Small businesses eat cost of inflation

For Vivian Bowers, owner of a south Los Angeles dry cleaner, inflation hit home when her wholesale cost for hangers soared by 48% in six months.

Tom Bock, who runs an electric bike dealership in Huntington Beach, Calif., has had to pay his workers 25% more, on top of a boost in commissions.

Hagop Berberian, owner of an auto repair shop in Inglewood, Calif., is afraid to fully pass on the escalating cost of tires, motor oil and Freon. "Either you keep the customer happy or you lose the customer," he said.

In October, the 6.2% rise in U.S. consumer prices was the biggest year-over-year jump in 31 years. Torrid surges in the cost of housing, gasoline, cars and food continue to capture headlines. For many small stores selling goods from furniture to footwear, and for providers of services from haircuts to home care, it is a nerve-racking time: Do they charge more and risk losing clients?

"Larger firms can absorb higher costs for supplies," said Holly Wade, research director of the National Federation of Independent Business, an advocacy group with more than 300,000 members. "For small firms, it's a different ballgame."

Across the economy, consumers who stopped traveling, dining out, getting their hair cut and going to movies during the COVID-19 pandemic amassed trillions of dollars in savings collectively. Rising vaccination rates enable shoppers to feel safer. Despite rising inflation, retail sales jumped 1.7% in October, more than double September's growth rate and the fastest pace since March.

But many small businesses are not feeling the love.

And their profits are at risk, said University of California, Santa Cruz economist Robert Fairlie. "When the cost to make a carne asada burrito goes up, some of that is passed on to the customer. And some of it is just eaten by the business owner."

In October, 69% of small-business owners polled by the independent business federation said they have raised prices because of supply-chain disruptions and rising employee wages in the face of labor shortages.

The number of owners expecting business conditions to worsen in the next six months rose to 52%, Wade said, the highest in 42 years of the group's surveys — and that was before a new global coronavirus variant, omicron, threatened progress in taming the pandemic.

When Vivian Bowers took over her parents' dry-cleaning business on S. Central Avenue in the wake of the 1992 riots, she recalled, the neighborhood was "blighted — gangs, drugs, prostitution."

But the energetic entrepreneur took a business planning class at the University of Southern California, chased out drug dealers on her block, launched pickup and delivery, and turned Bowers & Sons around.

With four employees, the neighborhood institution cleans uniforms for police officers, bus drivers, L.A. Live ushers and Ritz-Carlton housekeepers.

And it has extended its reach, picking up laundry from pricey downtown lofts and sheets stained with fake blood from the set of "Grey's Anatomy."

After barely surviving the Great Recession and its long aftermath, and after cutting hours during the pandemic,Bowers now faces a new threat: inflation.

Los Angeles raised its minimum wage to $15 an hour in July, hiking her payroll outlay. The costs of hangers, garment bags and solvent, as well as gasoline for the delivery van, have spiraled.

In June, Bowers raised her prices by 5%. Now she's worried about having to boost them an additional 10%.

"I don't want to chase away customers," she said. "If they have to choose between getting a blazer cleaned or putting gas in their car, which one are they going to do?"

Why is inflation so high?

"COVID — and greed," suggested Berberian, the auto repair owner.

"Millions of dollars in cargo is sitting out there on ships. People are selling the supplies they have on hand for the maximum. They're gouging us to recover what they've lost in the last year and a half."

Berberian thinks prices will level off in coming months. Meanwhile, he has pared his business hours to five days a week from six days, without cutting his mechanics' pay.

"If business is good at the end of the month, I give them a bonus," he said. "Look at what milk is costing — and eggs, groceries. I go to a supermarket and what I used to buy for 100 bucks now costs nearly 200 bucks."

Margot Roosevelt, Samantha Masunaga Los Angeles Times