Small Minnesota retailers face 'compounded' problems amid holiday crush

Mahogany Ellis-Crutchfield piled into her used van early on a snowy Sunday morning and drove four hours to her printer in Iowa, then turned around and drove back with a thousand rolls of colorful wrapping paper in hand.

The cost of shipping has increased too much for her to afford, so she makes the eight-hour drive every other week. Her logistics are not the worst of her worries, though.

The price for the paper and balloons she needs to create her GiftyWrap products and run her event business has skyrocketed. Like so many retailers, Ellis-Crutchfield also has struggled to find staff to sell her products and has had to cancel commitments to several holiday markets in recent weeks.

Plus, with coronavirus infections on the rise again and fear of a new variant taking hold in the United States, Ellis-Crutchfield is also painfully aware she is risking herself to exposure, but still she pushes on.

"It's about getting the business on a solid foundation, and during COVID that has been a really tricky dance," said an exasperated Ellis-Crutchfield. "I think the problem is that things have compounded."

All retailers are facing unprecedented headwinds that are challenging the core of their businesses right in the middle of their busiest time of year. However, Ellis-Crutchfield and other small retailers cannot use their heft to keep prices steady or, as Target did, absorb the cost of securing their own cargo ship to bypass some supply headaches.

"She is an example it sounds like of everything retailers are facing," said Bruce Nustad, president of the Minnesota Retailers Association, of Ellis-Crutchfield.

Despite the issues, Minnesota retailers were relieved by the shoppers they saw over the Thanksgiving weekend. About 80% reported to the association that store visitors were in line with expectations or better. Most had higher sales than last year, and the majority of retailers surveyed expected sales for the full holiday season to be better than last year.

To combat challenges, many small retailers are losing precious time like Ellis-Crutchfield's eight-hour drives to pick up the wrapping paper or phone calls and e-mails that are taking an hour each day instead of the usual 10 minutes.

After a bleary-eyed Ellis-Crutchfield returned from Storm Lake, Iowa, a week ago, she and her fiance unboxed the wrapping paper and put it on display in her pop-up space on the first floor makers market at Dayton's Project in downtown Minneapolis.

"I had to have products," she said, as she took a break from unloading.

Shipping 700 rolls of wrapping paper would cost about $600, meaning she would have had to charge $1 to $1.50 more per roll. Plus, her business cannot afford shipping delays.

Inventory is tight. One day before her last trip, she ran out of both colors of one print and promised customers she'd get more made. GiftyWrap features images of women of color, Black Santas, culturally significant prints for Asian customers and Minnesota-specific imagery such as loons.

Still building the business, Ellis-Crutchfield also carries a full-time corporate job as a project manager for a private agricultural company, so she often works late into the night packing orders, wrapping presents and handling other aspects of the business.

She currently has one employee who helps at the pop-up and at events. Workers have been so hard to find that many market vendors she knows are often begging each other for staff.

"I've reached out myself to other small business owners," she said. "Unfortunately, it has just led to not being able to grow in that way."

The labor shortage has been one of the top concerns of retailers this holiday season. According to a December report by the National Retail Federation, retail job openings are far exceeding hires. September retail job openings were the third-highest on record at 1.1 million while hires totaled 893,000.

The labor crunch can be seen at retailers throughout the Twin Cities. The GameWorks arcade on the top floor of Mall of America, for example, was closed on the busy day before Thanksgiving. A note on the door said staffing was one of the reasons.

GiftyWrap isn't the only retailer to face big increases in the costs of materials either. Inflation is at its highest in decades with inflation at the wholesale level, rising nearly 9% in October from the year before matching a record annual gain reached in September, according to the U.S. Labor Department.

All this has led to retailers missing out on sales because of the supply chain and related inventory shortages, according to a December summary of economic activity reported by the Federal Reserve Bank of Minneapolis.

Kevin Roalson, an independent consultant for Iowa printer Stickers and Posters, which makes GiftyWrap paper, said even before the pandemic certain types of paper were getting harder to come by as paper mills used resources to make other products such as adult diapers.

"The pandemic just quadrupled the problem," Roalson said.

Numerous mills were shut down during the height of the pandemic adding to the dearth in product. Overseas orders have been taking longer to get to the company. And the price tag has gone up more than once because of shortages, Roalson said.

Normally, Stickers and Posters sell to other resellers, but Roalson and the company were impressed by Ellis-Crutchfield's vision for her company.

"I'm so proud of her for making a go of it," Roalson said, adding that he hadn't seen Black Santas on much paper products before GiftyWrap.

Among her friends and family, Ellis-Crutchfield had always been known for giving elaborate gifts. Once she made a lifesize Barbie doll with an array of individual presents for one of her sister's birthdays.

"For me, I show people how much I care about them by being over the top and intentional about the way I give them gifts," Ellis-Crutchfield said.

She even once went through the trouble of importing wrapping paper from Europe, where there are more multicultural designs.

There is a need for those kinds of products that reflect people of different races and ethnic backgrounds, she said, so her business was born. After initially reselling paper, she began to work with Twin Cities artists to create diverse wrapping paper of her own, featuring women wearing hijabs, Afro-centric patterns and more.

Ellis-Crutchfield launched her business last fall before the holidays when many holiday markets were shut down. The Dayton's pop-up is her first brick-and-mortar space.

She already is thinking ahead to what she will do after the Christmas season. She should be at the Departments at Dayton's until at least March. She is currently talking to artists about paper designs for upcoming holidays including the Chinese New Year.

And she's thinking about even more creative ways to meet retail's challenges.

Ellis-Crutchield, who can't afford to pay herself, has had to come to terms with one of the biggest concerns of retailers: Selling items in person puts her more at risk for the coronavirus. The majority of her sales are made in person.

"People enjoy being able to see the colors and art of my patterns in person, feel the thickness and quality of our paper," she said. "It's hard to replicate that experience online; in fact, you can't."