Like everyone these days, if it weren’t so dangerous to drive with my eyes closed, I’d squeeze them shut every time I passed a gas station.
My personal high, in Ontario, was $1.40 a litre. Ouch. No. Double ouch.
For the aftermarket, the fear is twofold, of course. One, that the rise in fuel costs will force people to drive less, pushing out regular maintenance of wear-and-tear items, and two, that the cost of running will force drivers to choose between running the car and fixing the car.
According to researcher Dennis DesRosiers, the impact of gas prices has been an immediate curtailing of maintenance; if the current fuel prices are sustained, it will have a long-term impact on average kilometres driven. Both have a negative impact on the aftermarket service business.
In fact, we may have already seen some of this.
Check the rise in the price of gas over the past three years. At the end of 2003, the price of gas was hovering below 70 cents a litre in Canada on average, but ramped up to the 90 cent mark by mid last year. That’s a 20 cent difference, a rise of nearly 30%.
This last spike may have broken the psychological $1.00-a-litre barrier, but it isn’t much greater than the last rise.
Still part of me wonders what the real effect will be at the consumer level. People have continued to buy and drive trucks and SUVs, even if they just put $10 of gas in at a time. And, with summer behind us, discretionary travel is at a minimum anyway.
Perhaps, like the leagues of smokers who have sworn to quit at every price hike, they won’t like it, but they’ll keep doing exactly what they always do. Frankly, I suspect that driving is a habit that is far too ingrained in each individual driver’s daily life for $15 or $20 a week to make much of a difference. Those who are least able to afford it are also least able to afford to change their car or their job.
The impact of rising fuel prices on business, however, is a whole other kettle of fish.
For the person who drives for business, or those who manage fleets, there is no debate about what the cost of fuel has done to your bottom line.
I recently had a conversation regarding delivery costs with a jobber who decided to go it alone in his market with charging for delivery. He charges 75 cents per, and had initially expected others in his market to join him. When they didn’t, he stuck to his guns anyway.
While we spoke, I scribbled the math down: 15 delivery vehicles, each conservatively doing about a dozen deliveries a day, for about 200 days a year. These very conservative estimates still net $27,000. It is not profit–the real delivery costs are much greater–but it is money that can be reinvested in the business, used to maintain and build profitability.
Customers have not left in droves. Sure, a couple of customers will walk into the store to avoid the charge, but most have just become smarter about ordering, also lightening the financial load on the business.
Along the same lines, another jobber has floated the idea of adding a fuel surcharge to invoices, just like the shipping services he uses have done.
Whichever way you might choose to go, it cannot be denied that this may be the best opportunity for you to institute a similar change. Nobody is blind to the rising costs, and few transportation-dependent organizations are not passing them along in some transparent form.
The danger with all this talk, however, is that it is just talk, and that as soon as the gas price drops consistently below a buck a bucket, you’ll think everything is okay.
It’s not. Delivery costs have a major effect on your business, and not just in fuel. Efficient customers should benefit from smart ordering, but they won’t change without a push. And that is up to you.
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