How Small Businesses are Dealing with Price Changes and Supply Chain Challenges

The COVID pandemic brought with it a variety of unforeseen consequences, not the least of which was a business creation boom.  In 2021, there were 5.4 million new business applications, on top of the record 4.4 million in 2020. Many of these businesses were already in the pipeline, and were merely accelerated by the pandemic, while others were the result of potential entrepreneurs receiving stimulus money and the continued emergence of easy-to-use, digital-first, direct-to-consumer commerce platforms.  Retail e-commerce businesses were one of the top businesses started during this time, and the data shows that half of new business owners started with less than $10,000 and 80% used their own money.

Costs Continue to Increase

These new businesses were not without their challenges, and they are particularly impacted by an inflationary price environment.  There are a variety of factors driving cost increases, but for many small businesses there are two significant contributors: labor costs and energy prices. Over the past year, energy prices have increased 35% with gasoline rising almost 49%. At the same time, the labor market has also tightened. A declining labor force with 4.7 million fewer employees – mostly older workers and women –has led to a nearly 2 to 1 ratio of open jobs to people unemployed. For small businesses, these rising costs can eat dramatically into margin, and many don’t have enough reserves on hand to weather this inflationary period. However, there are steps they can take to address these challenges and experience success.

Supply Chain Disruptions

Another significant challenge facing small business is supply chain disruptions.  By the end of 2021, 61% of small businesses said that their supply chains had been disrupted by the pandemic with 63% saying they had to alter their supply chains in the past six months. This led to nearly half of these business owners saying that these disruptions had made it difficult to keep up with demand.

There are two principal reasons behind this: increased consumer spending and worker shortages, especially in transportation and logistics. These two factors combined to create significant delays throughout the entire supply chain – with small business retail bearing the brunt of these challenges with 78% of surveyed small retail business owners saying the pandemic disrupted their supply chain and 61% saying these disruptions have made it difficult to keep up with customer demand.

Unlike larger corporations that might have multiple supply streams and departments to source new materials, smaller businesses often struggle to pivot to a new supplier or don’t have the right resources to constantly source new product and materials. This has created an opportunity for companies like Threadsy, a new online wholesale retailer for blank apparel that is providing a critical link in the supply chain by offering deep inventory and product availability to meet increasing consumer demand.

Meeting Demand Just in Time

In an environment where costs are increasing, it can be difficult for small businesses to invest in and carry inventory, since small businesses often don’t have the capital or want to bear the risk of inventorying product that isn’t going to move quickly. Companies like Threadsy.com are providing small businesses with just-in-time inventory management capabilities. For the small business, this means having product readily available in multiple colors and styles at favorable price points without the need to buy in bulk and inventory unused product.  For small businesses looking to control costs, this provides a tremendous value and allows small business owners additional flexibility in terms of how they deploy their capital.

Managing Product Substitutions

All of these headwinds are inspiring small businesses to re-evaluate their supply chains. Everything from shifting product mix to expanding to less disrupted products are being considered and acted on. And for many small businesses, this isn’t any easy task. In addition to cost and lead times, there are questions about product quality, consistency, and options. Changes in quality and function can negatively impact a brand and require more marketing and sales spend to make up for the effort. Threadsy.com has stepped into this gap, providing a wide range of products in an easy to navigate way, empowering business owners to make the right decisions for their business in terms of quality and cost.

Market Trends for Small Businesses

As a company that works closely with small businesses and individual creators, Threadsy.com has seen how the supply chain has impacted small businesses. Prior to supply chain challenges, creators were able to focus more on the creative side of the business, as bottlenecks and pricing challenges weren’t such pressing issues. The trend now is to focus just as much on the ‘business’ side of the business as the creative. It’s not always as fun as coming up with a design, but creating spreadsheets that track expenses, shipping costs, and lead times is going to provide much needed stability until the supply chain starts to correct itself.

Large Retailers Filling the Gap

Supply chain issues are impacting all businesses, but not all businesses are impacted the same. Large retailers are definitely facing some headwinds in price and supply, but for micro-commerce brands with under $1 million in sales, these headwinds can mean the difference between keeping the lights on or shutting the doors. This is where large retailers can redefine themselves as a supplier within the chain.

For example, Threadsy.com can provide several services to these smaller brands to meet their needs while maintaining flexibility:

• Inexpensive shipping to minimize inflation and supply chain costs
• Quick and easy fulfillment to reduce lead times
• As needed inventory to right size the supply instead of having to order in bulk
• Competitive pricing to keep end-user costs down

With so much on the line for these retailers, it’s even more critically important for them to address their supply chains and pricing. This can include sourcing from a different supplier, looking at a different mix of products, or finding their right inventory mix to reduce overhead costs. Companies like Threadsy are addressing these pressures by either being a supplier of choice or an alternative when the supply chain is squeezed. However, it’s done, successful small businesses are looking to partners and alternatives to cope with a supply chain that is taking longer than expected to unkink after the pandemic.

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