Pump It Up Rising gas prices can mean rising profits, if you play it smart.
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It's a rough time to be a business owner. Everywhere you turn, there's news about the weakened economy and cash-strapped consumers. If you haven't felt the squeeze of soaring gas prices yet, you're lucky--but not immune. According to a January Nielsen report, 49 percent of U.S. consumers have already reduced their spending to compensate for high gas prices, and that number could increase if gas hits the $4 a gallon national average that's predicted for this summer.
So what's a small-business owner to do? First, don't stick your head in the sand hoping the crisis will pass you by. And second, don't be discouraged. Plenty of businesses are not only surviving the soaring gas prices, but prospering as well.
Scooter dealers across the country pull in significant sales each time the gas prices spike.
"Scooter sales were up 64.5 percent over the previous quarter a year ago," says Mike Mount, of the Motorcycle Industry Council.
Scooters get 50 to 100 miles per gallon.
"Dealers are having more and more people coming through the door and asking about fuel economy figures," Mount says. "Obviously, fuel prices have something to do with sales."
Also benefiting from the soaring gas prices are companies that offer prepared meals and frozen foods. These meals make it easier for consumers to buy in bulk, thereby reducing their driving costs.
"We've seen a significant lift in sales vs. last year or even the year before," says Tim Tsao, vice president of sales and marketing for Gahanna, Ohio-based Kahiki Foods, which distributes premium frozen foods nationwide. Sales are up 20 to 27 percent over a year ago for the company, partly because "people are less inclined to drive out to restaurants and eat. Instead, they're making fewer trips to the supermarket and buying more so they can eat at home."
Not every business is benefiting from the soaring gas prices, though. So how do you find opportunity in such a bleak situation? The answer is simple: Adapt.
Pump Up Your Website
Jill Caren recently made one of the hardest business decisions she's ever made. After three years of successfully selling high-end photographic gifts and art at her Marlboro, New Jersey, portrait studio, Caren decided to close her store's doors permanently at the end of February.
The trouble for Caren began last summer when she noticed a significant drop in visits from her mostly middle-class customers. Her high-end clientele didn't seem to mind driving to her store, but by the time Christmas rolled around, her retail sales had plummeted.
"I ran the numbers from last year to this year and went to my landlord and said, 'Forget it.' I had done nothing for January and February, yet my online sales were double what they were for last year. I realized there was no point in me having a retail location," she says. "I did better online in those two months than I did the first six months of last year."
Now Caren works full-time through her website, Expressionsphotostore.net, and schedules portrait sessions at her clients' homes.
"My customers love it," she says. "They love not having to drive, and I'm making more than double what I was making doing portraits in the studio."
Caren realized what many business owners already have: More consumers are turning to the internet to shop. They'd rather pay the nominal shipping fee than drive 10 miles to pick up a single item.
Switch Up the Game
Economic consultant Bill Conerly advises businesses to take a second look at their products and services. You may already have something that can help consumers reduce fuel costs, and it's just a matter of re-marketing it to cash in on their desire to save.
A software company that makes routing software, for example, recently realized it had an opportunity to capitalize on the soaring gas prices. The software, which analyzes daily deliveries and tells drivers the best routes to take, was originally developed as a labor-saving device, but now the company sells it as a fuel-saving device.
"That company caught on that they just needed to change their marketing," Conerly says. "I would sit back and say, 'What part of our business helps people deal with high-energy costs? What do we already have on the shelf, and what are we doing that might help?' "
Barbara Koscs of Errands, etc., a personal concierge service, is taking advantage of the soaring gas prices by refocusing her marketing. Her monthly newsletter to clients and prospects includes an article on gas prices with the suggestion that people join together and have her company shop for them as a group.
"For example, people in residential complexes, such as active adult communities, or people who work in the same office can hire us to make one trip to the supermarket for them," Koscs says. Rather than having to go shop individually, people can join together and split the cost of Koscs' time.
Whatever your business, there's opportunity to be found in the soaring gas prices--provided you adapt to the times. After all, if gas prices are changing consumer habits, then business owners should be changing their habits as well.