After weathering a pandemic, supply chain issues, labor shortages and inflation, Michigan’s small businesses say their outlook for this holiday shopping season is murky at best.
On the one hand, inflation is stabilizing. Incomes are rising, but so are expenses. Retailers also say some of the “Shop Local” goodwill associated with the pandemic has worn off, and consumers are returning to shopping at big retailers in person and online.
“We’ve come full circle,” said Kevin Begola, owner of Bridge Street Exchange, a men’s specialty store in downtown Fenton. Begola said going into the pandemic, online shopping was popular. Then everyone started feeling bad about Main Street America, he said, and consumers wanted to see small businesses survive.
“Since then, I think we’re seeing the big players trying to push the boundaries again, pushing back much more against traditional shopping,” Begola said. “The last few years have been inconsistent when it comes to trying to figure out what the hell is on the horizon.”
Only 12 percent of Michigan retailers forecast sales to increase from October to December in what is typically their busiest season, a recent survey by the Michigan Retailers Association found. Meanwhile, 11% of retailers surveyed said they expect sales to decline, and 77% expect no change.
“People’s budgets are stretched in a way that competition for disposable income is pretty fierce,” said Brian Calley, president and CEO of the Michigan Small Business Association. There are about 900,000 small businesses in Michigan, according to state data, and SBAM represents more than 30,000 of them.
However, it doesn’t appear that consumers are giving up on holiday shopping. Holiday spending is expected to reach record levels in November and December, with spending expected to be a 3%-4% increase over 2022 spending, according to a forecast by the National Retail Federation.
That’s a slower growth rate than the past three years, when stimulus dollars drove unprecedented levels of retail spending during the pandemic, the feds said, but in line with the average annual increase in holidays in the decade leading up to the pandemic .
Bottom line? Small businesses will have to work harder to compete for their share of holiday spending.
Keeping prices low
Jess Minnick, co-founder and CEO of the Not Sorry Goods store in Ferndale, said pricing has remained consistent despite inflation.
“We don’t want to change the barrier to entry for you to buy from us,” Minnick said. However, commodity costs have risen, Minnick said.
To maintain a profit, Minnick said, Not Sorry Goods doesn’t outsource production as much as it used to. For example, Minnick invested in a heat press to avoid having to outsource screen printing for the apparel and accessories it offers with graphic designs, and is seeing savings.
More on Not Sorry Goods: Not Sorry Goods in Ferndale offers an in-store personalization experience for apparel, decor
Jenny Brown, owner of the Everybody by Dutton Farm social enterprise in Pontiac, also said she has not raised prices on bath and body products, which include soap, candles and hand sanitizer, among others.
“We’ve been baking in healthy limits, but they’ve definitely gotten thinner,” Brown said. “But not to the point where we have to decide to raise prices at all.”
However, Brown acknowledges that the average shopper is willing to pay a premium for a product that is associated with a good cause. Brown employs people with developmental disabilities with the goal of removing barriers to employment for those who are unemployed or underemployed.
She said Everybody by Dutton Farm has seen an increase in corporate gift orders this year, which she attributes to companies being more mindful of corporate social responsibility.
Cali said that by trusting the people behind the product, quality and service can be differentiating factors for small businesses compared to big box and online retailers.
“It’s not a sterile relationship, but rather a personal one, and it’s more important than ever that small businesses can articulate the service and quality they offer,” he said.
Going beyond the online experience…
Minnick said she’s noticed that one major way the pandemic has changed consumer behavior is that they’re prioritizing convenience, whether that’s shopping online or visiting a large retailer where they can make a variety of purchases. at once.
That’s one reason why she tries to offer an experience that shoppers can’t get online or in those big box stores, by offering, for example, custom embroidery. She said customers will visit Not Sorry Goods to personalize gifts they purchased elsewhere.
“We don’t expect people to just support us because we’re already a small business,” Minnick said. “I don’t see that being at the forefront of customers’ minds.”
… and to be there for customers when Amazon can’t be
However, there is one way online shopping can’t compete with in-store shopping, and that’s when it’s the last two weeks before Christmas and it may not be possible to get your purchase delivered in time for the holiday.
Begola said Amazon and other online retailers have made consumers have the mentality that they can have anything they want at any time.
“I think that mentality will eventually catch up with people,” he said. “There are only so many deliveries that UPS or FedEx or Amazon can do, frankly. So the last two weeks we’ve been doing really well … I think people need to remember that if they want small businesses to stay (open). We’re up against the ropes.”
Contact Adrienne Roberts: [email protected].
