[Paleopsych] NYT: The High Price of Gasoline Sends Shoppers to the Web

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Wed Oct 12 00:07:43 UTC 2005

The High Price of Gasoline Sends Shoppers to the Web
[Further evidence that individuals will make their own adjustments to the 
energy "crisis."]


    THERE'S nothing like an energy squeeze to buoy the spirits of Internet

    Online shopping sites, already on a roll, are getting help from the
    high price of gasoline, which is prompting untold numbers of consumers
    to boot up their PC's instead of driving their S.U.V.'s to the mall.

    And while oil prices have fallen from their summer peak, prices at the
    pump remain at more than $3 a gallon in much of the country, with
    tight supplies likely to keep them high through the holiday season.

    "There's going to be a lot of talk about Christmas shopping being
    hammered because of higher fuel prices, but we're saying, 'On the
    contrary,' " said Shmuel Gniwisch, chief executive of the online
    jewelry store Ice.com. "Our sales will increase."

    Mr. Gniwisch said he expected sales on his site this holiday season to
    jump by more than 40 percent over 2004, partly because Ice.com has
    extended free shipping to all purchases instead of just orders
    exceeding $150. The new policy, he said, is aimed at snaring "the
    fence-sitters: people who've been coming to the site and looking
    around without buying, and there are a lot of them out there."

    A lot of them are getting off the fence and going online to escape the
    $100 fill-up, analysts say. In a recent survey by Shopzilla, a unit of
    E. W. Scripps that compares Web prices, 40 percent of Internet
    shoppers said they had increased their Web purchases to save on gas.

    Over all, online sales are expected to rise about 22 percent in the
    final three months of this year, to roughly $26 billion, according to
    eMarketer, a research firm. That compares with a 24 percent increase
    in the fourth quarter of 2004, to $21.5 billion.

    Store sales, by contrast, are expected to increase by 5 percent,
    according to the National Retail Federation, though at $435 billion,
    they will still dwarf Internet buying.

    Though the divergence in the rates of increase isn't surprising, high
    gas prices are accelerating the trend, said Donna L. Hoffman, a
    professor of marketing at Vanderbilt University. "It won't necessarily
    bring in more people to shop online, but it will bring in people more
    often," she said.

    Even Web sites that charge $5 for all shipments are unlikely to
    discourage shoppers, she said. "People will do the mental math, and
    say, 'If I go to the store, how much will it cost me, and how much is
    my time worth?' " she said. "Five dollars isn't much to pay."

    To be sure, Web merchants that offer free shipping will have to bear
    the extra cost, which is considerable. U.P.S. and FedEx currently
    impose a 3.5 percent fuel surcharge on ground shipments, and plan to
    raise it to 4.5 percent next month and perhaps bump it up again in

    But Ms. Hoffman said she believed that merchants can easily swallow
    the extra expense, either by raising prices in categories like apparel
    and home furnishings where consumers will not notice or by increasing
    volume for products like electronics and music where buyers can use
    shopping-comparison engines to resist price increases.

    Besides, she said, with 10 years of experience behind them, Internet
    retailers are running their operations more efficiently and more
    profitably than ever.

    Now is the time to put that business savvy to good use. In years past,
    some merchants who got behind on their holiday shipments resorted to
    free expedited shipping in the final days before Christmas, in an
    effort to stay on the good side of customers (not to mention the
    Federal Trade Commission). If they find themselves playing catch-up
    this year, it will cost them dearly. The U.P.S. fuel surcharge for
    expedited deliveries is 12.5 percent, while FedEx charges 15.5

    At the very least, consumers can expect to hear lots of noise from Web
    merchants in the weeks ahead about how much more sense it makes to
    shop online than at stores. "I'm sure you'll see us weave this into
    our promotional copy," said Lauren Marrus, chief executive of
    ChelseaPaper.com, a New York seller of paper products.

    As the holidays approach, Ms. Marrus said, ChelseaPaper's e-mail
    advertisements will promote free shipping, an annual tradition. Even
    so, prices will hold firm, she predicted. "The fourth quarter is a
    time when we don't like to do anything new," she said.

    Although Shopzilla and Shop.org, an industry group, said last week
    that 79 percent of Internet retailers would offer some form of free
    shipping this year, some executives are not sure they will join in.
    Matt Hyde, the senior vice president for merchandising and logistics
    at Recreational Equipment Inc., says that if competing sites do,
    REI.com could follow their lead, but otherwise the company would
    prefer not to incur the extra expense.

    In any case, REI.com plans to save millions of dollars a year in
    shipping costs when it opens a new distribution center in either
    Pennsylvania, Virginia or West Virginia in early 2006, Mr. Hyde said.
    Then, instead of driving packages for three days to Eastern states
    from REI's warehouse in Sumner, Wash., the company's trucks will make
    the trip in an average of 36 hours.

    Higher fuel prices, meanwhile, are showing up in other unexpected
    places on REI.com. Plastic kayaks, which are made using a petroleum
    byproduct, have gone up in price compared with last year, Mr. Hyde
    said, "And synthetic fabrics are seeing some price pressure, but
    because the fabric is such a small component of the overall price of
    the product consumers won't see that much increase."

    The recent shift in attitudes about gas guzzling is also having an
    effect on REI.com's fortunes. "Bike sales have been so strong this
    year that it's hard to see the additional spike, but all our bike
    accessories that are related to commuting are up about 30 percent
    above the trend," Mr. Hyde said.

    That is probably a good omen for all online merchants. Even if the new
    biking commuters stop off at the mall on their way home from work,
    there is only so much they will be able to load into a wire-mesh

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