With gas prices still hovering near $3 a gallon – and with expected summer increases ahead – small retail businesses should consider going online to keep profit margins high.
That’s the advice of Marc Joseph, president of DollarDays.com and author of “The Secrets of Retailing or How to Beat Wal-Mart.”
“Online stores are a great way for consumers to save money since they don’t have to pay for gas or drive to the store,” he said. “It’s also smart for retailers, as they can expand their sales beyond their neighborhood.”
Bijou Gardens relies on the Internet to bring in traffic. During the past six months, Internet orders have increased dramatically compared to walk-ins for the downtown-based business, said owner Vicki Jones.
High gas prices are to blame for the 4.1 percent increase in the Consumer Price Index for the West, according to the U.S. Department of Labor.
During May, the most recent figures available, transportation prices rose 3.6 percent, and surpassed the increase of all major expenditure categories. For the 12-month period ending in May, the transportation index increased 8 percent, doubling the increase for the annual period ending in April. For the month and year, gas prices rose 13.1 percent and 29.3 percent, respectively.
A survey by DollarDays.com, a Web-based warehouse for small businesses for consumer products, shows that 31 percent of small business owners say they will have to lay off employees if revenue continues to decline. Only 5 percent are offering financial supplements to help employees.
“Gas prices are already outrageous, and we’re headed into the summer and hurricane months, where prices typically increase,” Joseph said. “It’s no wonder that small business owners are worried. Small businesses are the backbone of the economy. It’s a scary time.”
Jones said she has not yet raised prices, but it’s an option.
“If they stay this high, we’ll have to look at raising the delivery rate,” she said. “Probably we’ll raise it by the first of the year. It’s really affecting us.”
According to the DollarDays survey, businesses are anticipating lower profits because of higher gas prices, and 71 percent are experiencing lower profit margins.
Jones has changed the way she does business in response to the gas prices. She and her husband used to make two deliveries a day, but have scaled back to a single delivery in the afternoon.
“It helps a little,” she said. “We try to plot it out, to be the most efficient we can.”
But some businesses have no choice: they rely on fleets of trucks to do their business, and must pay the gas prices even as they spiral higher and higher.
“I’ve spent 96.5 percent more this year – so far – than I did last year on fuel,” said Tom Kiemel, co-owner of Bestway Disposal. “Everyone feels it, everyone with a fleet is feeling it the same as we are. There just isn’t a lot we can do; we still have to drive house to house.”
Kiemel said his company attempted to recoup some of the high cost by placing a fuel surcharge on its commercial accounts. It lasted six months, he said.
“We got a lot of feedback about it,” he said. “Businesses were telling me that they feel the gas prices, they had delivery trucks or employees who are feeling the gas prices. So we removed it.”
Residential accounts pay a 77 cents surcharge. And like many small businesses in the DollarDays survey, Kiemel said raising prices will be the only way to recoup the energy costs.
“All the trash companies in Colorado Springs are considering it,” he said. “Normally, I’d raise rates once every two years – 3 to 5 percent – in line with the Consumer Price Index. Now, just to keep pace, I’d have to raise them double digits.”
The DollarDays survey showed 55 percent of respondents say business will suffer if tourism decreases. More than 70 percent say they have changed their personal travel plans as a result of high prices. But Experience Colorado Springs Executive Director Terry Sullivan said the city has not seen a decrease in travel because of high gas prices.
“We’re a drive market, 85 percent of the people who visit here drive here,” he said. “Denver’s the opposite, 85 percent of their visitors fly into Denver. But in Colorado Springs, we’ve relied on that drive market for 75 years.”
So far, tourists are still driving. Sullivan said that 2007 is shaping up to be a much better summer than last year. During the first week in June, he said the convention and visitor bureau’s Web site was receiving about 400 requests a day for tourists’ guides to the city, a huge increase.
“We’ve been at this $2.75 threshold for some time, but it has not appeared to thwart people from traveling,” Sullivan said. “According to the AAA, a family driving here from Dallas, Texas, would only spend $50 more this year than last year.”