Inflation poses new challenges
NEW YORK — Small businesses that endured shutdowns and lower revenue during the COVID-19 outbreak now must contend with another crisis: spiking prices for goods and services that squeeze profits and force many owners to pass the increases along to customers.
Mickey Luongo’s company, Total Home Supply, is paying as much as 15 per cent more than it paid pre-pandemic for the air conditioning and heating equipment it sells to other businesses and consumers. His suppliers have raised their prices because they’re paying more for raw materials, components and shipping.
Mr Luongo says some of his customers have pushed back on higher prices.
“We had one contractor who totally understood the price increase and was OK with it while other consumers get mad at us and think the increases are our fault,” says Mr Luongo, co-owner of the Fairfield, New Jersey-based company.
Surging demand from consumers for a wide range of products during the pandemic has driven up prices for finished goods as well as raw materials, supplies and equipment. Product shortages and bottlenecks in supply chains have added to the costs.
Mr Luongo has found that just about everything that goes into making and shipping an air conditioner or heating unit costs more.
“Copper prices gone through the roof — there’s copper in every air conditioning product and lots of it,” he says.
And Mr Luongo’s suppliers are paying more for shipping containers that are in high demand; one manufacturer told Mr Luongo that it only finds out how much it has to pay for a container on the day the ship carrying its products sets sail.
Total Home Supply is more likely to pass along an increase to a general contractor building homes than to consumers who can go to chain stores for air conditioners.
“We very carefully weigh pricing decisions for each item and do our best to stay competitive while trying to maintain a profit margin we can live on,” Mr Luongo says.
Service providers are equally pinched by higher inflation. With more homeowners remodelling since the start of the pandemic, supplies of paint, lumber and other materials have fallen and their prices have soared, forcing general contractor Victoria Staten to change her pricing policies.
“We’ve gone from guaranteeing estimates for 30 days to just five days,” says Ms Staten, owner of The Upside Chicago.
Ms Staten is also pricing labour and materials separately, rather than providing an all-inclusive estimate as she did pre-pandemic.
The scarcity of materials is also adding to Ms Staten’s costs — it can take several days to find items such as crown moldings that used to be found easily. She’s been absorbing the labour costs involved in these shopping trips but is considering adding staffers’ extra time to her invoices.