Archive | June 12, 2008

Shipping vs. Shopping Local: A Little Math

Gas prices have gone up dramatically recently (that’s no secret!) and they are changing people’s shopping habits. Could they make scrapbook shoppers more likely to shop online? Let’s do a little math with a few round numbers.

Let’s assume gas is about $4/gallon right now. (I actually paid $4.10 today but the news says the national average is closer to $4.) $8 is a generous amount for shipping for a purchase of about $40-50 of scrapbook supplies (based on my, um, personal research) depending on the content of the package.

So if you would spend $40-50 on a scrapbook shopping trip, your comparison is basically $8 shipping versus how much in gas would you use? $8 would buy you two gallons of gas – one for your trip to the store and one for the trip home. How many miles could you get out of that gallon of gas? Would one gallon get you from your home to the store? In my case it might – just barely. So the math is even, right?

Wrong. There’s another factor to consider – sales tax. Buying online avoids sales tax in most cases. Shopping online avoids the register ringing up sales tax – a significant savings.

And that is before you start comparing prices…which are usually higher by neccessity at brick and mortar stores because they have higher overhead.

Shipping for online shopping has not gone up as fast as gas prices have. What does that mean for local scrapbook stores? It means their markets are shrinking. The geographic area that they have that they can pull from where it is cheaper for their customers to drive to them than to order online has shrunk to 25% of what it was five years ago.

Five years ago, it cost me about $5 in gas to drive 60 miles each way to my favorite “local” scrapbook store. It was a nice trip to make to have some fun and indulge myself in some scrapbook shopping. I got to touch and feel the products before I bought – and it was cheaper than paying shipping online. Today, that same trip costs me $20 before I set foot in the store. I only visit that store now when I have to travel to that city for another reason. The trip is simply too expensive. It is way cheaper to pay shipping from an online store.

Is it any wonder local scrapbook stores are dropping like flies? Any economist will tell you that gas prices aren’t going down soon. So what’s a struggling store to do?

Obviously stores need to pull more customer density from the areas where it does pay customers to come to them instead of shop online. Your area is shrinking so you have to turn a larger percentage of people from that area into customers to maintain your customer base.

There are a lot of ways to do this: home decor projects, stamping, photo services, digital, and others. But the bottom line is that local stores are going to have to look outside their core market to get these new customers – and to survive.