Rising costs are increasing the pain of small businesses caused by a pandemic

NEW YORK (AP) – In just two weeks, the price of Peggy Jean’s Pies pies in Columbia, Missouri has risen nearly 40%, confusing co-owner Rebecca Miller and raising the cost of doing business. Miller will soon have to raise the price of southern pecans, chocolate bourbon pecans and German chocolate pie by $ 2 to $ 24.

While pecans have grown the most, Miller is experiencing price increases from blackberries to condensed milk and eggs. He consults three food brokers every week to get the ingredients at the lowest prices. But you still have to pay more for the walnut pies.

“We can’t afford that cost and we will continue to meet the wage demands, the increased cost of the goods in our cans and boxes, and we can afford to live as a family,” he said.

Sharply higher costs are another challenge for business owners due to the global pandemic. Transportation, the unpredictability of the workforce, and the coronavirus itself have created an environment where owners often guess when products can arrive and how much they cost. The Department of Labor said on Thursday that wholesale prices rose by a record 9.7% in December from a year ago.

“There is a huge amount of not only risk – predictable risk – but also uncertainty. We just don’t know what will happen. ” Said Ray Keating, chief economist at the Small Business & Entrepreneurship Council. “Consumer demand exists, but there are only huge constraints in the supply chain. All this contributes to the rise in prices. ”

In response, owners are raising prices, reducing employee working hours, giving up certain goods and services, and eliminating free shipping as part of a delicate balancing act. But with little visibility about how long higher inflation will last, some owners are increasingly worried about keeping their doors open in the long run.

“We put out a new fire every day and had to re-evaluate our business to conform to the new behaviors,” said Deena Jalal, owner of FoMu’s plant-based ice cream chain and co-founder of Sweet Tree Creamery, a Boston-based wholesaler. .

Overall, business expenses in FoMu’s stores increased by approximately 15% in 2021 compared to 2020. It raised prices by about 10%, but also took other measures: it switched to larger deliveries and switched to flavors like avocado ice cream, which became too expensive. that the price of avocado has risen.

“No business can bear the rapid cost increase we’ve seen over the past year,” Jalal said. “You used to be able to work very hard and you could see progress. You are working very hard now to stay afloat. ”

Jalal is afraid of the long-term outlook for the small business community if inflation does not subside soon. “If we have to work on this puzzle for another two years, I really think a lot of businesses, including us, will struggle to keep their doors open.”

Elizabeth Benedict, owner of the interior design firm Elizabeth Home Decor & Design in Chestnut Hill, Massachusetts, said prices for the products she bought have risen 7-30%. In addition, you pay the shipping surcharge.

“Most of these (raises) come with less than two weeks notice,” he said. “We cannot guarantee quotes that will appear and we have had to modify our contract and all the languages ​​in our quotes to reflect these changing terms.”

To address rising costs and overseas shipping delays, Benedict has significantly changed its supplier list and now only buys with U.S. brands that manufacture products in the United States and added services such as e-commerce and virtual design. But he still looks at his projects for a longer period of time and doesn’t hire new clients until things stabilize.

“We’re still spinning with the punches, but we definitely feel like they’re being pushed and pulled in too many directions,” he said.

Some online providers are eliminating free shipping to reduce costs. Gianluca Boncompagni, owner of the Off Road Tents e-commerce site, which sells off-road and land equipment, has quadrupled logistics costs. In October 2020, he paid $ 6,300 for a 40-foot container from China. By October 2021, he had paid $ 26,000 for a container of the same size.

Boncompagni increased prices by about 5% and began charging a flat rate depending on the size of the lot. Although it may reduce prices in the future, the shipping fee will not be maintained, he said.

“There’s simply no way for most online businesses to ship pallets and shipments smaller than a truck without having to pay at least a small fee for them,” he said.

Some businesses communicate with customers through the channels they develop at the time of the epidemic about why prices are rising, in the hope that they will be patient.

Kialee Mulumba, founder of the Jakeala beauty brand in Newport News, Virginia, had to raise the price of her beauty products by $ 1-5. Container prices have doubled – the previously 50-cent container now costs $ 1. Prices of organic olive oil butter and conditioners have risen from 5% to 10% and shipments from China have increased by 5%. It also reduced the working hours of four of its employees from full-time to part-time.

Mulumba sent emails to customers to be transparent and to inform them that prices are rising due to rising supply costs. But he noticed a slight drop in sales.

“I just hope consumers support the small businesses they like – it’s time to support small businesses,” he said. “Even if you can’t buy, you can share posts, like or comment on it – it would really go a long way.”

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