Here’s Where Small Businesses Are Feeling Inflation Most
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Consumers are spending more on goods and services, but they aren’t the only ones feeling a pinch. Small-business owners are facing their own constraints: higher prices and delays for supplies they need to serve their customers.
Small businesses have fewer options than their bigger counterparts. When the going gets tough, they often lack the other revenue streams and resources of large corporations. And the potential loss of small businesses stands to hurt the people around them more because these operations are often built on the relationships they have with customers, the local jobs they provide and being an indelible part of the communities they serve.
The share of these businesses experiencing notable price increases has grown considerably, according to data from the U.S. Census. And many are experiencing supply delays on goods purchased domestically and abroad.
The U.S. Census has been deploying weekly surveys to small businesses across the country since 2020. The Small Business Pulse Survey intends to measure the effects of the pandemic and other recent events.
States and metros where small-business inflation is worst
The week of Aug. 16, 2021, the agency began asking about prices small businesses were paying for goods and services, costs that would no doubt be passed on to consumers in large part. Then, 29% said they had seen large price increases since March 2020. As of April 2022, the last survey conducted at the time of this analysis, about 41% of small businesses said they were experiencing a large increase in prices over the past six months. And about 79% were experiencing at least a moderate increase. But some locations were experiencing these hikes at an even greater rate.
States where small businesses are most likely to say they’ve seen a moderate or large increase in prices over the previous half-year include: Nebraska (88%), Wisconsin (87%), Arkansas (86%) and South Dakota (86%). In all, 24 states had such price increases in more than 80% of small businesses.
Metropolitan areas where small-business owners are most likely to have seen a moderate or significant price increase over the past six months include: Milwaukee, Wisconsin, where 87% of small businesses say they’ve seen these rising prices; Charlotte, North Carolina (86%) and Columbus, Ohio (85%). In addition, three metro areas saw 83% of their small businesses reporting moderate to large price increases during this period: Orlando, Florida; Louisville, Kentucky and Oklahoma City, Oklahoma.
Supply chain disruptions still a small business problem, too
Closely linked to price increases, supply chain disruptions mean sellers can’t get the goods they need in a timely manner, whether to sell them or use them in production. Across the country, 45% of small business owners say they’ve experienced domestic supplier delays in the past week, and 19% have experienced international delays.
Initially, the supply delays were directly related to the pandemic and control efforts — ships were caught in port and producers were closed down in early attempts to slow the spread of COVID-19. That eased slightly, but the war in Ukraine and ongoing COVID-19 resurgences worldwide continue to tighten the flow of goods.
States where small-business owners are most likely to cite domestic supplier delays in the week prior to the survey date include Wisconsin (55%), Mississippi (54%), Maine (52%) and New Hampshire (52%). International delays are hitting small businesses particularly hard in Vermont (24%), Puerto Rico (24%), Washington (23%), Georgia (23%) and Minnesota (23%).
Metro areas most likely to cite such domestic supplier delays include Memphis, Tennessee, where 56% of small businesses report such issues; Charlotte, North Carolina (55%); Buffalo, New York (54%); Louisville, Kentucky (53%); St. Louis (52%) and Jacksonville, Florida. (52%).
What business owners (and their customers) can do
More than large corporate stores, small businesses are part of their communities. Customers can chat directly with owners as they get an estimate for a home renovation, order a coffee or buy a book. These relationships make small businesses far more valuable than just the goods or services they offer. And these relationships can help ease the stressors of the current economy.
For business owners:
Be transparent. You may have to raise prices or cut inventory, but there’s a good chance your customers will be willing to support you through the turmoil. Be forthcoming. Through conversations, social media or even a sign on the door, tell your customers about what you’re facing and how you plan on handling those obstacles.
Consider gradual price increases. You (and your customers) may grimace at the thought of one big price jump, so think about easing into it. In advance, let your patrons know you’ll be increasing prices by a certain percentage over a period of time. You could even market the current rates as a “last chance sale,” an opportunity to take advantage of lower sticker prices before they rise.
Take a look at your offerings and alternatives. It can be hard to pivot when under pressure, but being flexible could open opportunities you might not otherwise see. Consider working with additional suppliers, stocking alternate products or ordering directly from the manufacturer.
You’re feeling the effects of inflation on nearly every purchase, from food to gasoline, but you likely shop at small businesses because you value what these businesses bring to your community or you know the owners. In fact, a September 2021 NerdWallet survey found many Americans increased their small-business shopping early in the pandemic to help keep those operations afloat.
Make room in your budget for small-biz shopping. If continuing to support small businesses is a priority for you, consider if there are other places in your budget where you can make sacrifices. Could you cut out your daily coffee from the drive-through chain to do lunch once per week at a locally owned food truck? Maybe eliminating one streaming service would be enough to buy your next book from a locally owned bookshop instead of a big online retailer.
Swap the small businesses you frequent. For the time being, maybe you can’t continue to shop at the specialty store for your favorite cheeses, but you could hit the local gift shop when it’s time to buy birthday cards. Supporting small businesses isn’t an all-or-nothing experience, and with everyone feeling the pinch of inflation, propping up local shops may take some creativity.