Gas prices drive U.S. bargains
Retailers have dreamed up all kinds of promotions to pump up sales, writes CHRIS DOLMETSCH in New York.
As U.S. fuel costs rise to records, marketers of cars, travel and even golf equipment are offering deals on fuel to keep sales from flagging. Callaway Golf Co., the Carlsbad, California-based maker of Big Bertha drivers whose shares have fallen 31 percent this year, is giving away $100 of gasoline with the purchase of clubs costing as much as $529 each. Chrysler LLC in Auburn Hills, Michigan, is cap- ping buyers’ costs at $2.99 a gallon (about 78 cents Cdn a litre) on most vehicles. Expedia Inc. of Bellevue, Washington, is handing out $50 prepaid fuel cards when customers use the largest web travel agency to book at least three nights in a hotel.
“Gasoline prices are top of mind for the consumer,” said Callaway CEO George Fellows. “The campaign has hit a responsive chord in our customers and provides a significant incentive. We want people driving to the range and this will help them get there.”
With home prices at their lowest since September 2004 and unemployment at its highest since the following month, consumer confidence in June reached a 28-year low.
U.S. gasoline demand fell 3.8 per cent last week, a sign record pump prices are cutting into driving.
The average U.S. price for unleaded gasoline rose to about $4 per gallon this week, roughly $1.05 per litre.
The price is one-third higher than a year ago.
Marketers are taking the decline in consumer sentiment as an opportunity to use free fuel as bait, said Burt Flickinger, managing director at New York-based Strategic Resource Group.
“The last time we really saw anything like this was 35 years ago with the first big spike in oil in 1973 and 1974,” he said.
U.S. automobile sales dropped 8.4 per cent in the first five months of the year, according to Autodata Corp.
Suzuki Motor Corp. is offering “free gas for the summer” to get customers into showrooms. The Japanese automaker, whose shares have dropped 19 per cent this year, is giving buyers of any of seven models a prepaid Visa card good for about 4,800 kilometres worth of fuel per month for three months.
Chrysler, the third-largest U.S. automaker, is trying to reverse a 19.3-per-cent decline in U.S. sales in the first five months by capping gasoline costs at $2.99 a gallon for three years for buyers of most Chrysler, Dodge and Jeep vehicles. The offer, which was extended through July 7 from an original end date of June 2, covers regular, diesel or ethanol blends of fuel and is limited to about 20,000 kilometres annually.
While dealers offered their own promotions when gasoline prices spiked in the past, “this is the first really big push at this level,” said John Wolkonowicz, a senior analyst for North America at Global Insight Inc. in Lexington, Massachusetts.
The number of people visiting Chrysler dealers rose 25 per cent in May over April, but they may not be buying, according to Mr. Wolkonowicz.
“It’s making what looks like a risky purchase less risky for a while, but then the risk fully returns when the deal is over,” Mr. Wolkonowicz said. “And notice the other car companies didn’t rush to copy Chrysler.
“I suspect they did the analy- sis and concluded it wasn’t worth it.”
Toyota of Colchester, a dealer southeast of Hartford, Connecticut, in May stopped giving out $180 in gasoline for anyone buying a new or used vehicle after “zero response,” said general manager Al Duplice.
“There’s other things that we do that have been very, very popular, but this has not been one of them,” he said.
“You have a strained economy and you’re just not going to sell things to people just because you’re giving them some gasoline.”
Supermarkets and drugstores are attempting to use free fuel as an incentive for smaller purchases.
Customers at H-E-B food stores in Texas get $5 in gasoline for every $25 spent on housebrand merchandise. Giant Eagle markets in Ohio, Maryland, Pennsylvania and West Virginia are providing a credit of up to $1 a gallon for shoppers who transfer a prescription or sign up for a store credit card. Rite Aid Corp., the third-biggest U.S. drugstore chain, is offering $30 in fuel as a bounty for moving prescriptions.
“Gasoline is just taking a bigger bite out of shoppers’ household budgets so they certainly are going to be more receptive to programs that ease the pain at the pump,” said Jennifer Halterman, a senior consultant with the Columbus, Ohio- based TNS Retail Forward market-research firm.
High gasoline prices are forcing some tourist attractions to subsidize visitors’ driving. Timber Bay Lodge, a Minnesota lakeside resort, is giving 20 gallons to anyone reserving a houseboat, costing up to $2,995 a week, by June 15.
The National Basketball Association’s New Jersey Nets are also turning to gasoline to attract fans amid declining attendance as the team prepares to move to Brooklyn in New York.
The Nets are offering fans a prepaid card worth 10 per cent of the price of a season ticket, costing as much as $350,000, if they buy or renew by the NBA Draft on June 26, spokesman Barry Baum said.
“Everyone feels the rising gas prices,” he said. “We felt this was a way to give back while also attracting new season ticketholders.”
Such gasoline-related deals are “here to stay,” even if the price of oil drops as much as 15 per cent, Mr. Flickinger said.
“Consumers can’t really control the price of their car payments and their mortgage payments and student loans,” Mr. Flickinger said.
“The only way consumers can really control their variable costs is on gas and groceries. Gas cards will be the most powerful promotional vehicle of any kind this year and during the rest of this decade.”