Inflation: How It Is Affecting Small Businesses and Their Income

By Kathryn Hutchison, Senior Director for Threadsy.com, 

Inflation is a measure of the rising prices in our economy. Right now, inflation is top of mind because most Americans are paying more than they used to for everyday purchases like food, gas, clothes, childcare and more. Regular necessities have become nowhere near affordable for some low-income households and it’s a pressing issue for many. According to the latest report from the Bureau of Labor Statistics, the annual inflation rate in May was 8.6%, its highest level since 1981, as measured by the consumer price index. The U.S. is hardly the only place where people are experiencing inflationary whiplash. A Pew Research Center analysis of data from 44 advanced economies finds that, in nearly all of them, consumer prices have risen substantially since pre-pandemic times (https://www.pewresearch.org/fact-tank/2022/06/15/in-the-u-s-and-around-the-world-inflation-is-high-and-getting-higher/).

Small businesses are being affected now more than ever before by the rising costs of goods and services due to inflation. Data from MetLife and the U.S. Chamber of Commerce found that 85% of small-business owners surveyed expressed concern about inflation. And 1 in 3 listed inflation as their top business concern (https://www.forbes.com/sites/forbesfinancecouncil/2022/05/25/the-impact-of-inflation-on-small-businesses-and-how-to-manage-it/?sh=2eb4091cae41). According to a Business.org survey, 92% of small-business owners surveyed have dealt with rising costs since the beginning of the pandemic. The supplies and services you need to run your business are more expensive, and 26% have seen their costs rise by 20% (https://www.forbes.com/sites/forbesfinancecouncil/2022/05/25/the-impact-of-inflation-on-small-businesses-and-how-to-manage-it/?sh=2eb4091cae41).

Small businesses are especially impacted by the inflation happening now for a couple of reasons. First, the timing couldn’t be worse. After two years of pandemic-related closures and pivots, many small businesses have not recovered to pre-Covid sales. Now as they enter a new phase of post-pandemic recovery, business owners are also having to deal with rising prices. Everything from supplies to rent to wages has become more expensive, and many small business’ cost increases greatly outweigh any price adjustments they can pass on to customers. Finally, as the Fed hikes interest rates to slow inflation, this can harm small businesses by making it more expensive for them to get loans and credit. It’s a lot for small business owners to navigate during an already challenging time.

As we know, as the cost of products and services goes up, consumers start buying less and less, therefore, many small businesses are seeing their income decrease as a result of inflation. Rising costs mean tighter profit margins.  Some business owners may opt to take a pay cut as part of overall cost management, reducing their individual earning power. Others may see a decline in topline sales as pocketbooks tighten up. There are other small business owners that attempt to hike up their prices in order to still make a profit to keep up with inflation, which only causes some consumers to turn away from that small business, knowing that they could find “better prices” elsewhere. Whether people have their small businesses as their full-time job or a side hustle, the tighter profit margins are making it extremely difficult for them to also afford the expenses of food, gas, clothes and more.

Threadsy helps small businesses by offering them access to wholesale apparel quantities and pricing, without order minimums or special credit requirements. Being able to get smaller quantities of wholesale supplies without a pricing premium makes it possible for small businesses to better manage their cash flow, hold less inventory, and offer lower prices to their customers in turn. We’ve seen an uptick in orders from small clothing companies recently, as demand for affordable event T-shirts is on the rise. We have also seen an increase in small business orders from landscapers, restaurants, builders and more who are seeking to find low-cost options for employee uniforms and workwear. If we are able to help small businesses increase their profit margin even slightly to make a livable wage and increase their income, that is our goal. We’ve heard from our customers themselves on how our pricing has made their small businesses manageable and profitable, and we want to keep it that way for as long as we can. They are attempting to maximize profits by staying small and cutting expenses wherever possible, and we’re so glad that Threadsy can contribute to that.

Author Bio:

Kathryn Hutchison is the Senior Director for Threadsy, one of the nation’s leading online retailers for blank apparel. She joined Threadsy in 2021, leading the launch of the business and delivering significant growth during the company’s first year. Prior to Threadsy, Hutchison held multiple leadership roles in marketing and ecommerce at RetailMeNot and Whole Foods Market. 

When she’s not hard at work selling shirts, Hutchison loves trying out new DIY decoration techniques at her home in Austin, Texas. Her favorite t-shirt of the moment is the Next Level Apparel Ladies’ Triblend Dolman T-Shirt (style 6760) in Vintage Navy, perfect to wear while cheering on the Dallas Cowboys.