Rising costs add to pandemic pain for small businesses

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NEW YORK (AP) — In just two weeks, the cost of pecans for pies at Peggy Jean’s Pies in Columbia, Missouri, has jumped nearly 40%, perplexing co-owner Rebecca Miller and adding to the cost of business. Miller will soon have to raise the price of its Southern Pecan, Chocolate Bourbon and German Chocolate pies from $2 to $24.

While pecans have risen the most, Miller sees price increases in everything from blackberries to condensed milk and eggs. She consults three food brokers each week to get the lowest prices for ingredients. But she still has to charge more for the nut pies.

“We cannot absorb this cost while meeting wage demands, increasing cost of goods in our boxes and boxes, and allowing us to live as a family,” she said.

Significantly higher costs are another challenge posed to business owners by the global pandemic. The unpredictability of shipping, labor, and the coronavirus itself has created an environment where owners often have to guess when products might arrive and how much they will cost. The Labor Department said Thursday that prices at the wholesale level rose a record 9.7% in December from a year ago.

“There is a tremendous amount of not only risk – risk that you can calculate – but also uncertainty. We just don’t know what’s going to happen. said Ray Keating, chief economist of the Small Business & Entrepreneurship Council. “Consumer demand is there, but there are just huge constraints on the supply chain. All of this is fueling price increases.

In response, owners are raising prices, cutting staff hours, dropping certain goods and services, and canceling free shipping in a delicate balancing act. But with low visibility over the duration of rising inflation, some homeowners are increasingly worried about keeping their doors open for the long term.

“We put out new fires every day and had to reassess the way we do business to respond to new behaviors,” said Deena Jalal, owner of vegan ice cream chain FoMu and co-founder of wholesaler Sweet Tree Creamery in Boston. .

For its FoMu stores, the overall cost of business increased by around 15% in 2021 compared to 2020. It raised prices by around 10% but also took other measures: moving to more deliveries and cutting flavors like avocado ice cream, which has become too expensive. to do as avocado prices rose.

“No company can sustain the rapid increase in expenses that we saw last year,” Jalal said. “Before, you could work very hard and see progress. Now you work very hard just to try to stay afloat.

Jalal worries about the long term prospects for the small business community if the inflation does not subside soon. “If we have to work on this puzzle for another two years, I really think we’ll see a lot of companies – including us – struggling to keep their doors open.”

Elizabeth Benedict, owner of interior design firm Elizabeth Home Decor & Design in Chestnut Hill, Massachusetts, said prices have risen 7% to 30% for all the products she buys. She pays shipping costs on top.

“Most of these (increases) come with less than two weeks notice,” she said. “We cannot guarantee the quotes that come out and we have had to adjust our contract as well as all of our language on our proposals to reflect these varying terms.”

To deal with rising costs and overseas shipping delays, Benedict has significantly changed its list of suppliers and now only buys from American brands that manufacture products in the United States. And she added services like e-commerce and virtual design. But she still faces longer deadlines for her projects and won’t take on new clients until things stabilize.

“We keep pivoting with the punches, but we really feel like we’re being pushed and pulled in too many directions,” she said.

Some online sellers are eliminating free shipping to cut costs. Gianluca Boncompagni, owner of e-commerce site Off Road Tents, which sells off-road and on-road gear, has seen its logistics costs quadruple. In October 2020, he paid $6,300 for a 40ft container from China. In October 2021, he was paying $26,000 for the same size container.

Boncompagni increased its prices by around 5% and started charging a flat shipping rate based on the size of the item. While he may lower prices in the future, shipping costs are here to stay, he said.

“There’s simply no way for most online businesses to continue shipping pallets and fewer truck shipments without having to charge at least a little for them,” he said.

Some companies are using the channels they have developed during the pandemic to communicate with customers about the reasons for price increases, in the hope that they will be patient.

Kialee Mulumba, founder of beauty brand Jakeala in Newport News, Va., had to raise the prices of her beauty products by $1 to $5. The price of its containers has doubled – the one that used to be 50 cents was now $1. Prices for organic olive oil butters and conditioners were all up 5-10% and shipments from China were up 5%. It also reduced the hours of its four employees from full-time to part-time.

Mulumba emailed customers to be transparent and let them know prices were going up due to the rising cost of supplies. But she noticed a slight drop in sales.

“I just hope consumers support the small businesses they love — now is the time to support small businesses,” she said. “Even if you can’t buy, you can share posts, like or comment – that would really go a long way.”

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