A small business in Morristown, New Jersey, Enjou Chocolat, is still feeling the pain of inflation—but it’s not the only small business suffering.
Facing the challenges of soaring cocoa prices and increased labor expenses, Enjou Chocolat, which employs just under two dozen individuals, recently made the choice to raise the prices of many sweet treats for the third time over the past year.
“The third hike in prices was met with customer frustration,” said Mark Chinsky, a partner at the business. Chinsky noted that one customer, who had been purchasing half-pound bags of foil chocolate for years at $10.99, responded badly to being charged $4 more now.
“They said, ‘That’s just a rip-off, and you’ve lost me as a customer,’ which really hurt to hear,” Chinsky said.
A Terrible Time for Price Increases
Much like many Americans have felt, small businesses have felt the wrath of inflation over the years, and they are just as angry about it as their customers are, according to monthly surveys from the National Federation of Independent Business.
Small businesses often work within tighter profit margins than big-business giants like Walmart and Amazon, so the rising costs are more painful for them. Unfortunately, this also means they are forced to pass some of the rising costs onto their customers—which isn’t great for business.
The holiday season is one of the worst times for businesses to raise prices, particularly when it is a critical period for many small businesses across the U.S. This year, the festive season comes at a time when consumers are feeling bolder than ever to push back on the higher costs.
According to the Small Business Index, 8 in 10 retail businesses rely on holiday sales to meet their annual profit goals, but the NFIB’s latest survey of around 1,200 companies showed that a seasonally adjusted 26% of them stated they plan to hike prices this past October.
“Customers think we’re trying to price gouge them when we’re not, and the question is, will there be enough people continuing to buy at the higher prices to offset the few that now refuse to?” Chinsky said.
Americans Push Back on Rising Prices
Many Americans have simply had it with inflation, and it didn’t take very long after inflation reached a four-decade high in June 2022 for them to start pushing back on rising prices.
In a periodic collection of survey responses from businesses across the nation, the Federal Reserve’s Beige Book continues to detail customers questioning of price hikes, and the latest Beige Book reported consumer revolt.
“Frustrated by high prices, they are trading down from beef to chicken, from sit-down restaurants to fast casual, from brand names to private label,” Richmond Fed President Thomas Barkin said in a speech Tuesday. “Price-setters are learning their ability to raise prices is now limited by consumer responses.”
While big businesses like Walmart and Target announced broad price cuts this year to entice inflation-weary customers, the same is not as simple for small businesses.
Chief executive of Homebase, a payroll software provider for over 100,000 small businesses, John Waldmann, stated that Enjou Chocolat’s situation is something he hears all the time.
“Small businesses are really reticent to increase prices, so when they do, it’s because they have to,” Waldmann said. “They’re still getting inflation on all sides.”
Optimistic Outlooks
There is hope that customers will still be willing to open their wallets this holiday season.
A yearly report by the Conference Board on holiday spending released Tuesday showed that the average American shopper plans to spend around $1,063 on holiday-related purchases this year, up 7.9% from 2023. However, older and low-income shoppers reported that they’d be cutting back on holiday spending this year.
But the question remains: Will shoppers flock to small businesses who can’t usually afford the same broad price cuts as big businesses?
“While consumers are concerned about some of the inflationary pressures and their holiday budgets, there’s still a real commitment to support local businesses,” said Sarah Jordan, chief marketing officer at Constant Contact, which released a recent survey showing that 78% of more than 3,000 consumers surveyed said they “plan to holiday shop at a small business they have never purchased from before.”
