The most wonderful time of the year is posing some unique challenges for business owners as they enter into the second pandemic holiday season.
Business owners small and large are facing higher costs on a variety of fronts.
Many local businesses are doing everything in their power not to pass these on to consumers, but unfortunately, it seems be necessary.
Philomena+Ruth’s best-selling jumpsuit now retails for $98 – an almost 70 percent increase from before.
“The raw fabric that I use for my jumpsuits went up 20 percent in cost at the beginning of the year, so I had to adjust my prices for that,” store owner Elizabeth Hahn said, adding this is not the only cost increase she’s shouldering. “Some places that were offering free shipping are no longer offering free shipping, so sometimes when I’m getting my T-shirts and things like that, when they are coming, I’m paying more in shipping costs for that.”
The blank clothing Philomena+Ruth and Crafted in the Loo owner Summer Jackson customize with their designs is rising in price as well.
“The apparel stayed pretty steady for a while, but this past six months we have felt it go up,” said Jackson, whose T-shirt design business Creation Station Designs, one of several vendors found in the Waterloo storefront. “Some companies are even fluctuating their prices by the day. That’s the struggle that we’ve had – we can price something or price a job … and then the price might be different the next day.”
That is, if Hahn and Jackson can even get their hands on the blank clothing. Both said if the necessary styles and colors are in stock, they often run into certain sizes being sold out.
This has caused Hahn to miss out on large wholesale orders she ships to similar stores across the states.
“If I’m selling directly to my consumer, it’s not as much of an issue because I can tell them the story of why we don’t have the size or whatever,” Hahn said. “But, if I’m a store wanting to order a certain design from a maker, I need a full size run … I even got an order from one of my regular stores and when they placed the order, the shirts that I needed were available, (but) by the time I went to order those shirts, they were already gone. So even when things are getting restocked, they’re getting snatched up so quickly by everyone else who’s waiting for blanks.”
Joe Stefani, president of Desert Cactus, an e-commerce store that has licensing agreements with college and professional sports teams and more, said the company has seen price increases in certain raw materials they need to make products.
“We produce all of our own stickers in house. We’ve been hit with two price increases in 2021, one in May, one in October. Both times were a 10 percent increase for the actual raw materials, which is insane. We’re like, ‘This is bonkers!’ So what we did is we shifted our buying to another supplier who actually beat the price,” he said.
Even businesses who may not make products in-house are seeing increased costs related to manufacturing.
“We’ve received letters from almost all our wholesalers saying that their costs have risen exceedingly high, just like ten-fold as far as shipping costs and stuff,” Waterloo Mercantile Co. owner Jennifer Bullock said, adding that while the wholesalers have tried to absorb most of it, some eventually has to be passed on. “We know that the wholesalers’ hands are tied as far as what they’re being hit with and that makes our hands tied because we’re required to charge X amount for each item, there’s an agreement you have to follow, so it’s unfortunate but it’s the situation we’re in.”
Jackson said the large majority of Crafted in the Loo’s makers have reported having to pay increases in shipping costs, and Columbia’s La Bella Rosa Boutique owner Julie Derr said she has noticed this as well.
Stefani said while packaging costs increase every year, he hasn’t seen anything like this year’s.
He said Desert Cactus has seen large increases in cardboard envelopes they use to mail stickers.
“With the envelopes specifically, we’ve been whacked a couple of times with price increases and it’s just because the place that makes those envelopes for us in Chicago has been having a hard time getting ahold of the raw materials to make those,” he said.
Such increases, while they might seem small, can be quite insidious.
“You figure a small increase has a substantial impact on the bottom line, because even if your packaging costs 20 cents more (per) item going out, you times that by 500,000 orders. That’s $100,000 in the snap of a finger,” Stefani said.
Reports of packed ports have holiday shoppers worried their gifts won’t arrive on time, yet they may not consider how this can impact local small businesses’ inventory.
“There’s one of my shoe vendors that seems to be sending out (notices) all of the time that things are stuck at the port of that they’ve finally gotten a shipment or something to that effect,” Derr said, adding this vendor is based in California but obtains materials internationally.
Stefani said the Desert Cactus team has researched which ports’ shipping volume decreases year after year and strategically arranges its products’ routes to take advantage of this.
While Waterloo Mercantile Co. does not see a lot of problems stemming from port backups as most of its suppliers are in the U.S., it has seen other hiccups cause holiday products to come in late.
Bullock explained the timetable for retail is sensitive, and what may seem like a timely shipment to a consumer is not for business owners.
Even though she, along with many other merchants, ordered Christmas products as early as January, some shipments are just now arriving at the downtown Waterloo storefront.
“Two weeks ago, we received over 50 boxes from one of our wholesalers and it’s all Christmas, and that’s really too late. We’re really scrambling to get it all in our inventory system, priced and ready to be put out,” Bullock said.
Bullock explained retail stores will put holiday goods on their shelves early and mark them down as the holiday approaches. In turn, when a store receives festive products closer to the holiday, they are automatically expected to be marked down.
Bullock said she even received Halloween products after the holiday.
“At a small business, you cannot really afford to just hang onto the product until next year,” she said. “There’s just not enough space to hold all of that, and plus, you don’t want your money tied up in products that you can’t even sell for another nine or 10 months.”
The fear she would not be able to get the products on time is part of the reason Derr decided not to sell holiday specific clothing – such as shirts with Christmas sayings on them – this year.
Luckily, Bullock has plenty of holiday cheer in her store despite the late shipments.
“I haven’t had any problems with not having enough product to sell, but that’s because I order a lot of products,” Bullock said. “I think my eyes are bigger than my store … I keep thinking my store is 10 times bigger than it is (when I order).”
Factories across the world are wrestling with the implications of COVID, from rebounding from shut downs to having employees out sick. This can impact the amount of product available as well as further clogging the supply chain.
“COVID is affecting the people working in those factories,” Hahn said of international factories. “Those factories had to be closed for months just like everybody else, so that gets everything pushed behind. Then, if (they) do open back up and someone gets sick, (then) they have to close down because (they) have to keep everybody safe. So, all the issues that we’re going through here, imagine that happening in big factories where they’re supplying T-shirts for brands around the world.”
As the New York Times reported, a short supply of electricity in China is limiting the amount of product that can be produced in some factories. The price to generate coal-powered energy has risen with demand, and, as the publication states, this is just one portion of the problem.
Stefani has seen the implications of this, as Desert Cactus works with some factories in China.
“The big thing over there was – believe it or not – they were running out of power. What we’re hearing from our factories is where some of (them) might be usually working six days a week, they’re now mandated to work only four days a week from the government. So, the output is shrinking substantially.”
Seeing how COVID impacted other parts of the world before it showed up in the U.S. helped Desert Cactus to adequately prepare – even though this meant changing normal business operations.
“In December 2019, we were hearing from our factories in China that stuff was being closed down and at that point, we were like ‘Let’s start ramping up the inventory levels and such,’” Stefani said. “Obviously it’s taking a hit to the balance sheet because we have to go through now and outlay more cash to increase our inventory. However, what it’s doing is instead of us ordering three months of inventory at one time, we might order six or nine months at one time.”
Stefani understands not all companies were able to do this, and so he encourages shoppers to have back up plans this holiday season: If one’s retailer of choice does not have a product in stock, where else can it be purchased?
In order to bypass potential shipping delays, he also recommends customers take advantage of stores’ online and pick up in-store options.
Those shopping online to avoid higher state taxes may be out of luck as well.
Amazon has been collecting a flat 6.25 percent sales tax from Illinois residents since 2015. There are two changes with the new “Leveling the Playing Field for Illinois Retail Act” for Amazon customers in Illinois.
The tax is applicable to third-party retailers who sell through Amazon and local tax rates are now charged, which can be up to 10.25 percent for Chicago residents.
Also, do not rule out small businesses for fear they will not have specific products. As Bullock said, if an exact match cannot be found, something comparable most likely can, especially if the store carries the sought-after brand.
As in-person celebrations are becoming more commonplace, including holiday get togethers, Derr stressed La Bella Rosa Boutique has plenty of formal options.
“For awhile, my inventory of dresses I kind of cut back on because people were not going anywhere, but I’ve increased that again because people are going to weddings, showers, parties and things like that. So I’m fully stocked and I can take care of them for whatever event they have!”
Bullock said shopping locally benefits the consumer as well – not just the businesses.
“Even in a normal year, shopping local is always the best thing you can do for your community. You not only help those local shop owners, but you’re helping your city (because) all the sales tax and everything stays local,” Bullock said.