High Gas Prices No Problem for Etailers
By George Anderson
The classic Christmas tune includes the lyrics, “Let it snow, let it snow, let it snow.”
Well, whether there is a white Christmas or not this year, the one thing online retailers are probably hoping they don’t see coming down this holiday season are gas prices. Turns
out high prices at the pump are good for etailers.
According to a recent study by Shopzilla reported on by the Seattle Post-Intelligencer, “40 percent of consumers said high fuel prices made them hop online more often
to shop, rather than hopping in their car.”
“People are trying to take fewer commutes by car,” said Matt Hyde, the senior vice president for merchandising and logistics for REI. The retailer said bicycle sales were up
60 percent in September. The company expects to sell 50,000 bikes this year.
Another change for REI is that more consumers are shopping online, only venturing out to pick up orders. Company spokesperson Mike Foley said 40 percent of REI’s internet sales
are being picked up in stores.
EMarketer projects online sales will increase nearly 22 percent in the fourth quarter to $26.23 billion. “Much of the gain will be driven by shoppers shifting their purchases
online,” according to the organization.
Moderator’s Comment: What do you look for with online sales this holiday season? How should retailers without an online sales presence cope during this
period? –
George Anderson – Moderator
Online sales have been growing in any case. High gas prices will only accelerate the process. Much depends, however, on whether etailers are forced to raise shipping prices or decrease free shipping offers. A $15 shipping fee more than offsets the cost of driving to a store.
Retailers with their own store cards can hold the line on interest rates to compete. In-store promotions will be more important than ever.
In any case, the natural arc of online sales will continue to grow as high-speed internet grows and consumers become more comfortable with the security of online shopping. Personally, I won’t willingly walk into a retail store during the Christmas season, unless there is simply no other way to get what I need. The fact that I am saving on gas will only make me feel better every time I hit “Send.”
I think Karen has hit the key points here. The long term trend is to buy more online, despite the cost of gas. It will be interesting to watch to action on delivery charges.
It seems to be a wash. What you don’t sell in the store you just sell on your web site instead. Sure beats standing in front of Wal-Mart at 6am in the dark and cold.
If you assume that consumers make rational choices, then consumers will certainly compare the cost of shipping an item with the cost of gasoline to go to a retail store to buy the product. In that case, consumers may well be shopping online more often this holiday season. However, consumers rarely make a decision using only one criterion. What other factors are important to your consumers? Do they want to see the products, touch them, examine the features in person, have it immediately, how much time do they have for shopping during store hours, how convenient is it for them to go to your store? The responses to the combination of questions important to your consumers will determine whether they continue to come to your store (and how often) and whether they will gravitate to online shopping. If they gravitate to online shopping, then the combination of criteria important to them for online shopping will determine whether they purchase from your online site or someone else’s? Consumers are not unidimensional beings. Making predictions of consumer behavior on only one dimension is bound to result in “surprises.”
Even though UPS and FedEx raised delivery charges with fuel surcharges, on-line shopping is very alluring. And many on-line retailers offer free shipping anyway for orders above a certain size, so the fuel surcharges don’t matter. On-line shopping at Xmas is great if you’re not the ultimate last-minute shopper, since you don’t have to stand around overheated in winter clothes while shifting from foot to foot in line. You can browse an unlimited selection on-line, instead of having to select from the color you don’t want in the correct size versus the color you want in the wrong size. You can get the best price in 20 minutes with some clicks, instead of wasting half a day meandering from store to store, and you can do all this sitting at home in comfort.
Stores without on-line services, who have adequate margins, can improve customer service by encouraging telephone shopping with trained local salespeople. Not people hired just for 7 weeks at Xmas. Not people who put you on hold for 20 minutes. Not people in a remote call center who can’t just walk over and look at the item being discussed so they can answer detailed questions. Ever call a local store and try to shop over the phone? It’s often hell. I understand that the technology is new (it was invented over 100 years ago), but it is possible to use it to improve, not prevent, sales. By “shopping” I do not mean “ordering what you know you want and have the model number in advance”. I mean having a conversation with a person familiar with the assortment, who can articulate the major distinguishing characteristics of each and who is willing to assist constructively in a decision. And then the person takes the payment over the phone and gets the item wrapped and shipped pronto. (Or prepares it for pickup.) I believe that less than 1% of all stores can do this, and yet 100% of all stores have phones and employees and merchandise.
Tom and Karen are right. Online shopping will increase regardless of gas prices. But…that last mile problem just got incrementally more difficult.
Oh, the pain! The pain! Gas prices are so high – tell that to anyone who has lived in Europe and they will laugh in your face. Western Europe has lived for many years with extremely high gas prices, far exceeding that of the US. So how do they shop? Efficiently. They have learned to plan out their shopping, whether on-line or bricks and motors, creating a delicate balance of the two. Can Americans follow their lead? Can we buy what we want on the internet and go to the retailers only for what we need and can’t get on-line? Never. so let the gas prices increase. It really won’t make much of a difference.
Are there any retailers left without an online sales presence? Not many, I’d guess. In the UK, online sales are growing well ahead of all predictions; few retailers expect customers to come and collect their goods. Virtually all are delivered, promptly and economically, usually with a choice of methods and prices. Delivery charges are either stable or being eliminated, largely because of competition. You all know, I’m sure, that petrol prices are much much higher here than in your part of the world and that, combined with fears of terrorism (in London especially) are wreaking havoc for bricks and mortar stores. Even some of the least technologically savvy people I know are beginning to shop online – many because my husband, who was a pioneering business journalist extolling the virtues of the internet, persists in telling them how easy and reliable it is. As customer service and stock levels in real shops prove disappointing, conversion to online shopping becomes increasingly attractive. Those remaining retailers without an online sales presence need to wake up and either get themselves online and/or sharpen up their in-store act PDQ.