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To avoid price hikes, businesses are finding other ways to protect their margins

Justin Ho Nov 17, 2021
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Some stores are stocking fewer items or reducing their hours to deal with rising costs. Other businesses are creating new purchasing, storage or delivery strategies. Ralph Orlowski/Getty Images

To avoid price hikes, businesses are finding other ways to protect their margins

Justin Ho Nov 17, 2021
Heard on:
Some stores are stocking fewer items or reducing their hours to deal with rising costs. Other businesses are creating new purchasing, storage or delivery strategies. Ralph Orlowski/Getty Images
HTML EMBED:
COPY

Businesses that import products or ingredients are facing a tough conundrum in this inflationary moment. The goods themselves are getting more expensive, and so is getting those goods delivered, whether from overseas or across the country.

These businesses could simply decide to pass those added costs along to their customers. But many small-business owners say they’re doing everything they can to avoid jacking up their prices.

The cost of importing some of the olive oils and vinegars for sale at the Minneapolis store Vinaigrette has gone up a lot lately. Earlier this month, owner Sarah Piepenburg raised some of her own prices anywhere from 10% to 30%. It’s not something she wants to do again.

“At what point is my olive oil or my vinegar going to be cost-prohibitive to my customer base?” Piepenburg said. “Because I think it already has, to a certain degree.”

That’s the situation small businesses across the country are trying to avoid. Instead of raising their prices, they’re looking for other ways to protect their margins.

In some cases, less can be more.

“You may look at something that you did before and say, ‘Well, this is not worth it,’” said Pat Whelan, who handles imports for Sahadi’s, a grocery store and wholesaler based in Brooklyn, New York.

“By the time you staff the store, and by the time you run it, and by the time you open it, you realize for the first two hours, you’re losing money,” Whelan said. “Do we really need to be here at this time?

The store’s also selling fewer prepared dishes at the deli and stocking fewer items on its shelves. Whelan said that includes products like cheeses, varieties of blackberry jam and different types of almonds.

“Does it matter to you whether the sliced almond has a brown rim on it or a white rim on it?” Whelan said. “Probably not.”

While Sahadi’s is cutting back, TMB Baking is doing the opposite.

“What we’re actually trying to do is increase our purchases,” said Greg Warwick, CEO of the South San Francisco-based bakery equipment supplier. “Particularly things like spiral mixers and other things that are used in the bread-baking industry.”

Warwick said the hope is that by ordering more products, the company can negotiate lower prices with its suppliers. The company’s also working to control the cost of shipping by cramming shipping containers with more equipment.

“We’re crating them in a way that we can stack them higher into the container,” Warwick said. “[We’re] using every nook and cranny for different sizes and types of equipment.”

TMB’s leasing an additional warehouse to store all of that extra inventory. It also just bought a new truck to reduce the cost of delivering items. Warwick said these are expensive decisions, so they’re risky.

“But we can be willing to take that risk, just to keep our costs under control,” he said. “And our prices under reasonable increases to our customers, as much as we’re able to.”

At Vinaigrette in Minneapolis, Sarah Piepenburg has been trying to solve some of her supply chain challenges on her own. She always ships less than a truckload of merchandise, but she said it’s hard to even get the attention of the less-than-truckload carrier companies that provide the service.

“And even if the LTL carrier can actually pick it up, do they have a driver to get it from point A to point B?” Piepenburg said.

Twice now, she said, she and her husband have driven to Chicago to pick up orders themselves.

“And the thing is, we have a minivan,” Piepenburg said. “Putting 5,000 pounds on my minivan, and driving for six hours?”

Piepenburg said she traded in her old minivan for a newer one that can handle the weight of the goods better. Now, she’s in the market for a flatbed trailer.

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