By: Samantha Stone

 

          Other markets seem to anticipate a rise in sales when the price of a good like gas largely decreases. Because gas is a good that is purchased by the majority of the population, when the prices drop, marketers often view it as an opportunity for all these customers to spend their money elsewhere and possibly enter into their market. According to a New York Times article, retail data suggests that people are not spending the money they are saving on gas at retail stores. The reasons behind these actions can be analyzed in a variety of ways by looking at the product and its alternatives, what affects consumer behavior, and the consumer culture.

          The article addresses the expectations of retailers by including the short-term data on which they based their anticipation of future rising sales. In December, gas prices were declining, which created a positive outlook for Christmas spending in retail stores. However, after the holiday season passed they found that people were saving the extra money instead of spending it. The first thing to look at when trying to understand these outcomes is how the compared goods are categorized. Gas is a low involvement purchase with low risk. People usually don’t extensively research to compare prices of gas, which is very different from actions pertaining to retail goods. Retail stores often sell more high involvement items which means consumers will put more time into comparing prices because there is more risk. The risk is significant because it can be in the form of other’s opinions of their purchase, while gas doesn’t have this aspect. Using gas prices to predict retail sales may have not resulted in the anticipated outcome because the two goods are not equally measured.

          Although retailers had high hopes that consumers would spend more in their stores after evaluating their alternatives, the Commerce Department found that Americans were spending more money in restaurants and bars. This spending suggested that Americans were using the money they had saved on gas, to eat out more often. Regardless of whether this money was saved or spent on eating out it was clear that this money wasn’t going toward retail purchases.

          In this situation, consumer culture is also an important aspect to look at in addition to where the pocketed money is going. In the article they found that, “lower-income households still struggled to spend more despite the lower gas prices, because any money saved was offset by cost-of-living increases.” (Tabuchi 2) Retailer merchandise markets more of a hedonic need, which reflects our desire for sensory pleasure. For consumers with lower incomes, they often choose to use this money for more basic functional needs.