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|Gas Price Up, Online Sales Down|
Are your sales going down as gas prices are surging?
Our market is one that is based on impulse and disposable income. We also cater to a younger crowd, 40 and under.
I have noticed as the gas prices here in the US have really surged in the last week, that our sales have also tanked.
Anybody else seeing a sales slow down that they feel is probably due to surging gas prices?
There are many other factors, like people taking last minute summer vacations, but with gas prices climbing so high, many people are even forgoing these last minute vacation. I'm also wondering if the spike in gas prices is also causing people to tighten their wallets for fear that it is only going to get worse in the coming months and the might need to save that extra income they have now to afford higher gas prices in the coming months.
This summer has been strong for us. However, Thursday and Friday dropped to about 50% of the average daily total for the quarter. It may be due to the recent spike in gasoline prices, but too early to tell.
Thursday, Friday, and toady have dropped off for me as well. I'm in the UK and our 'Gasoline' Charges have remained constant. I can't explain the sudden drop, maybe its more people going away, or spending more in the High street, seen as how there are loadsa sales at the moment.
I love it when you guys in the US talk about petrol/gas prices. I'm in the UK and it cost me approx $96 to fill my car up today!
Rip Off Britian! as they say.
PS, how about $9 for 20 Marlboros or
$110 for a pair of Levi jeans
I was wondering when someone from Europe or the UK was going to chime in. Gas prices there have outpaced ours for years and years.
Realize though, it is not as much the price, but the percentage of increase. Gas prices in the US are up almost 50% over last year and they are prdicting that they will be up almost 75-80% by years end. Meanwhile, wages are only up 4-7%. Imagine phantom if that $96 suddenly jumped to $144 and answer the quesion, would it cut into and effect how and where you spend your disposable income.
As for cross border issues. Our sales from Europe and the UK are up because of the favorable exchange rate. I would imagine that for online merchants over there, USA sales are probably down.
Don't forget it's back to school time for many folks. So for them, buying school supplies will take priority over many things. We've noticed a drop in sales in the past couple of weeks.
Ledfish, I'm not from the US but I don't see how gas prices will affect online sales.
IMHO, significantly higher gas prices increase transport costs and therefore should benefit online shopping.
Back to school shopping is a factor (even OV is advising advertisers to bid for certain terms in this period) but only if you target the "parents" group?
Last minute offline summer shopping, BBQ, short travels may have an effect on online sales though.
Overall, I'm not seeing a significant drop in sales but then I've been increasing my advertising spend so can't really compare :)
The big transportation cost for many in the US is going back and forth to work. There is virtually always a store or mall close by and it doesn't cost much to drive there.
The hike in gas prices is likely to bring down disposable income across the board & probably not make any difference as to whether people buy stuff online or at the mall. If shipping costs go up or there are less free shipping offers on the net, it's likely to drive more people to the physical stores.
Just read a energy industry report that this past week we just experienced an 8 cent/gal. increase of the .33 cent increase in the spot price schedule to be phased in over the next 30 days.
$3.00/gallon is coming soon. This will definitely have a negative effect on the US economy. The report basically said in so many words, the blame can be placed on the China booming economy, little women in their SUVs, and good ole boys in their monster pick-up trucks.
The report went on to say that gasoline is still below inflation adjusted early 1980's prices. However, it failed to mention the obvious...we drive less fuel efficient vehicles today, therefore our cost per mile is higher than inflation adjusted 1980's prices. Disposable income is shrinking fast folks.
Back on topic:
Yes, this oil crunch is going to either make or break me.
Yesterday (Saturday) was one of the slowest days ever. So...Thur. thru Saturday were really off. Cut my prices (big sale promotion) and so far today sales are back up to normal. Actually, I need to increase the prices for my own products due to rising production costs associated with energy prices...."catch 22".
Read another article about an aol online survey of how rising gasoline prices is affecting consumer confidence. 63% said that they are cutting back on discretionary spending and a big percentage ( I forget the exact %) said high gas prices would create financial hardships for them.
skibum has some valid points especially on the shipping cost angle.
Less disposable income means people will be looking to cut costs on everyday things.
Maybe I should set up a website/blog on "How to save for the coming oil crisis" - and put some Adsense ads on there :)
Or "How to make more money to offset the loss in disposable income"?
Yes, just what the web needs, more made for adsense sites.
$3.00/gallon is coming soon.
I am in the Netherlands and we pay 1,28 euro\liter, which is about $1,50/liter. I don't understand what you are complaining about.
I guess the war in Iraq is costing Bush more than he has anticipated and now you have to pay for it.
Anyway, I don't think gas prices have anything to do with it. I think the whole world economy is down at the moment. I personally also spend less money online than I am used to for no specific reason.
We ship internationally and although the summer months had been slow, US orders had been markedly slow.
The gas prices may explain it. Since the tax of gas is less in the US than almost everywhere else, the actual percentage of increase would be much higher. Since cars in N. America are twice the size of everywhere else, I could imagine that US consumers would be much harder hit.
In many parts of the US, cars aren't a luxury - they're a necessity. In LA, for instance, car expenses can eat up about 25% of a person's take home pay (yes, that's right a quarter: car loan payments, insurance, and gas).
Increase in gas prices also have psychological effect - it reminds everyone how expensive things are, and how much more expensive they can get, as well as how much less they have to spend on other things. Let me tell you, gas prices are a big topic of conversation.
Miklo - Please go read message 5 of this thread. I will say it once again for everyone from Europe and the UK. It is not the price as much as it is the overall increase in price over the last few months.
Regardless of the price, when something goes up 50% or 70% in a short period of time, you have to wonder what the impact will be on consumers. At some point, unless people are getting wage increase at the same rate, they have less disposable income and that may impact there spending. It doesn't matter if the cost of gas is $2.50, $5.00 or $10.00 per gallon. It is a matter of how much it increase over a short period of time.
Let me ask it this way, how much is the price of gas up right now in Europe and the UK versus 6 months ago? Have your wages increased the same amount of 6 months ago as well?
And yes, as someone pointed out, in the US, cars are a necessity unless your part of the 10% of the population that live in a big city. 90% of the poulation lives in areas where there is hardly any means of mass transit.
DerekWong28 - Unless I'm mistaken, I think you are outside the US, so that would explain why your US sales have fallen of over the summer, but probably over the last year. It cost american more, because of the unfavorable exchange rate to buy non-US. Conversely, US retailers have seen and increase in OVerseas sales because Europeans can purchase goods from us at less cost because the exchange rate is in their favor.
The way things are shaping up we have the classic makings of stagflation (remember the 1970's)? Inflationary pressures of energy prices, rising interest rates to bring USD's back from China and OPEC, health care costs, food prices, etc. Then on the otherhand...the deflationary pressure of stagnant payrolls, less disposable income and lowered consumer confidence.
Yes, we Yanks freak-out when we have to pay 2.50 to 3.00 a gallon when a year ago it was a 1.50 - 2.00 less a year ago. The social safety net for us is very small. When thing like a 50% increase in petro prices happen we cut back on our spending for self preservation. This should be a cause for concern for our friends on the other side of the pond. So...cut us some slack if it seems we are unjustified with our complaining.
|I guess the war in Iraq is costing Bush more than he has anticipated and now you have to pay for it. |
The war has little to do with it...the environmentalists here have prevented the expansion and building of oil refineries and nuclear plants The last one of either was built in the USA was 20-30 years ago. The problem is not the fault of Bush, but of popularity of mega sized SUV's, electric companies having to resort to building fuel oil and natural gas power plants instead of nuclear. Add this to China's industrial expansion equals $65+ spot price for crude.
Well, we have had the introduction of the Euro several years ago. Can you imagine how that changed life here in Europe? 1 Euro used to be worth 2,20 guilders. Instead of converting all prices to the old guilder level most stores, products and anything else was converted directly into Euros, i.e. one beer used the cost 2,50 guilders, the average level right now is 2 euro, which is 4,40 guilders! That's an increase of 76%!
As far as gas is concerned: The prices in the Netherlands are extremely high and have also increased in the past year. The price level used to be around 2,05 guilders/liter. Nowadays, we have to pay 1,36 euros. (2,99 guilders) That's 45%. Don't worry, get used to it as long as Bush is running the show.
Most products now have an Euro sign instead of a guilder sign in front of it. Unfortunately, they did not do this with my salary.
For people living in the metropolitan areas I only have one advice: Get a bike! It's much faster and cheaper.
Everything in the U.S. is very cheap for Europeans right now, so you should see an increase for international orders, unless you only ship within the U.S. of course.
>>>the environmentalists here have prevented the expansion and building of oil refineries and nuclear plants
No, NIMBY has prevented the building of these things Mr. Limbaugh. Do you want a nuclear plant down the street from you? Or how about a nice HUGE, smelly refinery that works on a 24 hour basis. This combined with the fact I have seen 2 refineries closed down by oil companies in the area I grew up, why? Maybe they wanted to drive up the price.
The price of oil is not the only factor that is going to slow the world economy. Ask anybody who buys steel how much the price of that comodity has gone up. We do have an economic hit coming, not sure it will be as bad as it was in the 70's.
Online shopping could actually benefit if people decide to buy supplies online rather than pile into their SUV and drive 10 miles to the mall. Just a thought.
Yep. Our cost has gone up 300% in the past 3 years. Aluminum is up almost 200%. The expanding economy in China was pointed at as the major cause for the shift in supply/demand. It's slowing down a bit right now but we'll see if the prices go back down to something more reasonable.
>>Our cost has gone up 300% in the past 3 years. Aluminum is up almost 200%
I forgot about Aluminum, we buy a bunch of that too.
This economy is great for countries that have lots of raw resources, like Canada. There is a oil town in northern Alberta called Fort MacMurray, it is a classic boom town. They can not find enough labor to the point where the local MacDonalds is paying 20 bucks an hour, and they are short employees.
It's got me thinking about the UK. Prices for Petrol (Gas) have shot up here as well (not as much as the US from what you are saying in terms of percentages).
But...business is slower (or seems to be for us). Thinking about increases here: House prices (therefore mortgages for anyone that has moved - and a lot of people were moving a year or two ago - to the point where people were sat in the Estate Agents and offering to buy houses as soon as they came onto the market). House prices have doubled in a few years. House tax (council tax) has shot up by 50% in some areas. Electricity and utility bill have risen by a lot (over 25% for most companies, possibly more).
Wages haven't matched those increases.
Is that why it is slowing down over here also?
"Mr. Limbaugh"....ouch that hurt. Although I agree with about half of what he says, his attitude irritates me.
|Ask anybody who buys steel how much the price of that comodity has gone up. |
You are absolutely right...I am expanding my facility and when I got the quotes from contractors I almost had a heart attack. Steel and red iron are up 40% from a year ago and you can't lock in a price until the time of delivery.
This business climate is very uncertain right now. My strategy now is to cut profit margins and hopefully increase volume above normal levels. So far it is working, but don't know how long it will hold up. Winter may be a killer with heating costs adding to the gasoline prices.
Maybe we need to start another thread such as "business strategies for dealing with unfavorable economic conditions in the coming months"
>>>Maybe we need to start another thread such as "business strategies for dealing with unfavorable economic conditions in the coming months"
I guess that is what we are doing here.
Recessions are 90% psychological, people fear a economic downturn and start to cut back on spending. I feel we are on the cusp of that right now. Let's just hope it is only a mild set back.
Interesting that you have already taken action. We have raised some prices, and we expect continued growth in our online and offline business.
"Maybe we need to start another thread such as "business strategies for dealing with unfavorable economic conditions in the coming months"
I think starting a thread like this might be an excellent idea. Especially because I think in the coming months, one thing that there is going to be a lot of talk about is increasing shipping prices because the carriers, UPS, Fedex etc here in the USA, will be raising there rates if gas prices remain high. Frankly it is going to cost more to bring goods into inventory and more to send them out.
Rugles, I agree with you that recessions are 90% mind set. When the stock market started to slide in 2000, all you heard was negative economic news, layoffs, etc etc. People began to tight there belts. Here in the US, the stock market slide was followed by the Corporate scandels, people became more worried and tighten belts further. Finally people got sick of hearing the same thing everyday and stopped paying attention and so thing stablized. Depressed they were, but stablized. Things shugged along for a period. But finally the stock slides and scandels became old old news and then positive economic news start to comeback. Companies started reporting gains and profits. Most of the news was positive. The Dow started showing increase. People started to loosen up. As they loosened their belts, things continued to improve.
Now what are we hearing everytime we turn on the news. Rising fuel costs, staggering increase. New records for the price of a barrel of oil. How people are starting to forgo certain discretionary spending items, like eating out. How people are avoiding extra trips anywhere. How single wage families are cutting back on spending. Yada yada yada.
Anybody care to guess where we are heading with all this negative news?
Is it because of BUSH, who the heck really knows, but one thing is for sure. Just 5 years ago, those refineries where 15 to 25 years old and gas prices were not so unstable.
The China theory has alot of merit to it, but I also think the wool is being pulled over our eyes a bit as well. Something else is behind it.
I do know though that the refineries are making good money. A friend of mine who owns a gas distribution business got a new $8000 rader system for his new boat as a "thank you for being a good customer" from his refinery sales rep.
|The China theory has alot of merit to it, but I also think the wool is being pulled over our eyes a bit as well. Something else is behind it. |
At the risk of seeming to be a paranoid conspiracy theorist...a plausible assumption would be that elevating the price of crude would be a backdoor way of generating funds to re-build Iraq. As far as China is concerned...another theory could be that they are purposely manipulating their currency to accumulate USDs. In turn, we are force to borrow those dollars in the form of T-bills (gov't debt) to maintain domestic monetary supply (liquidity). In the long run this would drive our economy into the ground and at the same time increase China's leverage with regard to US/China foriegn policy.
There is one thing for sure...all these politician and pencil pushing bureaucrats are no match for the collective brain power of WW member. We will prevail!
[edited by: lorax at 12:45 pm (utc) on Aug. 17, 2005]
[edit reason] fixed quote [/edit]
I tend not to believe that macro-economics can not be manipulated with complex conspiracies. To many variables and uncontrolable factors contribute to the world economy as a whole. So I would suggest that the economic conditions are a living breathing beast that can change slowly or quickly by that invisable hand that Smith talked about. It was Adam Smith, correct?
You have to be naive, brainwashed or living in a cave not to realize that a protracted war in the mideast is not having an impact on the price of oil. Here are the factors I believe are driving up the price of oil:
- the War
- booming economies of China and India
- huge increase in large vehicles on North American roads
- lack of refining capacity
- various trouble spots around the globe
- general increases in world population
- oil is a non-renewable resource and we are reaching "oil peak"
Oh.... just read that the American inflation rate is up today because of oil costs.
Even Wal-Mart is worried about gas prices (today's CNNMoney story).
I think the greater worry is inflation. In the past, the Feds have been keeping inflation under control, but I think inflation has gone crazy now. In addition to steel and aluminum, the price of wood (plywood & lumber) has shot up as well. And don't forget real estate - it has simply gone crazy here in the US.
Also, just recently many of my friends with highly technical jobs (computer, etc) are worried about their jobs. For sure this will cut down their spending habits.
Our inflation rate (US) is vastly understated because gasoline, energy prices, and interest rates are not used as variables in the equation.
|I tend not to believe that macro-economics can not be manipulated with complex conspiracies. |
That may be true in today's world, but when Charles DeGualle (sp) dumped tons of gold on the US...we were manipulated to the point of going off the gold standard.
[edited by: oldpro at 5:38 pm (utc) on Aug. 16, 2005]
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