SHOPPERS are being warned to expect higher prices in local shops during the upcoming holiday season after new research revealed almost 90% of small businesses have been hit by inflation.
A new report from Constant Contact found 89% of small businesses are being hit by price pressures as they prepare for the year’s most critical sales period.
The research – which analyzed survey data from over 1,600 executives at companies with 250 employees or less – found small businesses were cutting back on expenses to manage costs.
About 52% of consumers said they have cut spending while 39% of businesses said they had passed on price hikes to consumers to deal with economic headwinds.
The proportion of US consumers planning to decrease their spending at small businesses was 52%, or almost double since 2022.
Constant Contact Small Business expert Dave Charest said small business owners did not want to raise prices and would only do it as a last resort.
“The last thing they want to do is raise prices but they are beholden to the economy just as much as the consumers are,” he said.
“So if you are seeing higher prices you’re good to think that it’s only because they’ve needed to do that not because they’ve wanted to.”
SHOP LOCAL
Charest urged shoppers to continue supporting businesses in their local neighborhoods rather than opting to do their holiday shopping at Amazon, Target or Walmart.
According to Constant Contact’s research, 62% of consumers cited price as a major factor in their holiday shopping.
Charest emphasized how important the holiday shopping season was for small businesses’ bottom line.
He said all businesses were taking action to mitigate the impact of inflation on their businesses, including cutting down on marketing costs and investing in technology.
About 46% of small businesses that were polled were cutting down their expenses.
While inflation has started to moderate in the US economy, prices are still 21.2% more expensive since the pandemic-induced recession began in February 2020, according to analysis undertaken by consumer finance company Bankrate.
PRICES SOAR
Prices in August rose 2.5%, down from a 2.9% rate in July and hitting a new three-year low according to the Bureau of Labor Statistics monthly consumer price index report.
Ahead of the release of updated CPI figures on Thursday, Bankrate’s data found Americans would need about $1,212 to buy the same goods and services that cost $1,000 in 2020.
While the Federal Reserve has begun to cut rates, economists say consumers might have to wait three to 12 months for the policy change to work its way through the economy.
LOOK FOR DEALS
Ahead of the holiday shopping season, Charest said small businesses may be an attractive option for shoppers.
He urged customers to look out for deals or bundle offers from small businesses.
“Often it’s about making sure their businesses are unique so they may offer a personalized service, better quality of stocks or loyalty programs,” Charest said.
“Ultimately we all want to do what we can to support our communities and consumers said they still plan to buy from small businesses, as the money goes back into their local community and makes them feel good.”
The new study comes ahead of a busy festive season, with small businesses heavily reliant on the end of year shopping period.
Small businesses rely on at least 50% of annual sales to the holiday period, almost doubling since 2023.
