How does inflation impact your business?

[Pesso]

Hello all you wonderful Sellers!

This week's question is especially pressing and we're all very curious to see what you have to say.

Inflation (a decrease in the value & purchasing power of money) has reached 9.1% in the US which is the highest it's been in 40 years, and similar highs around the world. 

How does inflation impact your business?

Have you felt it affect your business? If so, what have you done to get your business through it?

Looking forward to hearing your thoughts!

[TCSlaguna]

Most of our vendors have increased product costs due to (1) raw material supply chain issues, and (2) increased shipping costs due to gas prices. We have to maintain our margins to stay in business, so we have to adjust accordingly. Given our item library size (in the thousands), we prefer to do slightly larger increases yearly than having to update prices throughout the year. 

I think most customers understand and have heard about inflation on the news, so they are not surprised at this point when they see prices increase. But it's important to let customers, especially regulars, know why prices have increased if they ask. 

@DinaLRosenberg  Is there shrinkflation in our industry? Less incense per box? Smaller tumbled stones for the same price? I suppose so. 

Consumer spending has definitely dropped as people are noticing their money is not going as far as it used to. While Janet Yellen initially said she thinks this inflation is transitory, now she is starting to acknowledge that it may not be. We are definitely watching our expenses and holding off on any discretionary spending such as remodeling. 

[DinaLRosenberg]

I haven't noticed shrink-flation. We are very lucky to be able to buy and hold in bulk wherever possible in order to get whatever savings are out there. I've noticed candles have gone up across the board. We got super lucky that we had just put in an order before gas got crazy which really drives the price up... we've really been riding the wave so far ... so good. 

the prices of crystals has been high for some time due to demand more than inflation.... so many people want to get into this because they see live sellers online making a lot of $$$- Crystals are still our #1 category even though we sell so much more. Again, we're able to out buy in quantity must of our surrounding competitors although we really don't count the locals our competition. We're trying to be a national player. 

[LBm40]

Inflation? What we are experiencing is price gouging. Gordon Foods in particular. Nitrile gloves that were $5 for a box of 100 pre covid. Since covid it’s been $35 for a 250 count box. I found a new supplier that I can get a case of 1000 nitrile gloves for $75.  That’s half the price.  Canola Fry oil pre covid was $20 for a 35# jug has been $60 for the longest time. Corporate suppliers coke and pepsi included have been seeing profit increase while small businesses are suffering profit losses. Let’s all agree this is not inflation it’s price gouging. I’m **bleep**sed. 

[TheRealChipA]

@LBm40 GFS has always been one of the most expensive broadline sellers in the business.  A few years back, after I discontinued food and focused on frozen treats only, that became very obvious to me.  I was paying for the convenience of other folks being able to buy at their local GFS store.  Regardless, once I realized that I could buy from Webstaurantstore online for 20-30% less, including shipping since I have a Plus membership that gives me significant shipping discounts, I decided to only use GFS for emergencies only or even to go without if I could until I could get what I wanted from preferred vendors.  But, in general, all of the main hospitality suppliers that deliver to our doorsteps are way more expensive than they should be.  Hopefully, Covid and the current economy will cause them to realize they are driving away customers.

That fact doesn’t change the fact that we are in an inflationary cycle.  I blame quite a bit of it on the free money that governments threw around during the lockdowns and general pandemic.  “Free” money always comes with a big price tag.  We will all pay dearly for it, now.  Ugh.

[TheRealChipA]

At the beginning of the year, we didn’t notice it.  Over the previous winter we had been waiting for deals and product availability and stocking items in to lock our costs down once we opened for the season.  However, because of much better than expected sales this year (I know…. Such a problem to have! LOL), we ran through that inventory pretty quickly and then we started noticing inflation.

At first, we tried to hold the line and hope that this, too, would pass.  Ha.  My gauge that something is wrong is when I don’t have money to put aside weekly to pay our off season bills.  When that happened, I had to raise prices.  We’ve done that now twice, in smaller increments rather than one bigger price increase.  Since my check average (ice cream, after all) is $8-9, those percentage increases weren’t as noticeable as they are on a $40 sit down dinner or $100 retail item or service.  So far, no one has squawked, which I’m eternally grateful for.  I know how lucky I am in this regard.

Last year, we had three manufacturers of our main soft serve product, which is a lactose-free item that we can’t source widely.  One was $65 per case, and Webstaurantstore had two alternatives that were $10-15 less per case, with minimal shipping.  This year our per-case costs have gone up $20 across the board, and webstaurantstore’s shipping has dramatically increased.  That’s where we are hurting, and I’m looking at year another menu increase in a month if things don’t change.  

Ultimately, I might find that this is a year that I decide to draw less on Piper’s so that I can split the increased costs with my customers.  But I hope I won’t, and as long as I can continue to do incremental, barely noticeable price increases I hope we will get through this.  Thankfully, in my line of work, margins are decent and my employees are teen agers who do this as a summer job and love how much people are tipping, so they don’t complain.

[TheRealChipA]

I’m home now, relaxing with time to think.  I’ll add one more thought to my post above.  I mentioned in another post that a big part of this problem is all of the “free” money the governments of the world threw at Covid relief - personally and to businesses.  My business is one that took that money, because it was there, and I used it to change my business model to something that would be more pandemic-proof in the future.  This was a good thing for me and for my business.  But I suspected, and subsequent evidence proves, that there was a cost to this “free” money.  It has been a SIGNIFICANT driver of inflation worldwide, because it drove up demand when supply was becoming tighter and tighter.

The point?  By taking that “free” money, my business contributed to inflation.  We were somewhat complicit in the situation in which we find ourselves.  I remind myself of this every day when I want to b(*&ch about where we are.  Yes, the money was needed and welcome.  But, nothing in this world is free, and sometimes we have to pay the Piper (no pun intended) when the bill comes due.

Not everyone will agree with me, but that attitude does help me weather the current storm — I can’t blame this on everyone EXCEPT myself.

[myherosubs2]

You can't blame yourself! Even if you hadn't taken the "FREE MONEY" our country would still be in this mess.

You are only one business that took advantage It took all of us to get here.

[ProsperityPools]

1) The prices of the chemicals to treat our customers' pools have gone up exponentially. 

2) Gas costs have increased our expenses dramatically.

3) We still have a lot of new business, however, we now have a handful of customers unable to afford our services, due to having to budget significantly on household costs. We have been able to pick up new customers to replace them, so far, all organically and without spending any money on advertising.

4) The amount we charge (monthly) has not increased a lot, however, if we raise prices, we may lose some customers. A few have already told us they can't go higher, especially the people on a fixed income.

5) The amount we spend on our household (family, personal) has increased, so we must be crafty and increase sales in other non-related industries (i.e. - freelance writing, reselling, etc.) in addition to our pool company, of which we have approximately 80 customers.

6) All told, our business is doing about 25% better than last year (growth-wise), but if you factor the inflation, we are probably about the same, if not less, due to increased expenses from the inflation.

[QuokkaCoffee]

The main way we've tried to deal with it is by changing our bar and kitchen recipes to account for all of the price increases without having to pass costs onto our guests, for example:

• we started off last year with a hefty 22.5g dose per double espresso and now it's 21g
• the chocolate going into mochas went from 25g to 20g for a 12oz
• we've downgraded our extra creamy gold top milk to standard blue tops and really drilled into the team that there should be very little to no wastage per coffee made
• we have three different, very accessible scales so no one has an excuse to 'eyeball' things

Taste-wise the changes are subtle enough to feel like we're not cheating people. The biggest challenge has been getting hit with price increases without warning. Certain suppliers are big enough to telegraph ahead of time; most haven't. 

We also work really, really hard to keep our customer service and product quality consistent--with less discretionary spending available we'd like to think people choose to continue patronizing us because it's become less about the food and drinks and more about saying hello to the staff over their lunch breaks or on the way into work. 🙂

[lenjobakes]

@QuokkaCoffee Shrinkflation has been our modus operandi as well over the last few months. (Particularly after butter jumped 30% just before Christmas.) It feels like we have no choice!

Our customers deserve the best, but they couldn't (...maybe wouldn't?) embrace the full 30-45% cost increase that we're seeing. It's a tough balance for sure.

[mksavage]

I'm just revisiting this thread and the adjustments you made in quantities/recipes are giving me a lot to think about. We've made a lot of similar adjustments over the past year too, but I think it's time to re-evaluate what else we could do. Always appreciate insight from other restaurants!!

[LBm40]

Why is it we were essential to keep America open yet we have had our prices double, triple and quadruple on items that are essential for us to continue business. Fry oil, gloves, foil wraps, Fry bags, take out bags and more. That’s if they are in stock.
I run a burger and Fry stand drive through and take out only. What we are experiencing is greed. Tyson foods saw a 140% increase in profits and gave their CEO a 20% pay increase putting him at $14 million a year salary.
Beef up 20% pork and chicken up 15%.
We have been run through the ringer since 2020 at what point will we say enough and quit calling it inflation. They have not had cost increases high enough to justify what we have been being charged.
is this how essential businesses are suppose to be treated? We risked getting sick so we could keep the economy going. We had no guidance from health departments on how to better protect our team. We watched people cry when they found out they were essential and had to work because they were high risk. We wore masks. We followed the rules and we still suited up, showed up and smiled hoping to be a bright spot in people’s day. And this is how America has thanked us, by taking from little places like ours that just want enough to live a modest life,

so they can have more than enough. 

[lenjobakes]

I hear you, @LBm40. It's really hard not to feel like we've been done over. Operating a food business and not knowing whether or not your supplies are going to be in stock are just one of the most frustrating parts.

If suppliers were seeing similar costs to small business, it'd be one thing. But you're right - they are making record profits and we're (at least I) am just trying to hold on for 2024 to see if it gets a little better😅

Hoping that a turnaround point comes for you soon and while it may not be a source of comfort, know that you're not alone and you have a whole community of people who are sharing your frustrations!

[lenjobakes]

As a business that started up only a month before the pandemic, I honestly don't know what I've been experiencing.

I feel like I'm constantly in this mode of waiting for the other shoe to drop.

How does it impact my business? All I've done is pivot pivot pivot for the entire time that we've been operational - effectively spinning in circles.

Since flexibility is all we've known, it's what we rely on now. How do we maintain the premium ingredients we need to create the premium product our customers expect? Shrinkflation. Our squares are the same size, but they are marginally (10%) smaller and we increased the price (5%). We actually raised all of our prices 5%, but this was back in January before we knew that cold cup packaging had gone up 70% and that the price of dairy was going to increase for a 3rd time in 9 months.

Will we raise prices again? Probably. Maybe closer to Christmas when our volume is up - it helps to recoup costs.

But ultimately we're putting our heads down, grinding and pivoting our way to 2024 when we hope the worst of what's coming is over.

[QuokkaCoffee]

---

I feel like I'm constantly in this mode of waiting for the other shoe to drop.

I relate to this so much. On really bad days I equate it to just running in place and it's the worst feeling in the world.

And speaking of packaging, one thing that's been on my mind lately is the rollout of a statewide plastic ban. I agree with it in principle but it gets complicated at the consumer/retailer level. (*whispers* it would be nice if more attention was paid to building better waste management and recovery facilities but that's just my two cents...)

Our takeaway hot and cold cups allow us to keep our beverage lines, and therefore the experience of buying coffee from us, consistent. Not all BYO cups are made with volume indicators but there are workarounds for that. Where it gets really frustrating is when guests, on rare enough occasions, hand over dirty BYO cups and expect us to wash them because I guess that's what being a foodservice professional is all about?

Former colleagues have reported having to deal with actual mold. 🤢

And of course, the only available packaging that's compliant costs an arm and a leg. 

[lenjobakes]

Ohhhhh we're experiencing the same, @QuokkaCoffee! Canada is banning the use of single-use plastics as well but they are targeting food business first (Checkout bags, cutlery, straws, foodservice ware, stir sticks). Larger chains (i.e. Macca's) has already started transitioning for cutlery, but just like when Starbucks started using the brand of oat milk we use...you can't get it because they have the capacity to purchase SO much leaving shortages for everyone else.

We've gotten in the habit of using measuring cups whenever we make drinks in a BYO cup. It's the only way to keep it consistent. But we do not wash cups for customers. Someone handed me a dirty cup and I literally just handed it right back to them. I said it's a health and safety thing and we can't use their cup. People are wild.

[mksavage]

"Since flexibility is all we've known" -- Honestly, I think this is going to set you up really well in your business. I think so many small businesses get stuck in the habit of "We've always done it this way," and resist change or adaptation, which simply won't work these days. The situation is changing daily -- learning to pivot and adapt (with intention, of course) is the only way to survive, and I applaud you for being able to jump in and do that.

[lenjobakes]

I sincerely hope you're right @mksavage because I am T I R E D. Like, a very deep exhausted kind of a tired.

I don't know what we're training for, but I don't even know if I'll have enough stamina to go through it when it does come 😂

[mksavage]

I totally hear that, @lenjobakes -- I'm definitely feeling that same exhaustion. Hang in there and know that you're not alone! ❤️

[Hairgenius]

I can totally understand the world wind of discombobulation. As I to opened my salon right before the pandemic. As much as people want to give advice on business we only know the chaos, we only know how to constantly change and pivot and reassess and re-market and redesign. In three years I have yet to have one calm month. But I will say if you opened a business Right before the pandemic and you are still here. pat yourself on the back because that means adaptability and you’re able to tell what is needed in your business at that time and to change it and to still make it successful and keep everything running smoothly.