A good chunk of the news in the close-out to 2014 and the beginning of 2015 has been about rapidly falling oil prices, an economic development that deserves its share of attention from small business owners who might use working capital loans to take advantage of the lowest gas prices since the recession.
The origins of the story trace back to OPEC keeping oil production steady despite a global supply glut to force prices down in a bid to slow or derail the American energy renaissance. But all small businesses need to know is drastically falling oil prices means there is massive opportunity to grow, generate consumer spending and save on your own operational costs.
Consumers are saving, get them to spend more
According to an oil and gas industry survey cited by Bloomberg, American drivers paid an average of $2.2021 per gallon of regular gasoline to open 2015. Prices dropped around $0.29 in the three weeks to Jan. 9 and $1.14 from a year ago, leading to the lowest gas prices to open a year since 2009.
The continued drops in gas prices enable consumers to achieve huge savings, as some states in the South and Midwest even dream of $1 a gallon gasoline. CNBC cited predictions by French multinational financial services firm Societe Generale that said American consumers stand to save some $700 on average in 2015 thanks to low oil.
“We think investors may not fully appreciate the extent to which cheaper gasoline should boost U.S. consumer spending this year,” firm analysts said in a note on stocks.
It’s clear where small businesses can benefit with increased consumer spending – but it’s still up to business owners to attract consumers to spend their new discretionary income. Consumers may be a little hesitant to part with their newfound savings, but if small businesses can engineer sales or discounts that reward spending just a little more (like $10 off any purchase more than $50 would), they can effectively take advantage of low oil.
Incentivize visiting the physical store
If you’ve seen brick-and-mortar traffic slip a little in the online age and amid the winter weather, now is the best time to redirect customers to your physical store. Where they once may have balked at high gas prices to justify a shopping trip out, consumers may be more likely to drive out to physical locations instead of staying on their laptops.
Small business owners can actively incentivize in-store visits by making certain deals – like the one above – only available on an in-store purchase. That way, not only will you be generating additional foot traffic, but more sales, customer interest and loyalty.
Save where you can on shipping and fleet costs
While the previous two points focus on customer savings, small businesses can also reap their own savings on lower fuel costs. To do so, it’s important that owners take stock of all costs that are directly influenced by gas, like shipping products to online customers and gas costs for fleets if a business operates them.
With gas prices so low, small business owners can take the remaining overhead from reduced gas expenditures and reinvest in their businesses. Tracking costs and planning exactly where these savings will be applied to or held onto is crucial in this stage, as gas prices may rebound, as unlikely as that seems. Fluctuating gas prices affect small businesses more so than low or high fuel costs; without the ability to properly plan their expenses, businesses are left to guess and hope prices remain consistent.
For small business owners who want to make the absolute most of a fostering economy and low oil prices to start the year with a bang of expansion, investigating alternative small business loans will be as important an action as keeping an ever-watchful eye on gas prices and customer savings.