Small businesses eat the cost of inflation

0

For Vivian Bowers, owner of a dry cleaner in South Los Angeles, inflation hit home when the wholesale price of her hangers soared 48% in six months.

Tom Bock, who runs an e-bike dealership in Huntington Beach, Calif., Had to pay his employees 25% more, on top of an increase in commissions.

Hagop Berberian, owner of an auto repair shop in Inglewood, Calif., Is afraid to fully pass on the rising cost of tires, motor oil and freon. “Either you keep the customer happy or you lose the customer,” he said.

In October, the 6.2% increase in consumer prices in the United States was the largest year-over-year increase in 31 years. Scorching spikes in the cost of shelter, gasoline, cars and food continue to grab the headlines. For many small stores selling products ranging from furniture to shoes, and for service providers ranging from haircuts to home care, these are nerve-wracking times – are they charging more and running the risk of losing money? lose customers?

“Large companies can absorb higher procurement costs,” said Holly Wade, research director for the National Federation of Independent Businesses, an advocacy group with more than 300,000 members. “For small businesses, it’s a different ball game.”

Across the economy, consumers who quit traveling, dining out, having their hair cut and going to the movies during the COVID-19 pandemic have racked up billions of dollars in savings collectively. Increasing vaccination rates make shoppers feel more secure. Despite rising inflation, retail sales jumped 1.7% in October, more than double September’s growth rate and the fastest pace since March.

But many small businesses don’t feel the love.

And their profits are threatened, said Robert Fairlie, an economist at the University of California at Santa Cruz. “When the cost of making a carne asada burrito goes up, some is passed on to the customer. And some is just eaten by the business owner.”

In October, 69% of small business owners polled by the Federation of Independent Businesses said they had raised prices due to supply chain disruptions and rising employee wages in the face of labor shortages .

The number of owners expecting worsening business conditions over the next six months rose to 52%, said Wade, the highest in 42 years of the group’s surveys – and that was before a new one global variant of the coronavirus, omicron, threatens to make progress in containing the pandemic. .

When Vivian Bowers took over her parents’ dry cleaning business on S. Central Avenue in the wake of the 1992 riots, she recalls, the neighborhood was “devastated – gangs, drugs, prostitution.”

But the energetic entrepreneur took a business planning course at the University of Southern California, chased drug dealers out of her neighborhood, started pickup and delivery, and transformed Bowers & Sons.

With four employees, the neighborhood institution cleans the uniforms of police officers, bus drivers, LA Live bailiffs and Ritz-Carlton housekeepers.

And he’s extended his reach, picking up laundry from expensive downtown lofts and fake blood-stained sheets from the set of “Grey’s Anatomy.”

After barely surviving the Great Recession and its long aftermath, and cutting back on hours during the pandemic, Bowers now faces a new threat: inflation.

Los Angeles raised its minimum wage to $ 15 an hour in July, boosting its payroll. The costs for hangers, garment bags and solvents, as well as gasoline for the delivery van, have skyrocketed.

In June, Bowers increased its prices by 5%. Now she is worried that she will have to increase them by an additional 10%.

“I don’t want to chase customers,” she said. “If they have to choose between having a blazer cleaned or putting gas in their car, which one are they going to do? “

Why is inflation so high?

“COVID – and greed,” suggested Berberian, the owner of auto repair.

“Millions of dollars in cargo are lying around on ships. People sell the supplies they have at their best. They are swindling us to get back what they have lost over the past year and a half. “

Berberian believes prices will stabilize in the coming months. During this time, he reduced his working hours from six days to five days a week, without reducing the wages of his mechanics.

“If business is going well at the end of the month, I give them a bonus,” he said. “Look at what the milk costs – and the eggs, the groceries. I go to a supermarket and what I used to buy for $ 100 now costs almost $ 200.”

Margot Roosevelt, Samantha Masunaga Los Angeles Times

Share.

Comments are closed.