Babson College Professor Examines Effect of Rising Gas Prices

Babson College professor of marketing Dhruv Grewal has published research that speaks to the impact of gas price increases on consumer shopping behavior.

The research mashes together facts and statistics on two seemingly unrelated elements of society today: increasing gas prices and consumerism, specifically as it applies to grocery shopping.

Here are some bullet points of the research, entitled “An Empirical Investigation of the Impact of Gasoline Prices on Grocery Shopping Behavior,” which has been published in the Journal of Marketing:

• For every dollar increase in gas price per gallon, the average consumer reduces shopping frequency by approximately 10% and total expenditure by about 3%. 

• There is a substantial shift in spending away from grocery towards supercenters. 
• As might be expected, consumers buy fewer full price name brands, but, contrary to reports in the popular press, they shift more to promotions on name brands than to private label.  Indeed, for a 100% increase in gas price, promoted national brands gain an average of 29% in share points, whereas private label gained only 3% share point. 
• Among those who continue to buy name brands, there is a decrease in the share of bottom tier brands.  Thus, consumers who stick to national brands don’t compromise quality but do seek out deals to get more value for their money.
• A 100% increase in gas price results in grocery stores losing about 3.6% grocery format share points on average and supercenters gaining about 25% supercenter format market share points each. 
• A 100% increase in gas price results in grocery stores losing about 2.38% grocery format share points on average and supercenters gaining about 1.15 market share points each. 

 Research submitted by Babson College.