Is it Time to Connect Gas Prices to Online Shopping?
July 8th, 2008 by Scott Silverman, Executive Director, Shop.org Posted in Marketing & Consumer Trends
Like many Americans, I experienced a strong sense of sticker shock last weekend when it cost me $80 to fill up my minivan. For the last couple of years, I have resisted the idea that consumers, with the exception of people living in rural areas far from the nearest shopping center, would shop online to save money on gas. But, with the prices as high as they are right now, I think we’ve reached the tipping point. The question then, for online retailers, is whether you make “buy online, free shipping, save money on gas” part of your marketing message. Is it helpful to remind people that they are spending so much money on gas? Shipping costs are going up. If you are offering free or discounted shipping, it will further erode your margins. Any thoughts?
Scott, I think the high gas prices would be good for online merchants if the economy was healthy. Unfortunately, with a poor economy all retail sectors are witnessing hard times.
We at DelightfulDeliveries.com have talked about promoting the savings of shopping online and I think it’s a good way to offset the dislike for shipping charges.
Regarding margins, I can’t see how anyone can maintain free shipping and not have it erode margins. Everyone is paying fuel surcharges and if you aren’t compensating for these fees elsewhere you will feel the affects in your bottom line.
My non-ecommerce 2-cents:
This is a great time for change in America. I am hopeful we will find alternative energy sources and put an end to our reliance on foreign oil and make our world a “greener” place.
Happy July 4th to all.
Eric
Scott,
Not only are there marketing opportunities, but also the high gas prices may be the fuel (ok, bad pun) that helps online commerce continue it’s growth this holiday season at levels equal to or above 2007. No gas and free shipping - a powerful combination.
I would expect that the prospect of saving on gas may offset the impact the tough economy is having on online commerce.
The topic is certainly on every ones mind, and different ways to save are welcome and should help consumers both online and offline especially during the summer driving month. Free shipping has always been a hot promotion, i believe there was a Forrester report that mentioned that its is the most preferred promo a couple of years ago, and many merchants already offer it. I think a new type of offer or more gas related offer is needed.
With eBillme we just launched a new promotion that gives new customers a $20 gas card. https://www.ebillme.com/index.php/inserts/gas/
Larry, i’ve given a lot of thought to what you said regarding the impact of rising fuel prices on E-Commerce. On one hand it seems logical that as people drive less they will seek to buy more online, but I am curious as to whether any research exists to suggest that shoppers are indeed driving less and are turning to the web to do their shopping in perfect correlation. Perhaps these people are just buying less?
It is possible that E-Commerce benefits from the rise in fuel costs for a different reason (or perhaps multiple reasons). I’m no economist, but assuming that customers become more price-focused when their disposable income decreases, it is possible that the the ability to buy goods online without having to pay sales tax (saving 6 to 7%) becomes more highly valued to more people, and as a result E-Commerce flourishes because of the consistent cost-savings that arise.
“Save Money on Gas”, using this as a marketing message in a sales campaign? Hmm, I’m not sure, The flip side, maybe I don’t want my customer to be reminded that fuel prices are high and there is a down turn in the economy, do I want that person to think more carefully before buying my product, maybe I don’t want to remind them that they may of just saved $20 on fuel, but also give them a guilt trip about spending with me.
This aside, there would be no harm in doing a split test on a campaign for a week to see if it did increase sales.
Definitely an interesting topic. Recently I’ve started getting a lot of offers from Vegas and other destinations offering me gas credits and even flying credits to offset the travel costs. With retail there’s a lot less the brick & mortar locations can do to offset the prices since and to add to it, their paying increases themselves in freight charges.
Successful etailers will definitely use this to their advantage either overtly or subtly as both should work. You don’t have to pound it into people’s heads — driving to mall after mall isn’t going to be cheap so while there’s always been a lot of desire to “window shop” the websites that can figure out how to show people the right product mix are much more likely to earn an immediate conversion. I suspect this will mean even better returns for the big brand retailer’s online divisions (likely at the expense of some retail locations) as customers simply shift their spending habits around.
Of course some of the larger stores may not see as much benefit from the gas crunch online as they do offline as customers find themselves motivated to drive and shop them for a larger selection of products locally (i.e. people who have shifted to doing grocery, household and misc shopping at super walmarts rather than multiple locations).
That all said, there’s a wonderful opportunity to play with direct messages and just hint at the issue. Jay is right that reminding people how much they spend on gas can have an adverse reaction but it does make a great test. As does playing with other offers be it the Zappos.com style free shipping both ways offer to make returns easy or selling some of the on-site features as a better way to virtually “try on” products before buying online.
Of course there’s also an increase cost to etailers from the higher gas prices so getting super aggressive online won’t always be possible but when customers are trying to save drops of gas where they can, you can be a trip from the local Mall to the Big Mall to Target and back to the local Mall because they had the best price is going to happen a lot less often.
Some of my brick-and-mortar clients have been buying gas gift cards and giving them out in email marketing promotions…visit our store and we’ll pay your gas.
The same is true for my online clients, they have been playing up free shipping and no gas costs…
eBags sent out an email campaign a week ago, “Paying too much to get from here to there? Skip the mall we’ll ship it to you for free”. They had a graphic of the gas pump showing current gas prices for regular, mid grade and premium…then one for ebags which was set at $0.
Good idea to connect high fuel prices with savings, but if you’re a multi-channel retailer like we are then you could be blindsiding your store channel by doing that. Anna Y. has a good idea of balancing things out with store vouchers, advertised both in online campaigns and with store signage.
Scott,
Even if retailers don’t make the connection, shoppers already have. According to a recent Map Quest survey of 1,001 Internet users, 94% of consumers have changed their behavior because of gas prices. The rest of the results are at http://www.insidesocal.com/bargain/2008/06/the-effects-of-high-gas-prices.html
Another reason I know why gas is on the brain of every shopper: a recent post on my LA Daily News blog the Bargain Hunter: How to Save a Buck in Everyday Life (www.insidesocal.com/bargain) sparked a heated debate. The topic? Whether a Prius makes $ense.
(I’m not breaking new ground based on other replies…but in the name of throwing in my two cents)
It obviously makes sense to meet the consumer where they live (in this case, dealing with gas prices), but in the case of retailers with online shops AND brick and mortars–do they really want to encourage customers to stay away? Is it prudent to remind them that it might cost a few bucks to drive to a store? I’m not “Chicken Little” and suggesting that online outlets cannibalize in-store sales (an argument I’ve heard from old school retailers) but customers love to “graze” when they physically visit a store and that leads to additional sales.
I just offered my two-cents on a Bazaarblog post. In short, I think now is definitely the time and there are many word-of-mouth lessons learned that lead me to that conclusion:
http://www.bazaarblog.com/2008/07/07/retailers-now-its-time-to-stress-the-environmental-and-cost-benefits-of-shopping-online/
Great post, Scott.
Retailers trying to understand the impact that gas prices are having on their customers may want to read this month’s column by NRF President Tracy Mullin in STORES magazine. The article references BIGresearch data, which states that 86% of Americans are affected by gas prices, up from 76% who were affected one year ago. While the information is sobering, it may provide good insights for retailers in marketing efforts.
The column can be viewed at: http://www.stores.org/Current_Issue/2008/07/President’sColumn.asp
Anna is correct that eBags.com recently sent an email to our customer file reminding them to “skip the mall, we’ll ship it to you for free.” As a pure play, we are fortunate to not have to worry about competing against our own brick and mortar stores and feel that high gas prices are a compelling reason to shop from home or office. The email performed well, not in the upper quartile, but still solid results. The secondary benefit to eBags.com was to remind consumers that they have a choice of shopping from their home/office and saving $ or wasting time and gas $ driving all over town trying to find the perfect bag.
Rising food prices is also on many people’s minds. My Mum was complaining about this just last week on the phone to me! She is in England, I am in Los Angeles but we both had the same experience with our “weekly shop”.
As well as offering gas gift cards, it might be interesting to come up with promotions around food. Team up with a local food store/restaurant, or offer grocery gift cards from large chains such as Ralphs/Vons.
“Dinner is on us” or “Lunch is on us”…
Shipping, gas and sales tax can be the straw that broke the camels back when making a purchase. It’s psychological rather than the actual cost involved. One of my Brick and mortar clients had a hugely successful promotion with, “We pay your sales tax”.
It’s only 8% off, yet it led to significantly more sales that a 30% off promotion.
Peter - thank you for sharing insights on the eBags.com “save on gas” email - straight from the source! Thank you to all the Shop.org community members who offered their thoughtful comments and ideas on this topic. I’m sure the readers of this blog would love to hear from any other retails who have test results to share.
I think many consumers in US and Europe will not just shop online to save money on gas and sales tax, but they are looking for the same products on oversea shopping portal so that they can pay less to shop due to exchange rate difference again US Dollars and Euro Dollars again other countries exchange rate.