UNITED STATES NEWS

As small businesses raise prices, some customers push back

Sep 11, 2022, 2:00 PM | Updated: Sep 12, 2022, 3:43 pm
Kim Shanahan, who operates online store Gifts Fulfilled, stacks Get Well Soon boxes in her shop, Th...

Kim Shanahan, who operates online store Gifts Fulfilled, stacks Get Well Soon boxes in her shop, Thursday, Sept. 8, 2022, in Berlin, Md. This is a fulfillment project for another company to create jobs at her company. (AP Photo/Todd Dudek)

(AP Photo/Todd Dudek)

NEW YORK (AP) — Inflation isn’t only costing small businesses money. It’s costing them customers as well.

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

Williams-Davis says she has lost nearly half of her regular customers. Some have traded down and are buying coffee for $1 at the McDonald’s or bodega on either side of the café instead of paying the $3 she charges.

“If (customers) can get it for a dollar for not that notable of a difference, they’re going next door.”

One customer who had been coming in for years stopped in to tell Williams-Davis he bought himself a coffeemaker.

“He said I’m going to start making coffee at home, I need to budget, so I won’t be coming in here every day,” she said. “I feel like I’ve been on a goodbye campaign.”

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

On Tuesday, the government is expected to report that price increases slowed in August compared with a year ago, largely because of a steady drop in the cost of gas. Prices for other items, particularly food, are likely to keep rising quickly. Overall, economists forecast consumer prices rose 8.1% in August, compared with a year ago, down from 8.5% in July, according to data provider FactSet.

For much of the pandemic, small business customers were largely tolerant of price increases and kept on spending. But now owners say they’re seeing some pushback.

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 by Goldman Sachs 10,000 Small Business Voices. Sixty-five percent have raised prices to offset higher costs. And 38% say they’ve seen a decline in customer demand due to price increases.

Nicole Miskelley, who manages PMR, an auto and diesel repair shop in Marion, Illinois, said she has seen customers delay repairs that aren’t urgent such as scheduled maintenance or getting new tires.

At the beginning of the year, Miskelley’s labor costs rose 12% and the cost of towing cars to the shop went up due to higher gas prices. Parts are more expensive too. Last year, an air conditioner processor would cost her $200, but this year she can’t find one for under $400. So, she’s had to raise her average price for a repair by 30% to 40%.

Her customers have noticed.

“Typically, I am able to joke about how drastically different things are now and most agree with me,” she said. “On occasion, I deal with push back,” including the rare bout of yelling or cursing by a customer.

“Among a lot of my older customers, who are on restricted income like Social Security, they say they have to cut back,” she said. “They say, ‘I know I need these tires, but I need to make a couple more rounds (of Social Security) to save up.'”

She says she’s a little worried but hopes people can adjust to inflation.

“Right now , it kind of sucks because costs increased faster than I could catch up with. In time, I hope people budget better and their incomes change to reflect the economy.”

The pullback is more dramatic among consumers with less discretionary income. Walmart says its customers, who tend to have lower incomes, are spending more on food and less on other items. Small business owners are seeing much of the same.

Kim Shanahan operates 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 across the board have gone up.” Everything from cardboard, containers and the food that she includes in the baskets have become more expensive.

She implemented a 5% increase to cover some costs. After she raised the price of her most popular get-well gift basket called “One Tough Cookie,” from $27.50 to $28.95, sales went down, she said.

Less expensive baskets, such as those with gifts and candy that sell for $25 and under, have been the most affected, with unit sales down about 50% in 2022 compared with last year. “The whole segment of the market is gone for us,” she said.

“We are a ‘want to-‘ not ‘have to-‘ have item in our primary categories,” Shanahan said. “What we sort of see is people maybe buying a $50 gift dropping down to $35. And the whole lower tier aren’t even buying at all, they don’t have the discretionary funds.”

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

The increase doesn’t fully cover Uinta’s higher costs. Raw materials such as springs and foam have increased by 40%. But Northstrom fears that raising prices any higher could cause his customers to drop him.

“The pushback from retailers is pretty strong there,” he said. His retail partners include John Paras mattress stores and 2Brothers Mattress, both in Utah. “Sometimes we’re displaced by some of the larger guys with a lower cost product because of their volume.”

To adapt, Northstrom is redesigning the mattress to cut down on costs, and taking less profit, which isn’t sustainable in the long term, he said. He’s also focusing more on the higher end, mattresses that cost up to $1,200, which hasn’t been hit as hard.

“We’re feeling it, we’re not a necessary purchase, people buy food and gas,” he said.

___

This story has been edited to correct the name of the survey group to Goldman Sachs 10,000 Small Business Voices, not Goldman Sachs 10,000 Small Businesses.

___

AP Business Writer Christopher Rugaber in Washington contributed to this report.

Copyright © The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Lifetime Windows & Doors

United States News

Associated Press

Madame Wu, restaurateur to Hollywood’s elite, dies at 106

LOS ANGELES (AP) — Sylvia Wu, whose famed Southern California restaurant drew Hollywood’s biggest stars for four decades, has died at age 106, according to a news report. Madame Wu’s Garden on Wilshire Boulevard in Santa Monica became a dining destination shortly after it opened in 1959, popular for its cuisine and pagoda-style decor featuring […]
15 hours ago
Gabriel Madling loads sandbags onto his kayak so he can fortify his house on a submerged street in ...
Associated Press

Ian is long gone but water keeps rising in central Florida

GENEVA, Fla. (AP) — Residents in central Florida donned fishing waders, boots and bug spray and canoed or kayaked to their homes on streets where floodwaters continued rising Sunday despite it being four days since Hurricane Ian tore through the state. The waters flooded homes and streets that had been passable just a day or […]
15 hours ago
Associated Press

3 die when plane hits Minnesota home, but 2 in house unhurt

HERMANTOWN, Minn. (AP) — Three people aboard a small airplane died when it crashed into a house near a northern Minnesota airport, but the two people sleeping inside the home — and their cat — were unhurt. Hermantown Police said the Cessna 172 plane crashed into the second floor of the home just south of […]
15 hours ago
Associated Press

Fire damages Mark Wahlberg’s childhood home in Boston

BOSTON (AP) — A home where entertainers Mark and Donnie Wahlberg’s family once lived was damaged by fire Sunday in Boston’s Dorchester neighborhood, the fire department said. The blaze in a nearby home at around 10 a.m., but spread to another three buildings because of strong winds, Fire Commissioner Paul Burke said. Two firefighters suffered […]
15 hours ago
Associated Press

Chesapeake Bay lighthouse auctioned, with strings attached

HOOPERSVILLE, Md. (AP) — The federal government has sold off a rather inhospitable lighthouse in the middle of the Chesapeake Bay for a six-figure sum after a bidding war at auction. The Hooper Island Lighthouse, located west of Middle Hooper Island in Maryland’s Dorchester County, at first drew little interest, The Washington Post reported. But […]
15 hours ago
Associated Press

FBI: Jetliner evacuated in Albuquerque after security threat

ALBUQUERQUE, N.M. (AP) — An American Airlines flight from Texas to New Mexico was evacuated Sunday after landing at the Albuquerque airport because of a security threat, authorities said. All 179 people aboard Flight 928 from Dallas-Fort Worth were taken off the jet in the morning at Albuquerque International Sunport and were bused to the […]
15 hours ago

Sponsored Articles

...
Day & Night Air Conditioning, Heating and Plumbing

Here are 4 signs the HVAC unit needs to be replaced

Pool renovations and kitchen upgrades may seem enticing, but at the forefront of these investments arguably should be what residents use the most. In a state where summertime is sweltering, access to a functioning HVAC unit can be critical.
...
Day & Night Air Conditioning, Heating and Plumbing

Ways to prevent clogged drains and what to do if you’re too late

While there are a variety of ways to prevent clogged drains, it's equally as important to know what to do when you're already too late.
...
Day & Night Air Conditioning, Heating and Plumbing

Most plumbing problems can be fixed with regular maintenance

Instead of waiting for a problem to happen, experts suggest getting a head start on your plumbing maintenance.
As small businesses raise prices, some customers push back