SCHAUMBURG, Ill. -- Dramatic fluctuations in gasoline prices are disrupting U.S. consumer spending and are expected to continue, leaving consumers with less money to spend at retail, entertainment and dining out, according to a new study by The Nielsen Co. Its research shows that in 2007, the gasoline share of consumers' weekly spending ranged from 12% to 16%. As gasoline prices continue to rise, Nielsen expects consumers' gasoline share of their weekly spend to rise to 19%.
"With gas prices expected to hit $4 per gallon this year, consumers will be spending nearly a fifth of their household [image-nocss] budget on gas," said Todd Hale, senior vice president of consumer and shopper insights, Nielsen Consumer Panel Services. "That kind of increase has a direct impact on what they can afford to spend and is something retailers will need to address."
According to government statistics, the price of regular gasoline in 2007 ranged from a low of $2.11 per gallon to $3.21 per gallon. Nielsen's research shows that higher gasoline prices create a modest change in the number of average weekly gasoline trips, with consumers averaging 1.3 trips to the pumps per week, up from 1.24 trips when gasoline prices were at their lowest ($2.11 per gallon).
"The increase in gas trip frequency as gas prices rise suggests that some consumers are seeking to limit the amount of money spent each time they're at the pump," said Hale.
Though consumers may be making more trips to the pumps each week to limit the amount they spend per trip, they are not able to limit the amount they spend on gasoline each week. Nielsen's study shows that the amount of money consumers spent on gasoline each week increased dramatically as a result of higher fuel prices. Per-trip spending rose significantly, up 40% from $24.42 per trip when gasoline was at its lowest price, to $34.11 when gasoline prices hit their peak. With consumers making more than one trip to the pump each week, overall weekly gasoline spending rose from $32.02 to $46.72 per household—a 46% increase.
"Consumers tell us they are combining errands and trips, eating out less and doing more things at home to counterbalance rising gas prices," said Hale. "Nevertheless, the amount of money spent on gas each week is still taking a huge bite out of consumers' budgets."
With more than 146,000 U.S. locations, convenience stores are the preferred stop for consumers, attracting nine times more gasoline buyers than warehouse clubs or grocery stores. Warehouse clubs, however, see a higher level of gasoline spending per trip.
"If we take a look at the size of automobiles in a typical warehouse club parking lot, we can understand why warehouse clubs grab more money spent on gas per trip," said Hale. "Generally, you'll see more affluent consumers driving SUVs and luxury cars, leading to higher per trip spending on gas."
Retailers, especially warehouse clubs and some grocers, are offering low gasoline prices or fuel discounts based on in-store purchases as a way to ease gasoline cost strain and build shopper loyalty. C-store retailers can make the most of consumers' frequent gasoline trips with loyalty programs and value price offerings to enhance in-store sales, Nielsen said. Some c-stores are attracting consumers with a stronger focus on their foodservice business and capturing meals that might otherwise go to fast-food and casual dining restaurants.
"Today's consumers are looking for value and convenience and this year, the impact of rising gas prices is something all retailers will need to address through assortment, pricing and promotional strategies," said Hale.
The Nielsen Gas Monitor Report, based on consumer purchases captured via Nielsen Homescan, measures consumers' weekly gasoline buying behavior across key retail channels.
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