Insights

Here We Go Again: How Will U.S. Consumers React to Rising Gas Prices?
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Here We Go Again: How Will U.S. Consumers React to Rising Gas Prices?

Todd Hale, Senior Vice President, Consumer & Shopper Insights

The summer of 2008 seems like a distant memory given all that has happened in the past two years. But one thing most Americans are unlikely to forget about that year was the average price of gas reaching $4.11 per gallon. Fortunately, the price level settled back to $1.61 by the end of that year. But just two years later, the average price of gas has crept up to $3.05 per gallon, and some analysts expect the price to continue to rise to near 2008 levels.

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With this in mind, how will consumers react to higher gas prices, especially in an economy fraught with uncertainty? During the summer of ’08, U.S. consumers told us how they responded by reducing shopping trips, eating out less, buying for value and using more coupons. And what they told us they were doing aligned perfectly with their behaviors.

It was during that year that the “staycation” came into existence as consumers cut-back on unnecessary travel and did more at home in an effort to save money. We saw a flurry of meal deals from food retailers and manufacturers as they aggressively fought to win trips that restaurants were losing. Will past consumer reactions to gas prices come into play in 2011? We think so, so how are you preparing for another round of opportunities for increased at-home consumption?

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A number of the habits consumers formed in response to the high gas prices then have remained in place, and are likely to accelerate if gas prices go much higher, including buying gas linked to spending levels at grocery stores and purchasing gas at outlets offering other incentives.

The trend toward buying gas linked to spending at grocery stores will continue
Are you or other household members buying more gas at locations because of incentives tied to spending levels at the GROCERY store where you shop? June 2007 June 2008 June/July 2009 June/July 2010
Yes 19% 21% 25% 24%
Source: The Nielsen Company.

Other than GROCERY, are you or other household members buying more gas at locations because of incentives tied to spending levels at that store where you shop? June/July 2010
Convienience / Gas 19%
Warehouse / Club 14%
Mass Merchandiser 7%
Source: The Nielsen Company.

Retailers and manufacturers should look back at how their core shoppers and buyers responded to past gas price increases in 2008 and begin planning now for 2011. While it’s not yet clear how high gas prices might go, any further rises coupled with elevated levels of unemployment are likely to drive consumers to take additional steps to save money. It’s never too early to have the strategy in place to respond.