Home Body
Oct 1, 2008 12:00 PM, By Mike Janssen
The high gas prices grabbing U.S. headlines amount to yet another pressure on cash-strapped Americans in already tight financial times — which gives retailers even more reason to worry. In many places, higher gas prices are altering how consumers shop. They are making fewer trips to malls and trying to do all their buying at once.
In the rural Midwest, the issue has taken on an even sharper character. In recent years, some developers have built huge destination malls counting on shoppers to occasionally drive hundreds of miles to experience first-class shopping. For example, General Growth Properties opened the $200 million, 1.3-million-square-foot Jordan Creek Town Center in West Des Moines, Iowa in 2004 as a “retail resort” that includes a regional mall, a lifestyle center and a power center in one integrated location. The project is meant to draw in shoppers throughout the region.
Today, however, because of high gas prices, many Midwesterners may be foregoing trips to such large regional centers and instead staying closer to home. The net result of this may be that rural shopping centers, which had taken a hit in recent years because of the proliferation of regional destinations, may be seeing a rise in traffic in today's climate.
Overall, one dynamic that's at work is that shoppers are cutting back on spending on gas in order to keep discretionary spending levels relatively in line with what they were before. To do this, they may change where they're spending cash as opposed to cutting back on retail spending.
National studies as well as retail executives in Michigan, Nebraska and Ohio confirm that consumers appear to be curbing their mileage in order to reduce the number of times they have to pull up to the pump.
For example, shoppers in Kalamazoo, Mich., are making fewer trips and putting the brakes on discretionary spending for nonessentials, says Jodi Milks, managing director of the Kalamazoo office of Grubb & Ellis Paramount Commerce. This may reduce business for some retailers, yet Milks says overall spending at shopping centers could still remain steady.
A shopper might not drive across town to an outlet store for a bargain item and instead opt to buy a higher-priced substitute closer to home, just to save gas, explains Milks. “The price of gas makes it worth it,” she adds.
As of September 14, gas prices nationally averaged $3.80 per gallon, according to the American Automobile Association — up from $3.67 a gallon the prior week and $1.00 higher than the same period in 2007. In June, likely as a result of the escalating gas prices, Americans drove 12.2 billion miles in June 2008, a 4.7 percent drop in comparison with the same period in 2007.
The decline was especially evident in rural areas, where travel fell 4 percent compared to a 1.2 percent decline in urban areas. Yet driving less doesn't necessarily translate into spending less among consumers in more rural markets, who previously might have taken day trips to malls located in or near a major metropolis.
Out in Omaha
As in other outpost cities, shoppers in Omaha, Neb., appear to be cutting down on driving, but not on their shopping, says Rick Quinlevan, president of the brokerage arm of Omaha-based Lerner Co.
Omaha is one Midwestern city where habits appear to be changing, but not to the disadvantage of retailers, according to local observers. A factor may be the number of malls and shopping centers available to Omahans in their own backyard. The city has seen “phenomenal growth” in retail space in the past five years, according to a second-quarter market trends report by Omaha's Grubb & Ellis Pacific Realty.
Acceptable Use Policy blog comments powered by Disqus
