Americans facing the highest fuel prices in years are putting less gas in their tanks and making more frequent visits to the pump, according to retailers, mirroring the way Americans have adjusted their food shopping habits to contend with inflation. Drivers feeling the pinch are increasingly seeking out value at wholesale clubs like Costco (COST), Walmart’s (WMT) Sam’s Club, and BJ’s, all of which offer members discounted gas. According to location intelligence firm Placer.ai, visits to BJ’s Gas, Costco Gas, and Sam’s Club Fuel surged in early March as prices began to rise. At all three chains, the share of customers making multiple visits a month rose year-over-year in both March and April.
“In the most recent period, the number of gallons that customers fill up with when they come to our fuel stations fell below 10 for the first time since 2022,” said Walmart CFO John David Rainey on the company’s quarterly earnings call last month.” Bob Eddy, CEO of BJ’s Wholesale Club (BJ), told analysts his company had observed “some modest shifts in behavior” among consumers visiting its gas stations, “with average gallons per fill-up slightly lower.”
WHY THIS IS IMPORTANT
Gas prices have risen sharply this year, pressuring the finances of low-income consumers and driving them to ramp up their search for deals and value. High gas prices are both a potent reminder of rising costs and a driver of consumer inflation, making them a significant headwind to consumer spending.
The national average gas price is up more than 40% since late February, when Iran responded to U.S. and Israeli airstrikes by effectively closing the Strait of Hormuz, a vital trade route through which about a fifth of the world’s seaborne oil passed before the war. The national average price per gallon hit $4.56, a nearly four-year high and just 10% off a record, in early May before moderating slightly in recent weeks.
Soaring gas prices put the most pressure on lower-income consumers, who usually spend more of their disposable income on gas. “We see with our customers that the high-income customer is spending with confidence into many categories, while the lower income consumer is more budget conscious and perhaps navigating financial distress,” said Walmart’s Rainey.
The search for value is making wholesale clubs go-to gas stations. According to Placer.ai, gas station traffic has declined year-over-year every week since mid-April. Meanwhile, visits to wholesale club gas stations rose double digits throughout most of April. BJ’s “comparable gallon growth”—the gas station equivalent of comparable store sales—surged from 1% in February to 10% in March and April, suggesting some members put extra effort into a search for cheaper gas.
The draw of cheap gas could be a boon to wholesale clubs’ non-gas sales if shoppers tack in-store visits onto their trips to the pump. Costco CFO Gary Millerchip estimates “a little less than half” of gas station visits include an in-store visit. Costco sold more gas last quarter than ever before, which could have helped drive a 6% increase in non-gas comparable sales.
Millerchip advised against reading too much into the gas station’s role as a traffic driver. “I wouldn't say we've seen a dramatic change” in traffic trends as a result of gas prices, he said. “But we do think, over time, it’s a great way to build loyalty. When we look at our members that are engaged in gas with us, they are generally visiting more frequently overall, they're spending more with us overall, and they're also renewing at a higher rate.”
Granted, gas station traffic doesn’t always translate to more warehouse visits. BJ’s “didn't see a ton of that incremental value get into the club,” according to Eddy. And the price pressures drawing consumers to cheap gas can force them to cut back on spending inside the club. Excluding gas, BJ’s comparable store sales fell short of estimates last quarter.
Traffic to discretionary retail locations turned negative on a year-over-year basis in mid-April, “pointing to a potential pullback in non-essential shopping trips,” according to Placer. Even trips to non-discretionary retailers like grocery stores and pharmacies fell below last year’s level around the time gas prices peaked in mid-May.