SMEs that have survived shutdowns and reduced revenues in the wake of COVID-19 now have to face another crisis. Soaring prices for goods and services that weigh on profits and pass on the increase to customers for many owners.
Mickey Luongo’s company, Total Home Supply, pays 15% more than pre-pandemic payments for air conditioning equipment sold to other companies and consumers. His suppliers have raised prices because they are paying more for raw materials, parts, and transportation. Luongo says some of his customers have pushed back higher prices.
Luongo, co-owner of a company based in Fairfield, NJ, said:
The surge in consumer demand for a wide range of products during a pandemic has pushed up the prices of raw materials, consumables and equipment, as well as finished products. Product shortages and supply chain bottlenecks add to the cost.
According to the Ministry of Labor, prices of materials and components used in construction surged 4% from April to May, up more than 17% year-on-year. Manufacturers paid materials 2% more than April and 21% more than May 2020 last month. There is also fierce competition for workers, where some companies attract new hires and pay more to retain their current staff.
Inflation affects all businesses, but SMEs are struggling more than large businesses. Large companies have greater bargaining power because they buy goods and services in bulk and have a much larger source of income to absorb higher costs. These factors make it easy for large companies to avoid passing on their growth to their customers.
Barry Levine has seen a 12% increase in costs, primarily due to high air freight charges, but is holding back price increases for company-manufactured security and temperature cameras for the time being. Levine does not want its competitors to lose their business.
Levine, a company in Sperry West in San Diego, said:
That’s why Levine is looking for ways to reduce overhead. He schedules employees according to the number of orders the company has from distributors. They were able to get an unemployment allowance to make up for their unemployment time.
Still, Levine says he expects at some point to pass on some of the additional costs.
“I’d like to say that we’re going to keep the price forever, but that doesn’t happen,” he says.
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Some of the price increases could roll back, according to economist Ray Keating.
“The best scenario of rising inflation these days is temporary because the economic recovery is struggling to bring production, operations, supply chains and employees back to normal,” said the chief advocate. Keating, an economist, said. Small Business and Entrepreneurship Council.
Prices of gasoline and other fuels tend to fluctuate, so the costs most likely to fall are energy-related. Shippers may also reduce charges if supply chain bottlenecks are mitigated.
But Keating said, “The second scenario is inflation taking hold, and as the old saying goes, once the spirit of inflation is out of the bottle, it’s not easy to get it back.” Proverb.
Luongo has found that almost all costs for manufacturing and transporting air conditioners and heating equipment are high.
“Copper prices have skyrocketed. All air conditioner products and many of them contain copper,” he says. And Luongo’s suppliers are paying more for high-demand shipping containers. One manufacturer told Luongo that he only knew how much he had to pay for the container on the day the ship carrying the goods departed.
Total housing supply is more likely to convey an increase to general contractors building homes than consumers who can go to air conditioning chains. “We consider the pricing of each item very carefully and do our best to maintain a profit margin that allows us to survive while remaining competitive,” says Luongo.
Service providers are similarly pinched by higher inflation. Since the beginning of the pandemic, as home remodeling has increased, the supply of paints, wood and other materials has declined and prices have soared, forcing the general contractor Victoria Staten to change its pricing policy. ..
“It’s only five days from the 30-day quote guarantee,” says Staten, owner of The Upside Chicago. Staten also sets labor and material prices separately, rather than providing comprehensive quotes as it did before the pandemic.
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Lack of material is also increasing the cost of Staten — it can take days to find items like crown moldings that were previously easily found. She has absorbed the labor costs associated with these shopping trips, but is considering adding extra time for staff to her invoices.
Manny Barani’s Vitamin and Supplements business pays dramatically higher prices for transportation, packaging, and raw materials. Miami-based A1 supplements can pay $ 10,000 for container ship space and $ 400 for kilograms of protein or other ingredients starting at $ 50, compared to $ 2,000 before the pandemic.
Balani needs to tell its customers about price increases, but instead of raising prices overall, it takes a product-by-product approach. He raised the prices of some items by as much as 30%, comparable to the manufacturer’s price increases. Currently, he is watching if customers continue to buy at higher price tags.
“We take it every day,” says Barani. “The market determines whether these numbers can be tolerated.”
Rising costs, labor and supply shortages weigh on SMEs – NBC10 Philadelphia
Source link Rising costs, labor and supply shortages weigh on SMEs – NBC10 Philadelphia