This spring's spike in gas prices might be pinching low-income consumers, but some supermarket operators say the news isn't necessarily all bad.
The recent run-up at the fuel pump may be keeping shoppers closer to home, food retailing executives told SN last week, which could mean fewer trips to outlying supercenters or to restaurants, and higher spending per trip at traditional neighborhood supermarkets. Some operators have also moved quickly to capitalize on the increase by offering discounts, tied to in-store purchases, at their own fuel centers.
"Our kind of customer can no longer afford to shop around, and that's a powerful thing - like nothing I've ever seen before," said Ron Johnson, president and chief executive officer, Minyard Food Stores, Coppell, Texas. "And with gas prices expected to go up to $3.50-3.75 a gallon by the end of the summer, that phenomenon is likely to grow, with more consumers doing more planning to make their purchases at a single primary location, whether that be at one of our stores or whatever supermarket is closest to them."
Johnson said Minyard last year conducted a study that showed customers were driving out of the area to purchase certain items - so Minyard re-merchandised its stores and added those items, resulting in improved sales as customers "give us an opportunity to be their primary store," he said.
Johnson and other retailers said they've seen their customers making fewer trips but spending more per trip, which they attribute to the fast-rising cost of filling the tank.
"People are not driving to outlying areas to shop because of the price of gas, and it's my hunch Wal-Mart and similar operators will see a greater negative impact," said John Runyan, president and CEO, Associated Grocers, Seattle, a retailer-owned cooperative. "We expect the situation to benefit our members because many of them are neighborhood stores."
Rich Niemann Jr., CEO, Niemann Foods, Quincy, Ill., agreed that high gas prices may be a double-edged sword.
"It's possible that the loss of sales due to customers having less disposable income could be offset by some folks not wanting to drive the extra distance to a supercenter," he said.
Steve Smith, president and CEO, K-VA-T Food Stores, Abingdon, Va., said his team came up with a plan in the last few weeks to offer customers discounts on gas - the company operates 45 fuels centers at its stores - for spending a certain amount on groceries. Beginning in mid-May, customers save $1 for every $25 they spend on groceries in the company's Food City stores and another $1 for every $10 they spend on corporate-brand product.
"We hear a lot about how the cost of gas is putting a pinch in people's pocketbooks," Smith said. "When you have people on relatively low incomes or on fixed incomes, something's got to give if it takes $40 or $50 to fill up their tank. It may make the difference between eating out in a restaurant, or possibly not trading up to something when they are in the supermarket."
The Fuel Bucks program, he said, will be tested at 30 of the company's fuel centers.
"We want to trade people up in purchases, and we want to reward our loyal customers," he said. "We want to strike while the iron is hot. We can't solve the whole problem, but maybe this can aid folks, and help our business."
A U.S. Federal Reserve report last week said higher gas prices appeared to be hampering sales at discount retailers, although the report said overall retail sales in March and the first half of April were strong.
Retailers reported being wary of the impact of rising gas prices heading into the summer, and several areas of the country were already blaming gas prices for weaker-than-expected tourism, auto sales and retail sales.
The average price for a gallon of gas rose from $2.50 a month ago to $2.92 last week, according to the American Automobile Association.
