November 15, 2012
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<img src=https://internetinnovation.org/images/uploads/2012_cost_savings.jpg
width=500 height=1630 alt=10 ways being online saves you money />
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METHODOLOGY OVERVIEW
In updating the “Top 10 Ways Being Online Saves You Money” report, IIA looked at the leading areas
of consumer spending and the saving opportunities that are only available to Internet users. Based
on the 2011 Consumer Expenditure Survey released by the U.S. Department of Labor, we calculated
the amount and percentage that can be saved by having and using a high-speed Internet connection
with online resources for finding discounts on essentials like housing, apparel, gasoline and
food. Additionally, we took into account the power of group buying sites like LivingSocial and
Groupon that have changed the way people spend on basics like entertainment and provide tremendous
discounts on leisure activities, restaurants and sporting events. Other online resources like
couponmom.com and gasbuddy.com alert savvy consumers to deals at establishments in their city.
Some areas of this analysis, like housing, gasoline and newspaper expenditures, required data
specific to certain cities. For the purposes of this report, we chose five of the top 12 U.S.
cities by population (New York, Chicago, Los Angeles, Dallas and Jacksonville) also keeping
geographic diversity in mind. Overall, we found that the percentage of savings in this year’s
analysis was relatively similar to last year’s research and the year prior. But as pointed out by
the U.S. Bureau of Labor Statistics, average annual expenditures rose 3.3 percent in 2011, causing
a jump in the total dollars saved (in $8,870.01 2012, $7,694.56 in 2011, and $7,707 in 2010) with
consumers spending more in the 10 categories. This rise in spending in 2011 barely outpaced the
3.2-percent increase in prices for goods and services from 2010 to 2011, as measured by the
average annual change in the Consumer Price Index (CPI-U). The below methodology provides more
detail as to the calculations IIA used for each savings category.
ONE. HOUSING. POTENTIAL SAVINGS: $1,736/YR (12.75%)
Source: Search based study on apartments in New York, Chicago, Los Angeles, Dallas and Jacksonville
Methodology:
Sampled 50 online postings in the above markets to determine average cost savings relative to local apartment rent. Considered the average annual expenditure on shelter ($16,803) minus the annual mortgage interest and charges for owned homes ($3,184) based on the Department of Labor annual study on consumer expenditures. Applied 12.75% savings factor to the remaining average expenditure for apartment living ($13,619).
Site examples: www.apartmentfinder.com, www.apartments.com, www.craigslist.org
TWO. AUTOMOTIVE. POTENTIAL SAVINGS: $444 (A ONETIME SAVINGS OF 1.5%)
Source:Cost analysis based on average new car purchase price in 2011
Methodology: Applied 1.5% savings factor from JMR study to the average 2011 vehicle purchase cost net outlay ($29,602) based on a report by the New York Times.
http://www.nytimes.com/2011/05/21/business/21auto.html?_r=0
THREE. TRAVEL. POTENTIAL SAVINGS: $1,659/YR (20%)
Source: Amadeus Case Study amadeus.com/us/documents/aco/us/BearingPoint.pdf
Methodology: Applied 20% savings factor from Amadeus study to the average amount spent on travel ($8,293) based on the Department of Labor annual study on consumer expenditures.
FOUR. FOOD. POTENTIAL SAVINGS: $994/YR (25.90%)
Source: Search based study on basic basket of groceries based on top selling categories (Carbonated beverages, Milk, Fresh bread, Beer, Salty snacks, Natural cheese, Frozen dinners/entrees, Cold cereal, Wine, Cigarettes)
Methodology: Created a standard basket of monthly groceries to establish a baseline retail cost. Conducted a series of online searches against the baseline to identify cost savings exclusive to the Internet. Potential savings based on cost reductions at the aggregate basket level. Applied 25.9% savings factor to the average annual expenditure on food at home ($3,838) based on the Department of Labor annual study on consumer expenditures.
Site example: www.couponmom.com, www.peapod.com, www.coupons.com
FIVE. NON PRESCRIPTION DRUGS. $110/YR (33.25%)
Source: Search based study on common over the counter medicines (Pain Relievers, Antacids, Cold Remedies, Allergy Relief, Natural Remedies)
Methodology: Created a standard basket of the best-selling non-prescription drugs to establish a baseline retail cost. Conducted a series of online searches against the baseline to identify cost savings exclusive to the Internet. Potential savings based on cost reductions at the aggregate basket level. Applied 33.25% savings factor to the average annual expenditure on non-prescription drugs, which was derived as 10% of the average annual expenditure on healthcare ($3,313) from the Department of Labor annual study on consumer expenditures.
Site example: www.drugstore.com, www.amazon.com
SIX. GASOLINE. POTENTIAL SAVINGS: $161/YR (6.08%)
Source: Search based study on lowest gasoline prices in New York, Chicago, Los Angeles, Dallas and Jacksonville
Methodology: Researched average gas prices for each of the above cities, and found the lowest advertised prices in each, for a savings of 6.08% off of average gasoline expenditure ($2,655) based on the Department of Labor annual study on consumer expenditures.
Site example: www.gasbuddy.com
SEVEN. ENTERTAINMENT. POTENTIAL SAVINGS: $2,497/YR (48.10%)
Source: Search based study on restaurant dining, sporting/concert tickets and leisure activities in New York, Chicago, Los Angeles, Dallas and Jacksonville
Methodology: Applied savings factor of 48.10% on dining outside of the home ($2,620) and entertainment such as concerts, events and leisure activities to the entertainment budget ($2,572) based on the Department of Labor annual study on consumer expenditures.
Site example: www.groupon.com, www.livingsocial.com
EIGHT. APPAREL. POTENTIAL SAVINGS: $1,046.78/YR (60.16%)
Source: Search based study on basic clothing combinations for men and women
Methodology: Created a set of standard baskets of apparel for a man (khakis/jeans and shirts) and a woman (skirts/jeans and tops) to establish a baseline retail cost in each of five price categories. Conducted a series of online searches against the baseline to identify cost savings exclusive to the Internet. Applied 60.16% savings factor to the average annual expenditure on apparel ($1,740) based on the Department of Labor annual study on consumer expenditures.
Site example: www.overstock.com, www.jackthreads.com, www.gilt.com
NINE. NEWSPAPERS. POTENTIAL SAVINGS: $174.52/YR (84.88%)
Source: Search based study reviewing major newspapers in New York, Chicago, Los Angeles, Dallas and Jacksonville
Methodology: Calculated the standard annual rate for a daily delivery (including Sunday) subscription for the top three papers in each of the above cities. Potential savings factor based on average annual daily subscription rates vs. online subscription rates.
Site example: www.nytimes.com, www.chicagotribune.com, www.dallasnews.com
TEN. BILL PAY. POTENTIAL SAVINGS: $47/YR (100%)
Source: Cost analysis based on average consumer’s postage for six bills per month, plus one pay-by-phone charge.
Methodology: Created a to a standard multiple of monthly bills that are traditionally paid via postage (Rent/Mortgage, Gas, Electric, Water, Cable/Phone/Internet, Mobile). Applied average cost per US postal stamp ($0.44) for each monthly bill, plus the savings of one average pay-by-phone charge ($15).
Site examples: www.mycheckfree.com, www.chase.com, www.bankofamerica.com