Consumer Spending Shifts to Online In The Wake of Higher Gas Prices and Long Winter

MasterCard has released a report this morning that shows consumer spending has slowed as a result of a late Easter this Spring, coupled with a lingering Winter and a recent spike in gas prices. What is interesting about the report, detailed in the Associated Press, is that it shows consumers shifted some of their discretionary spending rather than eliminate it, and the place to which they shifted was the internet.

While consumer spending did slow in March 2011, the figures for year-over-year consumer spending were still up, and the MasterCard report, produced by MC Advisors’ SpendingPulse, shows all spending increased year over year, but online spending in all categories jumped 16.1 percent in March.

Major retailers will report their same-store sales numbers on Thursday, and that could help provide a clearer picture for many as to how the consumers’ spending habits are changing, with the availability of alternative venues.

The problem has been, for many retailers, the slow recognition of domains and the Internet as a viable option for sales leads and conversions. While many stores now operate exclusively as online venues, such as Circuit City, these shifts to the virtual world only happened in the wake of catastrophic declines in consumer spending at brick-and-mortar outlets.

A recent blog posted on NeusNews.com poses questions about the long-term viability of physical storefronts, versus those in the domain space. The blog suggests children being born today may know little of the mall scene, due to the continued closure of terrestrial operations, even as the economy supposedly makes strides toward sustainable recovery.

The lack of consumer spending in March, however, is still being blamed on more than just gasoline prices, which have surged an average of 86% since last year.

The figures are even higher in some parts of the country, with all or more of that alleged average increase happening since Thanksgiving 2010, based upon the trends we have witnessed in South Florida. Gasoline prices at one Shell station were $2.79 in late November. Today that same gallon will set you back $3.73.

With online consumer spending still accounting for less than 10% of all retail sales in the United States, that substantial increase in fuel prices, particularly in widespread metropolitan areas like South Florida, could put a great strain on physical retail outlets, many which are suffering under another specter, that of the quivering real estate market, which is finding most land-owners unwilling to sink too much into capital improvements, whilst the economic suffering lingers.

If the housing market is any portent of the near-term business real-estate market, we still have some way to go before prices halt their declines. And many newer businesses, including Rodan Media, do not have retail locations. They are simply unnecessary.

Consumers will still always appreciate storefronts. The ability to touch the objects you buy is a very human need. But the ostentatious display of consumerism, upon the face of Terra Firma, has begun a fundamental shift to a more electronic presence. The question remains, which companies will take advantage of the lingering economic slowdown to boost their online presence, and which will become memories and footnotes in American retail history?

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About the Author

Danny Pryor is a media, website and content developer based in Fort Lauderdale. He produces websites, video and other digital media through his company, Rodan Media, and is the executive director of the travel website, TurpikeInfo.com, which he co-owns with his business partners. Danny began website development in 2000, while working with Scoop Magazine, in Fort Lauderdale. His media and broadcasting career dates to 1988, when he began working in news radio, in Las Vegas. He has two awards from the Florida Associated Press, for Best Individual Achievement and for Best Spot News, for his radio news coverage of events in Miami, during 1992.



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