Pennies for Consumers' Thoughts

One cent per gallon can change purchasing behavior, report says

ALEXANDRIA, Va. -- High gasoline prices have not changed Americans' driving habits, but they have significantly changed their gasoline-purchasing habits, with price by far being the biggest reason why drivers select a specific store to purchase gasoline. In fact, more than one in four drivers say they change their purchasing behavior to save as little as one cent per gallon, according to a new National Association of Convenience Stores (NACS) report.

C-stores sell an estimated 80% of the gasoline purchased in the United States. To save only [image-nocss] one penny per gallon, 27% of drivers said they would take a left-hand turn across a busy street; 20% would drive five minutes out of their way; and 11% would even drive 10 minutes out of their way, the report found.

But consumers generally do not cut back on their driving when gasoline prices are high. More than half (57%) of drivers surveyed said they drive the same amount when prices are high, and only one in nine (11%) said they drive a lot less when prices go up.

Drivers clearly seek to save money on the gasoline purchase itself, however. The report found that nearly two out of three (66%) drivers said price is the most important factor when shopping for gasoline, while only 22% said location is the most important.

The findings represent a significant shift in consumer behavior over the past seven years. In 1999, a NACS consumer study found that price ranked behind convenient location as the most important factor when consumers select a store to purchase gasoline.

Increasing consumer price sensitivity has further intensified competition among retailers, resulting in a decline in gasoline net margins over the past few years to approximately a penny per gallon. NACS estimates that the breakeven markup for a gallon of gasoline was 13 cents per gallon in 2006, and the Oil Price Information Service reports that in 2006 the national average gross margins on gasoline were 13.76 cents per gallon.

Consumer price sensitivity also impacts retailers inside the store, the NACS report found, as 27% of consumers said they buy fewer items when gasoline prices are high, as opposed to only 6% who said they purchase more in-store items to combine trips.

In addition, consumers are much more likely to pay with plastic when gasoline prices are high. Nearly half (47%) of all drivers said that they are much more likely to use a debit or credit card when gasoline prices rise, leading to additional credit card interchange fees assessed to retailers and potential increases in personal debt for consumers.

The 2007 NACS Consumer Fuels Report is based on 1,238 consumer responses. NACS released findings from the report as part of the association's annual gas price kit, which examines conditions and trends that could impact gasoline prices.

Click here to view the kit.