As gas prices soar over $3 a gallon in many areas, Americans are finally beginning to react by curtailing automobile usage for the first time in decades, and retailers could be among those to feel the impact of this major reversal.
According to a recently published USA Today survey and analysis of federal highway data, Americans drove only 0.3 percent more miles in March 2007 versus March 2006, and this follows a 1.9 percent year-over-year decline in miles driven in February 2007.
To put it into sharper focus, over the past 18 months, according to the article, the U.S. population has grown at an annualized rate of about 1 percent, so this year's downward statistics announce loudly and clearly that the average American is driving fewer miles.
In contrast to the current curtailment, between 1980 and 2000, there was an average yearly increase in mileage driven by Americans of 2.7 percent, and between 1995 and 2005 the average annual increase was 2.2 percent. Taking the five years from 2000 to 2005, the average yearly increment in miles was 1.9 percent.
Estimates are that the number of miles per day is 200-300 million less than if the 2000-2005 average 1.9 percent increase had been sustained. The decrease in miles driven daily could translate into a million or more gallons of gas.
This long predicted and frequently debated development has now become a reality, and alteration in shopping patterns and behavior will emerge as part and parcel of it.
Several factors can account for the sharp drop, according to the USA Today article, including greater usage of public transportation and demographic shifts to more urban living. Other factors are slower growth in minority and women drivers, as well as the fact that people over 55 tend to drive less, an expanding portion of the overall population. But central to the decision to not drive as many miles is the soaring cost of gas. According to the American Automobile Association as reported in USA Today, the mid-May average price of a gallon of regular gas was $3.11. An SUV fill-up can cost $60.
Retailers, and the manufacturers that supply them, will soon be feeling the affects of the trend. A USA Today Gallup Poll indicates that "a majority of Americans say they have changed their driving habits in light of higher gas prices." In the poll, 70 percent of the respondents said that they would consolidate errands to reduce driving, something that directly affects retailers.
There's another threat. As Americans scramble to cope with higher gas prices, it's important to realize that transportation costs, at 18 percent, are second only to housing expenses in U.S. households. As transportation costs rise, other parts of the household budget will suffer, and, since housing costs tend to be more inelastic than other expenditures, spending on consumables could conceivably be under pressure.
Discussion Questions: Is the impact that high gas prices are having on driving patterns an opportunity or a challenge for one-stop-shopping supermarkets and convenience oriented drug stores? Now that the decrease in driving is here, what tactics and strategies should mass-market retailers deploy?
- Drivers Cut Back - A First in 26 Years - USA Today
- Fed-up drivers begin to look 'outside the box' - USA Today