Inflation is the increase in the prices of goods and services over time, as defined by the Federal Reserve. For businesses, this can mean higher prices for less profit. What does this mean for small businesses:higher prices of goods and services, loss of employees and in the end, loss of business.
Due to COVID-19, the increase in costs of living between the upper and lower classes skyrocketed. As explained by the U.S. Bureau of Labor Statistics, “[t]he cost of living increased faster than the cost of living of the official CPI…low-income households had higher rates of COVID-19 inflation (1.12% in May 2020) during the pandemic when compared with higher income households (only 0.57%).”
COVID-19 also became the direct cause of a nationwide labor shortage, causing companies to respond by increasing their wages for employees in the hopes to attract more workers. However, due to the rise of inflation causing their loss of profit, theses small businesses had very little wiggle room to raise these wages.
With the cost of restocking rising, the competition between small and large companies becoming more difficult and the labor shortage resulting in a more difficult process to hire new employees, small businesses are struggling to survive.
A 6.2% increase in U.S. consumer prices has left them stuck.
Many small businesses rely on the close relationships between them and their customers. However, as inflation increases, how do small businesses survive the economy while also maintaining their relationships with the only customers they receive?
The economic trend is forcing them towards raising their prices.
According to an article from the Los Angeles Times where Californian small business owners were interviewed for their experiences with navigating inflation, Dry Cleaner Vivian Bowers elaborated, “I don’t want to chase away customers. If they have to choose between getting a blazer cleaned or putting gas in their car, which one are they going to do? With revenue down by the quarter since 2019, I’m struggling.”
Along with the California small business owners, small businesses in Iowa are also struggling.
Des Moines Desire N Touch Beauty Supply owner said she too had to adjust her product prices in order to stay competitive with the other businesses.
“So if I’m buying a product for $100 I will sell it at like $103 that way I’m getting some type of interest on it, because there are taxes as well that you have to pay on the product.”
Causing Desire N Touch Beauty Supply to lose 20 to 30 customers due to the rise of inflation, one can only imagine how even smaller businesses such as localized coffee shops and boutiques are managing to keep their heads above water.
Currently with inflation continuing to rise despite its supposed natural rises and falls, businesses of all kinds are struggling. Particularly, the small businesses across the nation are increasingly feeling the pressure with this new inflation trend. How small businesses are managing and handling the situation varies between the businesses, however, the main consequence is the loss of customers and increased prices. How long can small businesses keep it up before sinking under the consequences of inflation?
Vince T • Jan 31, 2022 at 12:55 pm
Since COVID-19 blew up in March 2020, the small business world has not been the same. I seen this especially with both of my parents who own their own businesses and hearing them discuss the cost of living increasing, inflation increasing, and the fact that people do not want to work. The economy has seen better days, and it is pretty common now to see businesses struggle with their business due to all of these factors.
Vince T • Jan 31, 2022 at 12:55 pm
Ever since COVID-19 blew up in March 2020, the small business world has not been the same. I seen this especially with both of my parents who own their own businesses and hearing them discuss the cost of living increasing, inflation increasing, and the fact that people do not want to work. The economy has seen better days, and it is pretty common now to see businesses struggle with their business due to all of these factors.
Anna Smith • Jan 27, 2022 at 1:39 pm
Lot’s of people dream of owning their own business, but only a few actually do. It’s a lot of work, and having prices messed up because of inflation is ruining so many people’s dreams. They can’t afford many employees and eventually some can’t afford to keep up with the rent for their business. All of their hard work gone because of inflation.