While the final numbers have yet to be released, preliminary reports suggest this was a merry holiday season for U.S. retailers.
OPTION OPPORTUNITYFactors that encourage people to drive also largely funnel spending money out of local communities.
A MasterCard survey reports sales were up 8 percent over 2014, and that lower gas prices played a significant role in what consumers spent this past year – suggesting the money they saved in gas was spent on gifts.
“Overall retail sales, auto and gas, across all card and payment types, grew 4.6 percent from November through December compared to last year. Including gas, growth was just 2.7 percent, reflecting the lower gas prices and reinforcing the fact that consumers are spending the money they’re saving at the pump.”
MasterCard covers this with a mere two sentences, but the implications deserve far more than that. Indeed, the impact of gas prices on consumer spending – both the amount of money that’s spent and where that money goes – has significant impacts on local economies, and raises questions about the potential local economic benefits of driving less and dedicating less money spent on the costs associated with car ownership.
This year, as in past years, you have likely encountered some version of the Shop Small movement, most commonly promoted via Small Businesses Saturday. It’s an effort – often organized by local chambers of commerce and downtown booster organizations – to encourage consumers to shop at small, locally owned businesses. Supporters note the benefits are manifold, both quantitative and qualitative:
- Small businesses contribute to the quality of life of a region by providing local variety in food and retail that reflects local priorities
- The majority, up to 68 percent, of the dollars spent at a small business stay in the local economy, and
- Small businesses are more likely to contribute to local non-profits and charitable organizations than larger enterprises with out-of-state headquarters.
As the MasterCard report suggests, though, there’s an area of spending – whether during the holidays or otherwise – that also has a huge impact on local economies: filling up at the pump. According to the U.S. Energy Administration, about 88 percent of what we spend on a gallon of gas leaves the local economy:
- About $0.12 of every dollar spent stays in your locality or state.
- About $0.55 of every dollar spent leaves your state but stays in the U.S.
- About $0.33 of every dollar spent leaves the country altogether.
As a complement to the Shop Small movement, maybe we should consider a Drive Small effort as well?
While small, locally owned businesses often rail against online retailers, shopping malls, and big-box shopping centers, they could also be viewing parking lots as places where consumer dollars are being transferred to some other community’s pocket.
Consider Valley View Mall, the largest traditional mall in the Roanoke Valley region of Virginia, which has approximately 3,500 free parking spaces. Let’s assume the lot reaches capacity on a peak shopping day during the holiday shopping season – say, Black Friday (although many large mall lots are overbuilt due to massive parking minimums). And let’s also conservatively assume each of those cars traveled an average distance of 10 miles, which is the average Roanoke-area commute (no data on the average shopping-trip distance is readily available, but given Roanoke’s size, a one-way trip distance of 10 miles will connect pretty much every household in the Roanoke Valley to the mall). Based on current average fleet fuel efficiency and that per-gallon cost of $2.20, filling up that parking lot with each car making one trip results in about $5,000 leaving Roanoke, and about $1,700 leaving the U.S. altogether.
Of course, the trip generation of a mall parking lot is more complicated than that, with cars coming and going all day long. Still, some even more conservative assumptions about trip generation suggest that this single 3,500 space parking lot alone could have drained nearly $100,000 in potential retail dollars out of the region during the entire 2015 shopping season.
Granted, we can’t assume every one of these shoppers had some kind of auto-free shopping option, and of course some of them drove much further than 10 miles, so these economic impacts are educated guesswork at best. But the fact remains that driving around to shop – particularly if those trips take shoppers to big-box destinations which are already transferring local dollars to other states – has a significant but largely ignored impact on the local economy.
On the other hand, shops that are within walkable or bikeable distances to neighborhoods, or easily accessible by transit, are generally small, locally owned businesses. So choosing to walk, bike, or take transit to your shopping destinations means there’s a good chance you will, by default, keep your money more local. Additionally, the construction of dedicated bike infrastructure has been shown consistently to boost business for adjacent shops, while bicyclists in general spend more over time than drivers, as they make more shopping trips.
MasterCard’s numbers are based on current, historically low per-gallon prices, but there’s no reason to assume that consumers would spend their money differently if gas prices were at their normal, higher rates and consumers just drove fewer miles.
People’s spending on retail may peak during the holiday season, but their transportation expenses don’t. A Drive Small campaign maintained throughout the year could have a major impact on keeping local dollars local.
Photos: Packed mall parking (Jason Mrachina, Flickr, Creative Commons). Cyclists riding on the 300 South bike lane (Salt Lake City).