Gas Prices and Online Shopping: There is a Connection

If you have a brick and mortar establishment, you probably think that you have a good grasp of the various costs of doing business including your fixed costs, payroll, inventory and transportation in terms of receiving goods and shipping them out again. However, have you considered another facet of your product delivery scheme that can have a very real and very direct effect on your sales, the transportation costs incurred by your customers? Think about it: As the price of fuel rises, customers are less interested in getting into the car and driving out to your establishment.

What Goes Into Fuel Prices and What are the Consequences?

Fuel prices are more than just the price of gas at the pump. There are a large number of things that go into the price per gallon that you have to pay (all figures are approximate):

  • Crude oil prices: 53%
  • Refinery processes: 19%
  • Federal, state and local taxes and fees: 19%    
  • Marketing and distribution costs: 9%
  • Retail station costs and profits: 3%

What all of this adds up to is the price you pay at the pump. Now, as that pump price rises—driven up by oil speculators looking at growing markets like China, as much as by OPEC or anyone else, and threatening to reach the $4.00/gallon mark by this summer—the willingness of customers to drive to your shop also threatens to decrease. According to the National Retail Federation's 2007 Gas Prices Consumer Intentions and Actions Survey, more than 74% of consumers believed that fluctuating gas prices had an impact on their spending habits with over 40% reporting fewer shopping trips. There was also a marked increase in customers shopping closer to home, taking advantage of sales and using more coupons.

Offsetting the Damage: Dealing with High Gas Prices

Now I am not saying that the days of city-dwellers driving out to the suburbs to shop are over, but that behavior is declining. Fewer customers through the door mean fewer sales and lower income for your business. So how do you offset this drain on business? One thing you can do is change your marketing efforts to make coming to your establishment a treat. Another way is to open your business to customers in a way that does not require them to come to you by opening a virtual storefront on the Internet.

Market the Experience

Everyone likes to be treated like a star. Consider: If Johnny Depp and Helena Bonham Carter waltzed in with a straight-razor, meat pie and a song; after picking your jaw up from the floor, how would you treat them? You would do everything you could to meet their needs, right? You might even eat the meat pie (though I can’t recommend the shave) just to show how important they are to you. The point is that they would walk out of your place feeling like royalty. Do your current customers exit your establishment feeling like royalty or like something else, something considerably less regal? Take an inventory of how your customers see their experience in your establishment. Discover what you are doing well and what you need to improve upon. Some things to consider include:

  • Customer Interaction. How does your staff treat your customers when they come in? Do you meet or exceed their expectations? Have you gotten to know them? Do you remember things about them such as their favorite items, special days, etc.?
  • Delivery Options. Do you deliver in a timely manner? Are your customers satisfied or can you do a better job in getting your goods and services to them faster and more efficiently?
  • Prices. Are your prices in line with your competition or are they higher or lower? How can you adjust your price structure to satisfy the most customers while remaining competitive and meeting your financial needs.
  • Payment Options. Have you made payment as convenient and as flexible as possible for your customers?
  • Incentives. What do you do to keep your customers from going across the street? Clubs and frequent buyer cards, referral incentives and other things can have a real impact on how your customers see their relationship with you.

Opening Your Virtual Storefront

For many brick and mortar businesses, their Web site is a way to showcase their goods and services, share some information about their business and key personnel, tell a story or two about their most satisfied customers and give their site’s visitors a way to contact them and even directions to the store. In this case the Web site is, for all intents and purposes, an online brochure. There is nothing wrong with all this as far as it goes, but the problem is that as retail customers change their purchasing habits it does not go far enough. It brings you to the brink of e-commerce, but the time has come to go past that brink and take the plunge.

Don’t worry. The water is fine, the fish are—for the most part—pretty and pretty harmless, and the bottom is littered with treasure for those willing to go after it.

Online Business Components

It does not take an arm and a leg to get going in the world of e-commerce. You need two things to be able to conduct business online: A way for your customers to choose products and a way for them to pay for those products as well as for the shipping necessary to get their items to their doorstep.

The Product Catalog. This is the portion of your site where you showcase your products. Have a look around at other e-commerce sites and see how they do it. You should have a photo of your product, a brief description, the price of the item and a way for your customer to get further information such as a button that takes them to a product page. Small stores with a low number of products can get away with a simple menu on the main page, with perhaps a small photo icon of the product. Users can click on the icon and be taken to the product. Larger stores, however, tend to need a more robust and sophisticated solution. These stores usually have a single product per page and rely on either site search engines or hierarchical departmental menus or both to browse the store.

The Product Page. This page should offer all the information on the catalog page as well as further information about the product itself, colors, prices and availability. It should also have a way for your customer to specify how many of this item they would like to buy and way to send that information to a shopping cart.

The Shopping Cart. This is a temporary page that stores the information about your visitor’s purchase. It is essential for efficient online sales and luckily it is not difficult to obtain. There are a variety of shopping cart modules available for purchase or rental, or you can have one designed specifically for your site. This last will, of course, require you to hire a Web developer and is generally the most expensive option. Rentals can be based on lease time (month to month or annually) or on the number of items you plan to process each month. You will be able to find a good list of shopping cart providers at www.paypal.com.

Bringing it all Together: Store-building Software

Today, affordable store-building software takes care of all of these issues for you. These stores include the shopping cart, and now allow you to add, delete, or temporarily hide products, change prices, set up sales and promotions, pick up orders securely, manipulate graphics, and integrate the online operation with existing accounting and inventory systems and you can do it all from your desktop Internet browser.

Store-building software also maintains an online database where such information as product name, SKU, descriptive text, price, weight (to calculate shipping), and the file name of the product photo can be kept. With such a system you can easily select the products you want to appear on store pages. In more sophisticated and powerful store-building applications, you can also assign departments and sub-departments to each product for easy cross-linking within the store’s searchable online database.

Getting Paid. This is what it is all about, isn’t it? While merchants can, and sometimes do, take electronic checks, the primary mode of payment for online sales is the credit card. The reasons are obvious since credit cards are:

  • The only truly universal electronic medium of exchange.
  • A way to sell more products and services by offering convenience in ordering.
  • An automatic way to handle foreign currency.

The key with credit and debit cards is convenience. After all, there is no substitute for being able to order something and instantly consummate the deal. Still, simply because you accept credit cards, that doesn’t mean you should not offer other purchase alternatives as well. Have an order form that can be mailed in with a check or money order for those who don’t wish to use—or don’t have—credit cards. While you will be certainly catering to the fringe of your customer base, having this option will attract some shoppers that you would have lost otherwise.

Rising gas prices, even a coming recession, don’t have to mean a reduction in your business. By taking steps to make your business as convenient and accessible as possible, to raise your marketing and customer service to the next level now, you can head off any problems that may be coming down the road.