Inflation, supply chain, wages: Rising threats loom over small businesses

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For Vivian Bowers, owner of a South Los Angeles dry cleaner, inflation hit home when her wholesale cost for hangars increased by 48% in six months.

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Tom Bock, who runs an electric bike dealership in Huntington Beach, has had to pay his employees 25% more in addition to a commission hike.

Hagop, the owner of an auto repair shop in Inglewood, is afraid to completely pass on the rising costs of Barbarian tyres, motor oil and freon. “Either you keep the customer happy or you lose the customer,” he said.

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Skyrocketing inflation is plaguing many of California’s 1.6 million small businesses, which employ more than half the state’s workforce. The fickleness of the supply chain has made it difficult and costly to re-stock inventory. Workers are demanding higher wages amid labor shortage. And smaller firms are less able to meet challenges than larger competitors.

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In October, the 6.2% increase in US consumer prices was the biggest year-on-year jump in 31 years. Sharp jumps in the prices of housing, gasoline, cars and food continue to grab headlines. For many small stores selling items ranging from furniture to footwear, and providers of services ranging from haircuts to home care, it’s a nerve-wracking time: do they charge more and risk losing customers. pick up?

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“Large companies can absorb higher costs for supplies,” said Holly Wade, research director for the National Federation of Independent Business, an advocacy group with more than 300,000 members. “And when it comes to supply chain disruptions, they are at the top in terms of delivery, given their purchase volume. For smaller firms, it’s a different ballgame. ,

In the economy, consumers who stopped traveling, eating out, getting their hair cut and going to the movies during the COVID-19 pandemic have collectively saved trillions of dollars. Rising vaccination rates enable buyers to feel secure. And with the return of jobs, more people are spending freely despite rising inflation. Retail sales jump 1.7% In October, more than double the growth rate of September and the fastest pace since March.

The people of California are doing the best. In the second quarter, the Golden State experienced the nation’s fastest growth in personal income since the pandemic, after South Dakota, according to a pew charitable trust analysis, It rose 5.9%, adjusted for inflation, buoyed by government aid, job losses and higher wages.

But many small businessmen are not feeling the love.

And their profits are at risk, said UC Santa Cruz economist Robert Fairley. “When the cost of making a carne asada burrito goes up, some of that is passed on to the customer. And some of it is just consumed by the business owner. , Beef prices increased by 20% in one year.

In October, 69% small business owners voted The independent trade federation said they raised prices due to supply chain disruptions and rising workers’ wages due to labor shortages.

The number of owners expecting business to worsen over the next six months rose to 52%, Wade said, the highest in 42 years of the group’s surveys – and this was before a new global coronavirus version, Omicron reported. Threatened progress in removing .

Many small enterprises, still reeling from the financial hit of the pandemic, are counting on lost revenue over the holiday season, said Carolina Martinez, chief executive of California Assn. For micro enterprise opportunity, a business development network. “It’s really their moment to get to some level where they’ll feel comfortable continuing with their business.”

Vivian Bowers, owner of Bowers & Sons Cleaner, a second-generation dry cleaner in South Los Angeles, irons a shirt. US dry cleaning prices are up 6.9% year over year, which is higher than overall inflation of 6.2%.
(mail melkon /)

Dry Cleaner

When Vivian Bowers took over her parents’ dry cleaning business on South Central Avenue in the wake of the 1992 riots, she recalled, the neighborhood was “rogue — gangs, drugs, prostitution.”

But the energetic entrepreneur took a business planning class at USC, followed drug dealers on his block, introduced pickup and delivery, and turned to Bowers & Sons.

With four employees, the neighborhood institution, its walls adorned with photographs of Charlie Parker, Miles Davis and other jazz greats, cleans uniforms for police officers, bus drivers, LA Live ushers and Ritz-Carlton housekeepers.

And it has expanded its reach, from the laundry set of Grey’s Anatomy to expensive downtown lofts and sheets stained with fake blood.

Barely surviving the Great Recession and its long run, and after cutting hours during the pandemic, Bowers now faces a new threat: inflation.

Los Angeles raised its payroll outlay to $15 an hour in July, raising its minimum wage. Hangers, poly garment bags and solvents for delivery vans as well as gasoline costs have gone up.

In June, Bowers increased its prices by 5%. Now he’s worried about raising them an additional 10%.

“I don’t want to chase customers,” she said. “If they have to choose between cleaning the blazer or putting gas in their car, which one are they going to do?”

But with revenue down about a quarter since 2019, she said, “I’m struggling.”

Josefina Pantoja cuts pork as Sylvia Uribe cooks tamarind at Tamaleria Maria in Linwood
Josefina Pantoja, left, cuts pork as Sylvia Uribe cooks tamarind at Tamaleria Maria in Linwood. The restaurant is flourishing during the pandemic, but rising prices are a new challenge.
(Christina House /)

Restaurant

It’s tamarind season at the Linwood Restaurant that Rosalva Aguilar and her parents have decorated with Christmas trees, candy canes and reindeer piatas. Poinsettias adorn every table. On the courtyard, the stars of the celebration hang from white lights.

Orders are coming. Tamaleria Maria, a 19-year-old business that has weathered a recession and thrived during the pandemic, has hired six new workers to meet demand.

Restaurants face a new challenge as inflation ripples through the economy.

In recent months, Aguilar said, she has seen her wholesale chicken prices rise from 99 cents a pound to $1.50. Pork ranges from $1.05 to about $2. And the 25-pound lard, used in masa, now runs about $60, compared to $25 before.

As a result, restaurants increased the fee they charge for meat or cheese tamarind from $2.02 to $3.03. “If we don’t raise our prices, we won’t be able to sustain the business,” Aguilar said.

However, Tamaleria Maria is nothing if not resilient. When the pandemic first hit, it was closed for almost a month. When it reopened, it faced competition from home kitchens selling firearms as well. This year, it added new options, including a kit for making tamarind at home and an online ordering system.

“I’ve seen a lot of new people coming in because of the word of mouth,” Aguilar said. “I think it’s going to be a good year.”

Tom Bock, owner of Pedego Electric Bikes in Huntington Beach, rides an ebike.
Tom Bock, owner of Pedego Electric Bikes in Huntington Beach, has yet to raise bike prices, though his business has been challenged by higher shipping, labor and other costs.
(Louis Cinco /)

e-bike shop

At the Pedego electric bike dealership in Huntington Beach, a mural featuring bright blue waves attracts patrons with the message, “Hello, fun!”

As the pandemic took hold last year, the greetings were especially welcomed. With travel, indoor dining and sporting events cut short, “demand for e-bikes went insane,” said Tom Bock, who opened the small store in 2012 and also served as Pedego’s corporate head of operations.

“People couldn’t go on vacation, but it was something they could do outside with their families.”

Pedego e-bikes are expensive from $1895 to $5495. But in 2020, sales at Bock’s stores increased from 200 bikes to 330 before the pandemic. Although his bike rentals slowed as tourism dried up, his gross revenue rose by a third to $1.1 million.

Still, if the pandemic curtailed his gains, it also created problems. The global supply chain delayed the delivery of Chinese batteries to Pedego’s Vietnam factory. Shipping costs increased from $4,000 per container to $20,000. The company, which distributes bikes from its Fountain Valley warehouse to 200 dealerships, “probably has 8,000 bikes in the waters between Asia and here,” Bock said.

Supply snapping caused the company to cut back on assembling its more complex bikes and reduced the number of models the store could stock from 19 to 12. With inflation affecting not only consumer prices but also wages, Bock had to raise wages for four of his employees.

“Labor costs are my biggest fear,” he said. “People come asking for more money than ever before.”

Pedego hasn’t raised its prices yet, but may do so soon, Bock said. He’s not looking forward to it. “There are at least eight different electric bike stores in Huntington Beach,” he said. “We have to be competitive.”

    Hagop Barbarian, owner of Allwright Automotive in Inglewood, Calif., with his personal car, a 1967 Mustang.
Hagop Berberian, owner of Allwright Automotive in Inglewood, gives his mechanics a bonus when a month’s business is good, helping them meet rising living costs. Above he is posing with his personal Mustang.
(Caroline / Cole)

auto repair shop

As the pandemic broke out in 2020, Hagop Berberian slashed its business at Allwright Automotive by a quarter. The three government loans did not cover all their losses. He took the plunge into savings.

The Berberian put up a multicolored sign on the wall outside his Inglewood office: “In God We Trust.”

But as his two-mechanic shop reopened this year, the Berberians’ confidence in the economy fell.

“It’s ridiculous,” he said. “Everything is moving. Even the simplest part: I was paying 75 cents for a lightbulb. Now it’s $1.25.”

Last week a customer came in to change a tyre. The same tire that Barbarian sold him six months ago had already gone up in price…

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