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

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

Tom Bock, who runs an electric bike dealership in Huntington Beach, has had to pay his workers 25% more, on top of a boost in commissions.

Hagop is the owner of Inglewood’s auto repair shop. He is afraid that he will not be able to pass on the rising cost of tires, motor oils, and Freon. He said, “You either keep the customer happy or lose them.”

Skyrocketing inflation is slamming many of California’s 1.6 million small businesses, which employ more than half the state’s workforce. Supply Chain snafus makes it more difficult and costly to replenish inventory. People are looking for higher wages in a labor shortage. Smaller firms are more able to handle the challenges than larger companies.

In October, the 6.2% rise in U.S. consumer prices was the biggest year-over-year jump in 31 years. The headlines continue to be dominated by the dramatic rises in food, fuel, housing, and cars costs. It is nerve-wracking for small businesses that sell furniture and footwear as well as those who provide home care services, such as haircuts and hairdressers, to decide if they should charge more or risk losing customers.

“Larger firms can absorb higher costs for supplies,” said Holly Wade, research director of the National Federation of Independent Business, an advocacy group with more than 300,000 members. Due to their high volume of purchases, they are at the top of supply chain disruptions. For small firms, it’s a different ballgame.”

Across the economy, consumers who stopped traveling, dining out, getting their hair cut and going to movies during the COVID-19 pandemic amassed trillions of dollars in savings collectively. Increasing vaccination rates make shoppers feel more secure. With more jobs available, people can spend freely despite inflation. Retail sales increased 1.7% in October, more than twice September’s growth rate. This was the fastest pace since March.

Californians are doing better than most. According to a Pew Charitable Trust analysis ., the Golden State saw the nation’s fastest increase in personal income after the pandemic. It grew by 5.9% after inflation adjustment, thanks to government assistance, higher wages and returning jobs.

But many small businesses aren’t feeling the love. Robert Fairlie, a UC Santa Cruz economist, stated that their profits are at stake. Some of the extra cost for making a carne asada burrito is passed onto the customer. And some of it is just eaten by the business owner.” Beef prices are up 20% in a year.

In October, 69% of small-business owners polled by the independent business federation said they have raised prices because of supply chain disruptions and rising employee wages in the face of labor shortages.

The number of owners expecting business conditions to worsen in the next six months rose to 52%, Wade said, the highest in 42 years of the group’s surveys — and that was before a new global coronavirus variant, Omicron, threatened progress in taming the pandemic. Many small businesses, still reeling from the financial impact of the pandemic, are counting on the holiday period to recover their lost revenue. Carolina Martinez, chief executive officer of the California Assn. Micro Enterprise Opportunity is a business development network. “It’s their moment to really get to some levels where they would feel comfortable continuing their business.”

Vivian Bowers irons a shirt

Vivian Bowers is the owner of Bowers & Sons Cleaners. He irons a shirt. Dry cleaning costs in the United States are up 6.9% annually, which is higher than the overall inflation rate of 6.2%.

(Mel Melcon / Los Angeles Times)

The 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 “blighted — gangs, drugs, prostitution.”

But the energetic entrepreneur took a business planning class at USC, chased out drug dealers on her block, launched pickup and delivery, and turned Bowers & Sons around. The neighborhood institution had four employees. Its walls were adorned with photographs of Charlie Parker and Miles Davis, and it cleaned uniforms for bus drivers, police officers, L.A. Live ushers, and Ritz-Carlton housekeepers.

And it has expanded its reach by picking up laundry from expensive downtown lofts as well as sheets stained with fake blood taken from Grey’s Anatomy sets. After barely making it through the Great Recession, its long aftermath and cutting hours during the pandemics, Bowers now faces an additional threat: inflation.

Los Angeles raised its minimum wage to $15 an hour in July, hiking her payroll outlay. Hangers, solvent, and poly garment bags have all increased in price. In June Bowers increased her prices by 5%. Now she’s worried about having to boost them an additional 10%. She said that she didn’t want customers to leave. “If they have to choose between getting a blazer cleaned or putting gas in their car, which one are they going to do?”

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

Josefina Pantoja shreds pork as Sylvia Uribe makes tamales at Tamaleria Maria's in Lynwood

Josefina Panoja, left, cuts pork while Sylvia Uribe prepares tamales at Tamaleria Maria’s Lynwood. The restaurant thrived in the pandemic but rising prices have made it difficult.

(Christina House / Los Angeles Times)

The restaurant

Tamale season is here at Lynwood eatery, which Rosalva Aguilar has decorated with reindeer pinatas, candy cane, and Christmas tree. Poinsettias adorn every table. The patio is lit by white lights and decorated with festive stars.

Orders are pouring in. Tamaleria Maria’s, a 19-year-old business that has weathered recessions and thrived during the pandemic, has hired six new workers to meet demand. The restaurant is now facing a new challenge, as inflation continues to wreak havoc on the economy.

In recent months, Aguilar said, she has seen her wholesale chicken prices rise from 99 cents a pound to $1.50. Pork is up to almost $2, from $1.05. And 25 pounds of lard, used in the masa, now runs about $60, compared with $25 before. The restaurant raised the price of a meat or cheese taco to $3. 03 from $2.02. Aguilar stated that if we don’t raise prices, we won’t be able maintain the business.

Nonetheless, Tamaleria Maria’s is nothing if not resilient. It was closed for approximately a month when the pandemic struck. It reopened in the face of competition from other home-based tamale shops. It added options this year, such as a kit that can be used at home to make tamales and an online ordering system.

” “I have noticed that a lot more people are coming to the site, thanks to word-of-mouth,” Aguilar stated. “I feel like it’s going to be a good year.”

Tom Bock, owner of a Pedego Electric Bikes in Huntington Beach, rides an ebike.

Tom Bock is the owner of Pedego Electric Bikes Huntington Beach. However, he hasn’t raised his bike prices yet as a result of higher shipping and labor costs.

(Luis Sinco / Los Angeles Times)

The e-bike store

A mural featuring bright blue waves welcomes customers to Huntington Beach’s Pedego Electric Bikes dealer. It reads, “Hello, fun !”

As last year’s pandemic swept the country, this message was particularly welcomed.” With travel, indoor dining and sport events curtailed, “E-bike demand went crazy,” said Tom Bock, who opened the small store in 2012 and also works as Pedego’s corporate head of operations.

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

Pedego e-bikes are expensive, ranging from $1895 to $5495. But sales at Bock’s store boomed from 200 bikes yearly before the pandemic to 330 in 2020. His gross revenue rose by a third to $1.1million, even though his bike rentals declined as more tourists left.

The pandemic did not only increase his profits but also caused problems. Global supply chain snarls delays Chinese batteries deliveries to Pedego’s Vietnam plant. Shipping costs rose from $4,000 per container to $20,000. The company, which delivers bikes to 200 dealerships from its Fountain Valley warehouse, “probably has 8,000 bikes in the water right now between Asia and here,” Bock said.

The supply snafus 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. Bock was forced to increase the wages of his four employees due to inflation. He stated that

“Labor costs are his greatest fear. “People come in asking for a lot more money than ever before.”

Pedego has yet to raise its prices but may do so soon, Bock said. He doesn’t look forward to it. He said that Huntington Beach has at least eight electric bike shops. “We have to be competitive.”

 Hagop Berberian,  owner of AllRight Automotive in Inglewood, California, with one of his personal cars, a 1967 Mustang.

Hagop, the owner of AllRight Automotive, Inglewood, offers mechanics bonuses if they have a good month. This helps them to meet rising living expenses. Above is he posing with his Mustang.

(Carolyn Cole / Los Angeles Times)

The auto repair shop

As the pandemic raged through 2020, Hagop Berberian saw his business at Allright Automotive drop by a quarter. His losses were not covered by three government loans. He also tapped into his savings.

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

But just as his two-mechanic shop was rebounding this year, Berberian’s trust in the economy plummeted.

“He said it was absurd. Everything is going up. Even the simplest parts: I was paying 75 cents for a lightbulb. It is now $1. 25.”

Last week, a customer came in to replace a tire. The same tire that Berberian had sold him six months earlier had risen in price from $65 to $85 wholesale.

“I wasn’t going to charge him $20 more,” Berberian said. “I am a five-star shop, and I don’t want him feeling cheated. So I just charged him $10 more.”

Why is inflation so high?

“COVID – and greed, he said with a hint of bitterness. Gesturing toward the Port of Los Angeles 20 miles away, he also blamed supply chain delays that have contributed to shortages. Millions of dollars worth of cargo are sitting on ships. People are selling everything they have to make ends meet. They’re gouging us to recover what they’ve lost in the last year and a half when people were driving less.”

Berberian thinks prices will level off in coming months. He has reduced his business hours from six to five days per week, and he did not reduce the pay of his mechanics.

“If the business is doing well at the end the month, I give them an extra bonus,” he stated. Look at the cost of milk, eggs and groceries. I go to a supermarket and what I used to buy for 100 bucks now costs nearly 200 bucks.”

Cases of jewelry in a store.

The showroom at Chong Hing Jewelers San Gabriel flagship store. The store was founded in 1970 and sells luxury timepieces and fine jewelry.

(Chong Hing Jewelers

The jeweler

In a sprawling San Gabriel shopping center, two security guards stand sentry at Chong Hing Jewelers, a 51-year-old business that evolved from a goldsmithing company selling custom pieces to a purveyor of luxury watches and jewelry. During the pandemic tourism, which was a major source of income, dried up and nearby stores began to close. Chong Hing made it mandatory that all four of its stores in the San Gabriel Valley Valley and Bay Area were open only by appointment. This limited the number who could visit. However, business was much better than expected. Victoria Lee Castro, the grandmother of the company’s founder, said that

Loyal customers “pulled through.” “There’s still birthdays, there’s still anniversaries, there’s still major events where they want to buy a gift for their loved ones.”

This 2021 holiday season, demand for luxury watches and jewelry is high — particularly for 24-karat gold and jade jewelry, as well as Jaeger-LeCoultre, Chanel and other expensive timepieces. Castro denied that the rumours that customers won’t spend as much this year are unfounded.

” They haven’t been spending, shopping, and want to get something nice for themselves,” she stated.

But, it has been difficult to restock some of the store’s classic watches such as the Chanel Boyfriend or Chopard Happy Diamonds. Higher manufacturer prices have caused some watches to be more expensive. On a recent visit to a supplier with her parents, “My mom, who has been doing this for about three decades, would just go, ‘Oh, my god, now it’s this much?'”

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