SMEs get creative to fight inflation


September 29, 2022


Stephanie Overman

The cost of citric acid, a key ingredient in bath products sold at Crystal Wellman’s Sugar + Spruce shop in Fredericksburg, has risen 200% due to inflation and supply chain issues.Photo by Will Schermerhorn

Inflation and supply chain issues have pushed the price of citric acid up 200%. This is a problem for her Crystal Wellman, because citric acid is the main ingredient in the bath products she sells at her bath, body, and skincare product store, Sugar + Spruce, in downtown Fredericksburg.

Wellman could have simply tried raising prices, but she and other small business owners are instead looking for creative ways to buck inflation, the fastest pace since November 1981. Falling gas prices pushed her to 8.5% in July.

Other ingredients used to make sugar-spruce bath products have seen only modest price increases, says Wellman. , To promote the effervescent effect of citric acid, can not be made without citric acid.

At the same time, “over-the-counter purchases are down. People are probably holding a little more dollars than normal. They’re not where they used to be,” says Wellman, who has been in business for 10 years.

“There are so many angles that we’re hitting. We pay a lot for shipping. It feels like every order is a little different,” she says. Good, but not at the level it was before … margins are 75% to 85%.”

“People don’t spend a lot of money. It’s not a huge amount, but we’re a small business and every cent doesn’t matter,” says Tawan Scott of Mary’s Hair & Nail Supply in Richmond. Mr.Photo credit: Chandell Taylor

So far, Sugar + Spruce has made minor price adjustments. Before the pandemic, customers who bought items in bulk received discounts. That incentive is gone and individual item prices remain the same.

Wellman has bigger ideas again to “get people to put more things in their baskets.” She wants to bring back the fun of in-person shopping.

“We’re seeing more workshops on how to make candles. People are trying out products in stores, which COVID couldn’t do,” she says. “I feel like people are craving experiences. Fredericksburg has a great historic downtown. I can do it.”

Tawan Scott, owner of Mary’s Hair & Nail Supply, a beauty supply store in Richmond, is also feeling the pinch of inflation and plotting ways to combat the loss of business.

“People don’t feel like they’re spending a lot of money. It’s not a huge amount, but for us, a small business, not a single cent matters. I’m not sure the big stores feel that way.” We rely on the community,” she says.

With wholesale prices rising, “we have to give our customers a higher price,” says Scott, who opened the store with his family in October 2021.

“We do some additional things like running some sales and sending out coupons to attract more people. It’s been doing pretty well,” she said, adding that her store was recently featured on BLK RVA, a Richmond-area tourism website dedicated to black businesses, culture and communities.

Scott’s big idea is to directly confront declining customer spending. She believes that many women don’t come to the store often to buy products because she has her hair in braids. Braiding your hair means you don’t have to pay to braid your hair for a few months.

“I think there are also knitted products. You can bring it inside the store.I was able to get an additional type of braided hair.”
Scott is thinking of hiring a braider to work at the store to attract more customers.

Like Scott, 5.4 million entrepreneurs will apply to start a new business in 2021, a 53% increase from 2019, according to U.S. Census data.

Many of these new small businesses are in the service sector, according to Steve Cooper. SCORE (Service Corps of Retired Executives) Volunteer Steve Cooper is an organization partially funded by the US Small Business Administration.

The nature of the service industry’s business may ease the burden of inflation a bit.

“They don’t buy a lot of stuff. They’re not manufacturing companies,” says Cooper. In many cases, these businesses are run by one person, do not have to pay wages, and many work from home, so they don’t have to deal with office overhead.

According to Donald Jennings, a SCORE volunteer at Orange, the bigger problem for fledgling startups is, “People starting businesses have a Pollyanna view of funding. Banks won’t lend money to ideas. Proven product or service required Self-funded, [from] family. Bootstrap. ”

Jennings urges small business owners battling inflation to “eliminate unnecessary costs, especially recurring costs. Make the most of the infrastructure you have.”

Higher commodity and labor costs pushed the price of a soft serve cone at the Virginia Beach Aqua S shop in “Hawaii” Lynn up from $4.75 to $5.75.Photo by Mark Rose

resilient industry

Coby Loessberg, president of Legendary Custom Signs & Graphics in Manassas, said his business is doing relatively well.

“The sign industry is pretty resilient to economic cycles,” he says. The uncertainty in the early days of the pandemic was so high that it saw some setbacks, but the industry recovered quickly, increasing demand for COVID-related signs and acrylic sneeze guards.

Loessberg’s flagship firm has raised prices in response to inflation, he says. “We have tried to report for a while, but our prices are driven by our supply chain and are unpredictable now. In some cases, materials are going up. The cost of transporting fuel was starting to fall, but now it’s rising again.”

Loessberg expected supply chain problems at the peak of the pandemic. [problems] in the last 6-9 months. It is difficult to obtain aluminum composites, which are rigid materials. It’s backordered,” he says. Prior to the pandemic, Legendary Custom Signs & Graphics had low inventory on hand. This was because supplies were easily available the next day. “We are now ordering 3-4 additional rolls of records.”

The market for clear acrylics “has been hit hard.” Manufacturers have since caught up with demand, but are now limiting acrylic production to a smaller number of colors. , focused their manufacturing on products that were in high demand.

Madhu Garlanka, CEO of Allwyn Corp., a Herndon-based information technology services and consulting firm with 200 employees, doesn’t have to worry about rising costs or shortages of raw materials. However, she points out that inflation has significant “indirect effects” on companies like hers.

“The cost of people trying to increase their income is rising. We have to pay more to keep our employees,” says Garlanka. “We’re trying to source people for the project, and that’s the challenge.”

One way to address this challenge, she points out, is to negotiate a higher price when a customer’s contract is renewed.

Another way is to take advantage of the wider employment pool made available by remote work.

“Previously, we were looking for locals where our clients were,” says Garlanka. “Now we can hire people from areas where the cost of living is lower. Employees want to work remotely.”

ice cream and beer

The food and beverage industry has been hit particularly hard by rising costs and shortages of all kinds of supplies.

Xiawei “Hawaii” Lin, owner of the ice cream shop, said: Raw materials cost more. I believe it will go higher. ”

Lynn opened the Aqua S Soft Serve Ice Cream franchise in Virginia Beach in December 2019. Additionally, Virginia’s legal minimum hourly wage was raised to $11 in January, and is expected to rise to $12 in early 2023. Lynn’s store has about 10 employees.

Additionally, Aqua S is facing supply issues, she says. “I use Italian ice cream powder. The ingredients are imported from Italy, and we cooperate with them. The number that can be obtained is limited.” Even local products such as juice are sometimes in short supply. .

At the Mustang Sally Brewing Company in Chantilly, “costs have gone up significantly,” says Sean Hunt, managing member and founder of the brewery.Photo by Will Schermerhorn

Combined, these factors pushed soft serve cone prices up from $4.75 to $5.75. “When we first opened, our profit margins were usually around 40%. Now, I can’t say. Now he’s probably 10% to 20%,” he says. She receives a business assistance grant, but she sometimes says, “I don’t know how to keep the door open.”

While it would be helpful to have more products available for sale in the winter, being a franchise also comes with limitations.

She has great impetus to expand beyond storefronts. “We do catering, weddings, birthday parties, business her staff appreciation events. We sell to eateries. We partner with nonprofits to host events.” ”

Sean Hunt, managing member and founder of Mustang Surrey Brewing Co. in Chantilly, also said, “We’ve experienced a significant increase in costs. The same is true for certain products.”

His brewery’s big-ticket items are grains, hops, and fruit. Grain prices have risen gradually over the past year, but hop prices “haven’t gone up as much,” he says. “Fruit is very variable. It seems to go up and down. We’re trying to understand that in the long term.”

The cost of canning supplies has also risen, he said, reducing the profit margins on Mustang Sally’s sale of canned beer products to grocers.

He estimates that raw material prices have risen by at least 10% and will rise to as high as 15%, taking into account new surcharges set by shippers to compensate for higher fuel prices.

For now, Hunt says: I raised the price a little. The question is how much do we pass. Perhaps next year we will evaluate it. ”

Meanwhile, breweries are reassessing the types of fruit they use. “We make a lot of fruit beers. We use more of the available fruit,” he says. For example, “I had a product that I was making based on blackberries. I was going to keep doing that for two more months, but the cost of blackberries skyrocketed, so tangerine fruit he made beer.”

Hunt believes the best approach to this situation is to focus on something “inflation-proof”: the customer experience.

“Our theory here is that we are neither a restaurant nor a bar. Breweries are different. We are 100% an experience. he says. “At the end of the day, someone has a lot of experience to choose from, but at a reasonable cost.”

To create that experience, Mustang Sally hosts a number of events and offers many craft beers that customers can’t find anywhere else, says Hunt.

“I want to make sure we’re making an interesting lineup. We’re trying to make it attractive. You can really do anything with sour beer. I had the mango coconut raspberry tart beer. It’s fun. About 4 months.” Every year there is a sourfest, and I had the Swedish fish marshmallow sour.”

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