Fuel & Gas Retailers Feel the Impact of Inflation on the Economy: 2021 Trends

Consumers are facing pandemic-induced price hikes across the spending spectrum right now. It seems like everything is becoming more expensive, from groceries and rent to clothing and cars. As the annual inflation rate climbs to its highest peak in four decades, we’re all feeling the pinch. And one of the biggest offenders can be found at the gas pump, where fuel costs are surging due to a combination of factors, including post-pandemic supply chain issues, rising inflation, and global diplomatic crises with direct impact on fuel markets.

The recent acceleration of inflation is a complex trend caused by many factors, including supply chain problems and labor shortages—and it’s not expected to reverse course anytime soon. Consumers are altering their spending behavior to cope with the dollar’s reduced purchasing power, often in unexpected ways. Discover what this means for gasoline retailers, and learn how you can adapt your marketing strategy to mitigate the impact of inflation on your business.

Key takeaways:

• Despite inflation and rising prices, wallet share for gas spending has remained stable, even against pre-pandemic levels.
• Purchase behavior has shifted in favor of fewer trips with high spend averages.
• Retailers that offer customers opportunities for "combined trips" are seeing big benefits, as consumers can complete grocery shopping and refueling in a single stop
• Building brand loyalty and rewarding customers for repeat purchases can help mitigate some of the pains from losses and narrower margins seen on targeted offers and promotions.

Despite rising prices, gas spending is steady

Sharp and unpredictable swings in the cost of gas are nothing new for drivers; volatility is par for the course when it comes to the price at the pump. Americans are normally quite concerned about increasing gas prices, but we’re paying less attention this time around. Why? Since fuel is just one of the many goods that cost more right now, we’re not as sensitive as usual and haven’t made any drastic moves in gas spending. In 2019, consumers spent around 3.7% of their monthly wallet share on fuel, which is almost identical to the relative share today.

But there’s more to filling up the tank than the price on the sign. Spending behavior is also influenced by anxiety about the future and by pandemic-spawned habits that are still sticking around, such as bundling of trips and purchases. Coupled with rising fuel costs, these factors are prompting customers to plan ahead and be more purposeful with their shopping trips. Gas retailers are seeing two major ‘clustering’ trends as drivers consolidate their purchases in volume as well as store visits.

Fuel Trend #1: Bundling gas & grocery/retail trips together

Shoppers are buying their groceries and gasoline in as few trips as possible, which is predominately a byproduct of Covid conditioning. But there’s another important element at play: as consumers recognize that both fuel and groceries cost more, they form a psychological connection between these two types of purchases. They’re being mindful of their budget on the same trip, in the same spending moment, with gasoline and groceries alike. And they will likely continue to connect these two types of purchases in the future.

Fuel Trend #2: Fully filling up the tank before prices go even higher

As we’ve seen in the data above, consumer gas spending is holding steady. However, the amount of money being spent during each fuel purchase is significantly higher: up 27% from 2019 and up 40% from 2020. Rising gas prices account for a portion of this increase, but the rest is a result of customers feeling the need to completely fill their tanks each time they’re at the pump (vs. partially filling up). This behavior reduces the number of trips required, but it’s also a reaction to the ongoing price hikes. Drivers fear that if they don’t fill up today, it will just be more expensive tomorrow.

The long-term impact of inflation on gas and fuel

We’ve explored the two biggest trends that gas retailers should be aware of in this era of inflation, which are both caused by the ‘clustering’ of everyday purchases as consumers grow more wallet-conscious:

• The continuing association of the fill-up with other frequent shopping events, such as grocery and retail purchases.
• The increased volume of gasoline purchased per trip

This phenomenon of customers buying more in fewer trips began in the early days of the pandemic, when certain goods like toilet paper were limited (or perceived as such) and the future was uncertain. Impromptu stops at the supermarket or gas station gave way to planned, purposeful shopping trips that occurred less often but produced bigger receipts. Today, supply chain issues are still causing shortages and the future remains uncertain—and thus the mentality of buying more in fewer trips is alive and well.

Why does this matter? These trends have sizable implications for the dynamic between branded, stand-alone gas stations and chain stores like Costco, BJ’s, and Sam’s Club. With their own privately branded pumps adjacent to their storefronts, chain retailers have a big opportunity to woo consumers on their one-stop shopping trips.

What’s next for retailers and rising gas prices?

Our insights show that chain retailers are introducing a potential disruption into the gasoline market, which we can expect to continue and expand. Brands like Costco, Albertsons, and Kroger have seen a slight increase in sales from customers who are trying to combat a future of unknowns by combining trips to stock up. Chain retailers had a share of 21.5% of trips in November 2021 (up from 20% in June 2020), largely at the expense of traditional gas brands like Shell, Chevron, and ExxonMobil.

How you can ease the pain at the pump

Drivers are looking for value to offset the impact of rising gas prices on their fill-up, and marketers can help to relieve their pain with targeted offers and promotions. Now is the time to focus on building brand loyalty and rewarding customers for their loyalty. One smart way to do so is by partnering with Cardlytics. Our native ad platform is a tool for marketers to implement omnichannel strategies and help drive pump to store conversions. The platform works within banks’ digital channels  and allows marketers to run targeted ad campaigns backed by our purchase insights. 

But our purchase insights are just the beginning. By helping you connect the right people to the right offers, we’re not just driving tangible revenue together—we’re helping people feel a little relief during a challenging time. Learn more about partnering with Cardlytics.  Please contact us today.