Retailers offering discounts on gas

Retailers offering discounts on gas

July 6th, 2011 By Stephanie Clifford/New York Times News Service in Business Around the Region

CHATTANOOGA AREA GAS PRICES

$3.30 - Average price of a gallon of gas in Chattanooga on Monday

$3.56 - Average price of a gallon of gas nationwide on Monday

$3.51 - Average price of a gallon of gas in Chattanooga a month ago

$2.52 - Averge price of a gallon of gas in Chattanooga a year ago

Source: AAA Daily Fuel Gauge

With gas prices locked at well above $3 a gallon, some retailers and manufacturers are trying to get more shoppers back on the road by picking up some costs at the pump.

Publix, the grocery chain which operates two supermarkets in Chattanooga, is offering $50 gas cards for $40, with a minimum purchase of $25 in other products. Kellogg's asks that shoppers send in 10 bar codes from cereals like Raisin Bran or Corn Flakes for a $10 gas card. At CVS, customers receive a $10 gas card when they spend $30 on certain items.

Even shoppers at Wal-Mart, the country's largest discount retailer, are gassing up at a savings. The company announced last week that in 18 states, including Tennessee, Georgia and Alabama, shoppers could save 10 cents a gallon at Wal-Mart and Murphy gas stations if they paid with a Wal-Mart credit, gift or prepaid card.

(The savings are featured at Wal-Mart's Murphy stations in Chattanooga, Ooltewah, Hixson, Soddy-Daisy, Cleveland and Dunlap in Southeast Tennessee and at stations in Lafayette, Fort Oglethorpe,Dalton, and Calhoun in Northwest Georgia).

Though prices for food and clothing are also increasing, gas prices are having the most direct effect on shoppers' behavior, retail analysts say.

On weekdays, gas sales are down slightly from a year ago. But on weekends, when most people are not commuting and can choose how much to drive - and when retailers want their parking lots full - the declines are much larger, according to MasterCard Advisors Spending Pulse, which issues a weekly gas index.

"When you start to see weekend pumping taking a hit," said Michael McNamara, the group's vice president for research and analysis, "retailers want to do something to combat that."

The gas discounts resonate with many consumers, in part because gasoline is not an optional purchase for most people, who can often recite from memory - and with some agony - what their neighborhood gas station charges per gallon.

"They view it as having an immediate positive effect on their wallet," McNamara said of a gas discount. "That's why so many retailers are turning to it."

The gas promotions recall the summer 2008, when gas prices were above $4 a gallon. At that time, auto-dependent industries like tourism and car manufacturing started running gas price deals. Chrysler offered guaranteed $2.99-a-gallon gas for three years to get people to buy cars, and Suzuki gave three months' free gas, while hotel companies like Marriott also offered gas cards.

With gas at about $3.62 on average in late June according to SpendingPulse, those kinds of deals are also returning. Some Marriotts are bringing back the free-gas promotions, and tourist destinations and even casinos are giving discounts on gas, too.

Last time, however, retailers generally did not get in on the discounts. The spike in prices came before the recession, and spending continued to be strong - even when gas prices peaked in July 2008, retailers' sales at stores open at least a year rose 2.1 percent, according to Thomson Reuters. But now, with consumers feeling short on cash after the recession, high gas prices are keeping some of them from shopping as frequently.

"The increase to gas prices," Wal-Mart's chief financial officer, Charles M. Holley, said in a call with reporters in May, "certainly does hurt our core customer going to the store, and they'll consolidate trips."

Even when the gas deals do not save shoppers that much money - the Wal-Mart promotion saves consumers about $1.60 per fill up for a 16-gallon tank - they can give them a psychological lift.

Cheryl Moore, 35, a mother of three in Spokane, Wash., said that when gas increased to $3.88 a gallon at nearby stations, she cut back on shopping trips. While she used to shop every day for food and other staples, she now goes twice a week.

"Now it's like, 'Well, wait a minute, let's carpool'; or, 'Maybe we can wait another day and do everything in one day,' because it's just so stinking expensive," she said.

Moore uses lots of coupons. But she said that somehow saving $10 on gas, as the Kellogg's promotion offers, for example, seemed much more appealing than saving the equivalent amount on groceries through coupons.

"It's right there in front of you, and I don't have to do any of the other math," said Moore, who has written about some of the gas-saving deals at The Frugal Life of a Mom blog.

But though retailers are framing the gas discounts as an I-feel-your-pain response to shoppers' concerns, some are either complicated to qualify for, or not that deep.

At CVS, the qualifying items vary week to week and depend on the location; this week, Pampers and Pantene are among the included items in several cities. At the register, shoppers must use a loyalty card to get credit for the purchases.

Wal-Mart's deal is restricted to shoppers who have a Wal-Mart credit card, a Wal-Mart Money Card (a prepaid Visa or MasterCard) or a gift card. Those cards are not free - the money card costs $3 to issue, $3 to reload and $3 a month, while the Wal-Mart credit card has a 22.9 percent annual percentage rate, which is quite high.

"These are fun, topical and varying degrees of clever," Brad Wilson, founder of the deal-hunting site BradsDeals.com, said in an email. "But not great deals."

Other stores offer deeper discounts. Stop & Shop recently expanded its gas program, which lets shoppers accumulate points toward gas discounts with each dollar spent at the grocer, up to a $2.20 discount per gallon.

Kroger, which also has a points-toward-gas program, in May adjusted the rules to reflect rising gas prices. Previously, it capped gas discounts at 10 cents a gallon in many markets; now, it lets shoppers accumulate points that give up to a dollar off per gallon at Kroger-owned gas stations in several states.

"The increase in gas prices is taking a bigger chunk out of family's wallets," said Keith Dailey, a Kroger spokesman. "It's a popular, and increasingly more popular, program."