The Price at The Pump and Online Success

In 2006, we noticed a periodic drop-off in commerce (traffic) and eCommerce (sales) for many of our client's websites. At first, we attributed the drop-off to poorly funded advertising campaigns (and to a certain extent this was true). In the mean time, there was a lot of buzz about the success of free viral marketing techniques, like blogging, chat and social networking websites (everyone was trying to reach the "tipping point" via MySpace at that time). However, while viral marketing efforts and advertising dollars remain a constant to the success of any online business (particularly eCommerce), there were and are, much bigger economic forces at work.

Notwithstanding the direct negative affect that the News Media has on consumer confidence, these bigger forces are primarily: The Price at The Pump, The Cost of Food and Wall Street. It doesn't take reading an academic article in The Economist to know that if you're paying more for food and gas, there is less to spend on everything else.

Fast forward to this past week: Wall Street was down, the Price at the Pump was up, and all of the businesses that we regularly observe dropped off steeply and in some cases, came to a complete stop. Examining my own finances over the course of a 3 week period, I spent $40 in gas 3 weeks ago, $52 in gas 2 weeks ago and $75 this past week. My mileage remained the same. Let's put that into perspective: 2 weeks ago, I had $12 less to spend in disposable income and this past week I had $35 less to spend. To illustrate, the difference between spending $40 a week and $75 a week, adds up to $1,820.00 a year.

As a final note, "studies" show that people hit their threshold at $4 per gallon (meaning that they stopped spending on other things). However, based on our observations, the threshold is much lower, at $2.48 per gallon. To put it another way, if you own a small or medium sized business, make no mistake about it, you're online success is at the mercy of The Price at the Pump.