Some small businesses worry they’ve hit the limit on raising prices
Some small businesses worry they’ve hit the limit on raising prices
We’re gonna be getting a lot of inflation data this week. The consumer price index for June will be released Wednesday. The next day, we’ll hear about the prices that producers are charging.
And Tuesday we learned that in June, the number of small businesses raising prices fell to its lowest level in more than two years. That’s according to the National Federation of Independent Business.
That could be a sign that input costs and wage pressures are easing up. It could also be a sign that sales are weakening and the economy is slowing down.
About a year ago, James Beck realized that he was raising prices a lot at his hot sauce shop in Houston called iBurn. So often that it wasn’t even worth printing out new price tags anymore.
“I just gave up and said, ‘Hey, if you need to know a price on something, just ask me,’ because there’s just no point in putting price tags out when we’re constantly having to change them,” Beck said.
But more recently, Beck said he’s started to hit a limit on raising prices. He sells a lot of hot sauce online, and the competition there is heating up.
Plus, some of his products have just become unaffordable. Take the barbecue brine he sells that’s almost doubled in price.
“For one of the first times, probably in the history of me doing this, I said to myself I wouldn’t pay $28 for this product,” Beck said.
Consumer spending has stayed relatively strong so far, but small businesses in general are worried that won’t last, said Bill Dunkelberg, chief economist with the National Federation of Independent Business.
“One of the questions we ask is, ‘What do you expect to happen to your real sales volume going forward over the next three to six months?’ Those numbers are really not very good,” Dunkelberg said.
He said those downbeat expectations could cause more businesses to hold off on raising prices.
It could also prod them to make tough decisions “about things like spending and capital outlays and expanding the business and ordering more inventories,” Dunkelberg said.
Or … paying their employees.
Madeline Reeves owns a marketing and consulting company called Fearless Foundry. Just like James Beck, Reeves said she’s felt pressure to keep a lid on price hikes.
But she’s also felt pressure to pay her workers more.
“Employee costs continue to go up, and if you’re a good employer, you want to continue to be able to help your employees be able to keep up with inflation,” Reeves said.
But her revenue has been falling for the last six months, she said.
That’s had consequences. “I mean, the main thing we’ve had to do is cut staff. You know, my team is a third of the size it was over a year and a half ago,” Reeves said.
She said she’s holding off on boosting her employees’ pay. At least until her revenue gets to a point where she can afford it.
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