House press conference on February 28, 2008:

Bush is right about uncertainty, but we can make decisions in the face of this uncertainty by tracking and analyzing changes as they happen. Tracking of reactions to changes in the past gives us some idea about what to expect from similar changes happening now.

What we have learned from past spikes in gasoline prices is that consumers tend to change how, where, and what they drive when gasoline prices go up. Then, when the price of gasoline eases, they reverse some, but not all, of the changes they imposed on themselves.

For a long time and until relatively recently, we were using cars more intensely. Cars got bigger and went faster to more places as new roads were built and more stores popped up along all the new roads for people to drive and drive their big new cars to and fro.

But at some time in the fairly recent past, we—en mass—started a secular diminishment in intensity of automobile usage. Some behavioral changes, like changing the kind of car we drive, are necessarily less reversible than others. The retail landscape reorganizes to accommodate the new behaviors—such as walking or biking to shop, and retail innovations including building small stores able to flourish serving small trade areas in turn encourage further diffusion of behaviors such as walking to shop.

Car Ownership and Use

As consumers drive less, consumers tend to keep their cars longer, especially since the vastly improved automobile technology extends automobile longevity and makes extended warranties more economically feasible. Today, new car buyers anticipate keeping their cars for an average of eight years.

Most consumers are not in a position to replace gas guzzlers just because they guzzle gas, so while they wait for the old clunker to clunk-out, they drive less to keep within their gasoline budgets. However, when they are in the market shopping for a new car, lower gas mileage cars have a preferential edge.

The reduction of time spent behind the wheel can become an enduring habit. The drop in gasoline prices seen this year through October was not accompanied by more time spent behind the wheel. People are learning, and more importantly, learning to like using their cars less.

How Consumers Get Around

As consumers spend less time behind the wheel, alternative means of locomotion grow. Bicycles, motor scooters and motor cycles, and even skate boards are now experiencing growth.

Public transportation is also benefiting slightly at this point. But $4 a gallon gasoline will push more people on to the public transportation system. As William DeKooning’s famous quote points out, “the worst thing about being poor is that it takes up all of your time.” But as more otherwise well-off people are effectively impoverished by high gasoline prices and get on public transportation system, it will lead to some time-saving improvements in the systems, which, in return, will encourage more people to use it.

Walking—which Chinese jokingly refer to as “bus no. 11” (because two 1’s look like legs)—is gaining importance because it is a way to improve personal and the planet’s health besides being a way to save money on gasoline expenditure.

As more and more people get out from behind the wheel and walk, run, bike, or skate around town, pedestrian pathways will be improved and become widespread and safer to use, which can attract more walking, running, biking and skating.

Consumer Behavior

The rise of gasoline prices leads to an increasing bifurcation of shopping opportunities and behaviors.

On one hand, consumers reduce the number of trips they make by doing one-stop shopping at super centers and membership warehouse stores that continue to get bigger and bigger as they bring more and more stores under one roof.

The growth of mega stores forces a consolidation in the supermarket industry. There will soon be a time that there was only enough room for one major supermarket chain in each market area plus a secondary supermarket chain that survives (barely) by living in coverage gaps left by the dominant chain and providing convenience or specialty merchandise.

As consumers keep their homes fully stocked with staples by making infrequent, long distance, one-stop shopping trips to stock up on low priced non-perishables, they also need to increase the number of short distance trips made to close-by neighborhood stores—like Trader Joe’s, Whole Foods, and Aldi—to meet recurrent and/or urgent needs for food and other consumables.

Tesco, the British retailer, seeing an opportunity in the United States for a new kind of store, has invented a new store to serve consumers living in densely settled neighborhoods with close-by shopping for fresh, tasty, ready-to-eat or heat foods and other consumables. Tesco is counting on gasoline-starved U.S. consumers to spread a welcome mat for their small footprint Fresh & Easy stores.

Consumers who are driving less for shopping also flock to online shopping, but a major barrier is that they are likely to be out grazing somewhere when the packages arrive. So they increasingly turn to so-called click-and-brick shops, where they can order their stuff online and pick it up at a convenient nearby store.

As consumers drive less and the retailing landscape moves toward mixed use—bringing shopping, work, recreation, and housing closer together—the trend of consumers spending more time commuting is beginning to be countered by a trend towards consumers having more free time to spend as they wish—which strikes a win-win blow for everyone, except maybe the oil companies.

To be kept informed about further findings from ongoing research on this topic, contact 8SAGES.com.

ALSO SEE PREVIOUS BACKGROUND ARTICLE 

SAGE Advice: Selling Newspaper Ad Space in a Shifting Petroleum Paradigm September 29 2006

HOME | ABOUT US | CONTACT US
Copyright 2008 SAGE Survival and Growth Enterprise LLC. All Rights Reserved.