While Small Businesses Raise Prices, Some Customers Retreat | News, sports, jobs

While Small Businesses Raise Prices, Some Customers Retreat |  News, sports, jobs

New York (AFP) – Inflation isn’t just costing small businesses money. It costs them clients, too.

At the Bushwick Grind Cafe in Brooklyn, New York, Kymme Williams-Davis raised prices and switched to different types of goods to keep up with rising costs for milk, coffee, paper goods, and plastic, as well as shortages of items like paper cups and plastic lids. Haven’t experienced anything like it since it opened in 2015.

Williams-Davis says she has lost nearly half of her regular customers. Some bartered and bought coffee for $1 at a McDonald’s or a bodega on either side of the café instead of paying the $3 they charge.

“If (customers) can get it for $1 for a noticeable difference, they’re going to go next door.”

A customer who had been coming in for years stopped by to tell Williams Davis that he had bought himself a coffee maker.

“He said I’m going to start making coffee at home, I need to budget, so I won’t come here every day,” She said. “I feel like I was on a farewell drive.”

Inflation has risen at nearly the fastest pace in 40 years, driven by robust consumer spending and rising costs for food, rent, medical care and other necessities.

On Tuesday, the government is expected to report that price increases slowed in August compared to last year, in large part due to the ongoing decline in the cost of gas. Prices for other items, especially food, are likely to continue to rise rapidly. Overall, economists expected consumer prices to rise 8.1% in August, compared to a year ago, down from 8.5% in July, according to data provider FactSet.

For most of the pandemic, small business customers have been largely tolerant of price increases and have continued to spend. But owners now say they’re seeing some downside.

Ninety-seven percent of small business owners say inflationary pressure is the same or worse than it was three months ago, according to a survey of more than 1,500 small businesses conducted by Goldman Sachs and 10,000 small businesses. 65% have raised prices to offset higher costs. And 38% say they have seen a drop in customer demand due to higher prices.

Nicole Miskley, who runs an auto and diesel repair shop in Marion, Illinois, PMR, said she has seen customers delay non-urgent repairs such as scheduled maintenance or getting new tires.

At the start of the year, Miskelley’s labor costs rose 12% and the cost of towing cars to the store increased due to higher gas prices. The parts are expensive too. Last year, an air conditioner processor cost her $200, but this year you couldn’t find a processor for under $400. Therefore, it had to raise its average repair price by 30% to 40%.

Notice her customers.

“I’m usually able to joke about how drastically different things are now and most of them agree with me,” She said. “Sometimes, I deal with the pressure to back,” Including the rare spell of yelling or cursing by the client.

“Among a lot of my older clients, who have restricted incomes like Social Security, say they should cut back on expenses” She said. They say, ‘I know I need these tires, but I need to do two extra rounds (from Social Security) to save. “

She says she is a bit worried but hopes that people can adjust to inflation.

“Right now, it’s kind of annoying because costs have gone up faster than I can catch up. In time, I hope people will balance better and their incomes will change to reflect the economy.”

The decline is most dramatic among consumers with lower discretionary income. Walmart says its customers, who tend to have lower incomes, spend more on food and less on other items. Small business owners see a lot of the same.

Kim Shanahan runs the online store Gifts Fulfilled in Berlin, Maryland, which sells gift baskets and care packages and employs people with disabilities.

“Last year has been challenging to say the least,” She said. “All prices rose across the board.” Everything from the cardboard, to the containers, to the food you put in the baskets is becoming more and more expensive.

I implemented a 5% increase to cover some costs. After I raised the price of the most famous recovery gift basket “One hard cookie,” From $27.50 to $28.95, sales fell.

Less expensive baskets, such as gifts and candy that sell for $25 or less, have been hit the hardest, with unit sales down nearly 50% in 2022 compared to last year. “The whole part of the market has disappeared for us,” She said.

“We want–“no”–“must–“to have an item in our base classes,” Shanahan said. “What we’re kind of seeing is people are probably buying a $50 gift and it’s down to $35. And the whole lower class doesn’t buy at all, and they don’t have discretionary money.”

Schuyler Northstrom of Uinta Mattress, a Salt Lake City, Utah, mattress maker, says he has raised his prices by 15% since 2020. A mattress that used to retail for $289 is now $330.

The increase does not fully cover Uinta’s higher costs. Raw materials such as springs and foam have increased by 40%. But Northstrom worries that raising prices even higher will lead to his customers abandoning him.

“The pullback from retailers is pretty strong out there,” He said. Its retail partners include mattress stores John Paras and 2Brothers Mattress, both in Utah. “Sometimes we are replaced by some bigger people who have a less expensive product because of their size.”

To adapt, Northstrom is redesigning the mattress to reduce costs, and make less profit, which is not sustainable in the long run, he said. It also places more emphasis on the top end, the $1,200 mattress, which hasn’t been damaged as much.

“We feel like, we’re not a necessary purchase, people are buying food and gas,” He said.

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