AUSTIN, Texas — The pandemic has thrown yet another curveball at the U.S. economy. Businesses big and small now are faced with rising inflation rates, forcing prices of both supplies and products to rise.
"It's hard to get product in, especially when it's being shipped in from overseas," Marc Hobbs, owner of King's Hobby Shop, said. "We were talking about the inflationary effect of prices, you know, the prices of everything is going up."
Hobbs said the pandemic has been a double-edged sword for the small business. On one hand, he's grown his customer base since the start the pandemic as people were stuck at home. On the other hand, prices have started to rise again, which he has to pass on to those same customers.
"One of our big manufacturers did a 15 percent increase on every product across the board, then we had another company from Spain that did a 10 percent increase on their catalog and then our international shipper, DHL, went up on their fees significantly, so much so that we can't use them as regularly as we used to," Hobbs said. "If the the wholesale price goes up 15 percent, then our MSRP or, you know, the suggested retail price would also go up 15 percent. ... You just have to pass along at least a portion of it to the to the consumer."
Hobbs isn't alone. According to a new survey from Business.org, 82% of small businesses raised their prices as a direct result of rising rate of inflation.
Only 17% of businesses say they have done anything to change in the face rising inflation rates.
Some businesses, like Formaspace, have already raised their prices twice in the past year due to the state of the economy.
"We've had two official price increases this year, the first one in the spring following a big increase in steel prices and things like that that occurred in late 2020. And then we had to have another 15 percent temporary bump that we just implemented earlier this fall," Jeff Turk, CEO of Formaspace, said.
For manufacturers like Formaspace, suppliers are increasing costs, while Formaspace must stick with the price given to clients previously.
"In those cases where we promised somebody something two years ago, we're having to live up to that price that we gave them contractually years ago for a situation that I don't think anybody could have ever foreseen," Turk said.
"In order for a company to be successful, they need to be able to keep promises and they're doing their best to keep promises. But when the goalposts keeps moving, it's very difficult to keep," Joe Zente, owner of the Austin chapter of The Alternative Board, said.
As prices continue to change rapidly, it has a domino effect that leads to customers footing at least a portion of the bill. As prices change, it affects consumer behavior as well heading into the holidays.
"People feel uncertain about things and when people feel uncertain, they tend to like pull back their spending. They're less free, feeling less impulsive," Sarah Mittal, a marketing professor at St. Edward's University, said.
Mittal focuses on consumer behavior, especially as the pandemic has affected spending habits of people.
"Especially for durable goods, we're gonna see consumers put off those purchases and instead be more likely to repair them or refurbish them because those are things that they feel like they have more control over," Mittal said. "They probably also feel like they don't know if we're getting the best price because we're reading about how things are inflated right now."
Hobbs said despite the rising prices, he's found a way to help keep the price of some of his collectables at a reasonable level.
"We've picked up the consignment business, you know, buying collections from people, you know, even going to estate sales and that sort of thing and selling pre-owned goods. And also, we found some people that are doing locally sourced items," Hobbs said.
As the holidays quickly approach, consumers should expect prices to be a bit higher than expected, even after the typical deals that start right around now.
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