A car pumps gas at a Costco gas station. The conflict between Ukraine and Russia has resulted in rising gas prices in the United States over the past two weeks.
Michael Ho Wai | Lightrocket | Getty Images
Along with fried chicken, biscuits and iced tea, family meals at Southern fast food chain Bojangles now include a $ 10 free gas card.
In select Krispy Kreme stores, the price of a dozen glazed donuts has dropped temporarily on Wednesday to keep drivers taking breaks as they pay more for liters of petrol.
Businesses are dangling gas-related perks as Americans feel pain in the pump and some are starting to make choices about where to cut budget. Warehouse clubs, including Walmart-owned Sam’s Club and BJ’s Wholesale, have rolled out special campaigns to highlight cheaper gas as a major membership benefit. Merchants, including Kroger and Giant Eagle, are announcing fuel programs that make customers’ grocery spending a lower price per item. gallon.
“We’re a car economy,” said Jackie Woodward, Bojangles’ chief brand and marketing officer. “It’s something that really hits the core of how people go about their lives, and I think that’s why it resonates with our customers.”
Bojangles began handing out $ 1 million in gas gift cards last week at company-owned restaurants and franchisees, many of which are in southern states, particularly hard hit by inflation.
Woodward said the Charlotte-based business customer is typically a worker who “cares about the food they feed their families and how they can stretch their dollars.” She said the fast food chain seized the opportunity to show that it is attuned to customer concerns. So far, she said, customers have responded with surprise and gratitude as they get more for their money.
Gas prices are just one of the daily costs that have risen as inflation soars for about 40 years. The national average for one gallon hit $ 4,331 on March 11, the highest price ever, according to AAA. It has fallen to an average of $ 4,098 from Tuesday, but it is still a significant increase from the $ 2,863 average a year ago. In some northeast and west coast states, gas prices are even higher. In California, for example, an average gallon of $ 5,748 ranged from Tuesday, according to AAA.
Prices, which appear on large signs across the country, drive only a fraction of household spending, but can have an overall impact on consumer confidence, said U.S. Bank President Tendayi Kapfidze.
“The mindset effect is probably greater than the wallet effect,” he said.
Impact on retail sales
Consumers spend about 4% to 6% of their monthly expenses on gas, Kapfidze said. It is more of a burden in low-income households, where the percentage can rise to as much as 20%.
Retailers will get new clues as to how consumers will react to these prices on Thursday morning when the Department of Commerce reports retail sales from March. Retail sales in February fell back from expectations, signaling that consumers’ pace of consumption may be declining.
Even before the detailed data from March are published, however, there are growing concerns about the state of consumers. Over the past two weeks, an uncertain economic background has prompted analysts to downgrade some retailers’ shares and upgrade others. The war in Ukraine has injected further uncertainty about consumer thinking. Some economists have warned of the risk of a recession, even though unemployment remains low and job openings go faster than people occupying them.
Companies such as Macy’s have recognized that they will have to compete for discretionary dollars as some consumers choose between buying a new outfit, booking a vacation or going out to eat.
Gas prices will be displayed at a gas station in Manhattan, New York City, New York, on March 7, 2022.
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Steve Sadove, former Saks CEO and senior adviser to Mastercard, said retailers are at a turning point after “a period of near-nirvana” where consumers had fewer places to spend their money.
During the earlier part of the pandemic, people put stimulus checks and extra savings into purchases. Companies had fewer promotions and higher profits due to lower inventory than usual. Holiday sales, for example, hit a record $ 886.7 billion despite supply chain snares and omicron-driven peaks in Covid cases.
Sadove said the consumer remains healthy, but he expects spending to decline. Higher retail sales figures now reflect higher prices for gas and other goods, not just customers’ appetites to use, he added.
Sending a message
While the higher price of the pump is a burden on consumers, some retailers see an opportunity to seize a larger share of household budgets.
From last week, cashiers at Giant Eagle grocery stores began promoting the company’s loyalty program at checkout. The privately owned grocery store has 200 supermarkets and 270 grocery stores with gas stations in Pennsylvania, Ohio, Indiana, Maryland and West Virginia.
One of the cornerstones of the program is rewards that customers can redeem for dollars on groceries or gasoline. To encourage customers to sign up, the grocery store is offering a 10 cents discount on every gallon of gas purchased from their pumps for the first 90 days, said Justin Weinstein, vice president of customer experience. It has recently waived the expiration date for rewards, he said.
“Rising fuel prices were our thoughts when we made this change,” he said.
Weinstein said the Giant Eagle has noticed that gas prices have already changed purchasing patterns. Customers have been on their way to smaller, more frequent refills.
Some companies have a bit of fun with an otherwise serious case. As of this week, Krispy Kreme said it is leveraging its “strategic donut reserve.” Over the next four weeks, it will price a dozen of its glazed donuts on Wednesdays to match the national average for a gallon of gas. That’s less than half the typical price of over $ 10.
Dave Skena, chief marketing officer, said the idea was born out of his own team complaining about gas prices. The easy idea, he said, is having a very real problem for household budgets. Gas prices are unique because the billboard-sized numbers are in the faces of consumers, he said.
“It’s very visible and it’s not very substitutable, and for many people it has a significant impact on other things they can afford – especially on things that are fun to have,” Skena said.
Donuts will be sold at a Krispy Kreme store on May 5, 2021 in Chicago, Illinois. The donut chain reported yesterday that it plans to make the company public again.
Scott Olson | Getty Images
For member-based warehouse clubs, branded gas stations – and their lower prices – have become a way to attract customers.
Sam’s Club CEO Kath McLay said some members sign up specifically for cheaper prices at the pump. When they fill up, she said, the club is looking for ways to woo them inside.
“We see gas as a membership benefit – so we always want to be super competitive – and then it becomes a traffic driver for the club,” she said.
This month, Sam’s Club is offering 10% back in store credit every Tuesday to club members who use one of their signature credit cards at any gas station.
Warehouse club competitor BJ’s encourages customers to fill their refrigerators and refuel at the same time. Customers who spend $ 100 or more at a club this month get a 50 cents discount per. gallon the same day as the transaction. If they trade in one of BJ’s co-branded credit cards, they get an additional 10 cents off during a one-month promotion.
Costco, another warehouse club, saw sales jump in March as gas prices crept higher. Its comparable sales increased 17.2% in the five weeks ending April 3, compared to the same period last year.
Some of these sales gains came from gas prices and customers shopping in stores after being drawn to the warehouse club’s petrol pumps.