4 Industries Struggling Due to the High Gas PricesAugust 26, 2022
It seems like gas prices are rising like never before, and they show no signs of slowing down.
This happens due to a confluence of events, such as the war in Ukraine, and just about everyone is feeling the pinch. Gas is hard to cut back, no matter how much it costs. We use it to get to and from work, school, soccer practice, and social events. Since cutting gas in a significant way can be challenging, many people cut back in other areas to be able to afford gas.
This is true when it comes to the business world as well. Every extra cent that the price of gas gains is another cent that doesn’t get into a company’s coffers. Unfortunately, when a business’s profit is affected, that cost gets passed on to consumers. This can affect the overall revenue of a business as well. Some types of businesses are more susceptible to rising gas prices. Here are four industries that are struggling due to high gas prices.
Retail might not be an obvious choice when struggling with high fuel prices. However, they are very much affected, which can seriously harm business. To start with, retail stores must have their products shipped. If shipping prices go up, they will feel the pinch. However, they will also be feeling it from the other side. When gas prices go up, shoppers have to cut from their budgets. Too often, non-essential shopping like retail is the first thing to go. For starters, they will make fewer trips to retail stores to save on gas. Then, even when they do go, they spend less while they are there.
This phenomenon tends to affect the larger chains that are based on volume. This can include big box stores that sell items at a lower cost. On the other hand, boutiques and specialty stores do not struggle as much because their clientele can afford the rise in prices and thus are more willing to spend on non-essential things.
Fast food restaurants make a lot of money on people on the go. They rush to work or home afterward and stop for a quick bite. Or they are out shopping or running errands and need some food to fill the hunger gap between tasks. This model has served fast food joints well for decades, but rising gas prices can seriously affect their bottom line.
When gas prices rise, people are less likely to be out-driving. What are any fast food restaurant’s bread and butter? It’s the drive-thru. Fewer people are driving through if there are fewer people on the road. Plus, the people on the road are less likely to stop. For example, when gas prices rise, carpooling rises too. Instead of an individual making a snap decision to stop for a bite, full cars just head to their destinations. High gas prices will also cause people to choose to eat at home more often to save money.
Recent years have seen a significant increase in delivery services for various products. You can get food, alcohol, retail goods, and anything under the sun delivered right to your door. However, gas prices can negatively affect delivery services, even though everyone else goes to brick-and-mortar stores less often.
Delivery services have a lot of costs as part of their business model. They need to pay for maintenance to their vehicle, for starters. They must also have commercial auto insurance since a personal policy will not cover business-related tasks. On top of that, they will need all the necessary insurance for any business, such as general liability and commercial property coverage. Without these, a delivery service could be in financial trouble if something bad happened. Gas is one of the most important costs they have. Every mile they drive comes with a cost in fuel.
That means every delivery takes more out of their pocket than it used to. Of course, they can pass that cost on to the customer, but then customers may balk at the new prices. Plus, fewer people are ordering non-essentials because they are trying not to spend like they used to.
When you think of the typical mall, who do you picture hanging around in the food court, walking aimlessly with friends, and spending all of their money on jeans? That’s right, and you picture teenagers. While going to the mall is a big part of being a teen, it is not so when gas prices get too high. Teenagers are at a low scale for disposable income. Yes, they get an allowance and can work, but that work is part-time. In addition, they have to drive to and from school and social engagements, and those gas increases can take a big bite out of the money they have to spend.
That means that malls have fewer and fewer shoppers walking through. That means less revenue for the stores that are in the malls. When a store has so little revenue that it has to cut its staffing, what type of worker is the first to go? That’s right: the part-time teenager. Meaning there is even less disposable income to go around.
Almost every aspect of modern society is affected by gas prices. Fuel is needed for transporting goods, manufacturing, and fueling equipment. Therefore, it is very hard for everyone to cut back on their use of gas all at once. That means that everyone has to get used to paying more for it when the price rises. In some ways, it’s very obvious what types of industries would be affected by high prices, such as the transportation industry. However, as you can see, other industries that are struggling with the high price of gas aren’t so obvious.