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After navigating a pandemic, supply chain issues, worker shortages and inflation, Michigan small businesses say their outlook for this holiday shopping season is murky at best.
On one hand, inflation has stabilized. Incomes are rising, but so too are costs. Retailers also say some of the “Shop Local” goodwill associated with the pandemic has worn off and consumers are back to shopping at big-box retailers in person and online.
“We’ve done a full cycle,” said Kevin Begola, owner of the Bridge Street Exchange, a specialty men’s shop in downtown Fenton. Begola said heading into the pandemic, online shopping was popular. Then everybody started feeling bad for “Main Street America,” he said, and consumers wanted to see small businesses survive.
“Since then, I think we’re seeing the big box players trying to push the envelope yet again, clawing back a lot more against traditional shopping,” Begola said. “The last couple of years have been inconsistent when it comes to trying to figure out what the heck is on the horizon.”
Only 12% of Michigan retailers predict sales will rise from October through December in a period that would typically be their busiest season, a recent survey by the Michigan Retailers Association found. Meanwhile, 11% of the retailers surveyed said they expect their sales to decline and 77% anticipate no change.
“People’s budgets are strained in a way that the competition for disposable income is pretty fierce,” said Brian Calley, president and CEO of the Small Business Association of Michigan. There are about 900,000 small businesses in Michigan, according to state figures, and SBAM represents more than 30,000 of them.
However, it doesn’t appear consumers are pulling back on holiday shopping. Holiday spending is expected to reach record levels during November and December, with spending anticipated to be a 3%-4% increase compared with 2022 spending, according to a forecast from the National Retail Federation.
That’s a slower growth rate than compared with the past three years when stimulus dollars led to unprecedented rates of retail spending during the pandemic, the federation said, but consistent with the average annual holiday increase 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 store Not Sorry Goods in Ferndale, said pricing has remained consistent despite inflation.
“We don’t want to change the barrier of entry to purchase from us,” Minnick said. The costs of goods has gone up, though, Minnick said.
In order to maintain a profit, Minnick said, Not Sorry Goods isn’t outsourcing production as much as it used to. For example, Minnick invested in a heat press so she wouldn’t have 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 in-store customization experience for apparel, decor
Jenny Brown, owner of the social enterprise Everybody by Dutton Farm in Pontiac, also said she hasn’t raised prices on its bath and body products, which include soap, candles and hand sanitizer, among others.
“We have baked in healthy margins, but those have definitely gotten thinner,” Brown said. “But not to the point where we have had to make a decision to increase prices at all.”
Brown acknowledges, though, that the average shopper is willing to pay a premium for a product that’s associated with a good cause. Brown employs people with developmental disabilities with the aim of removing barriers to employment for those who are unemployed or underemployed.
She said this year, Everybody by Dutton Farm has seen an increase in corporate gifting orders, which she attributes to companies being more mindful of corporate social responsibility.
Calley said leaning into the people behind the product, the quality and service can be differentiating factors for small businesses compared with 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 be able to articulate the service and quality that they offer,” he said.
Going above and beyond the online experience …
Minnick said she’s noticed that one major way the pandemic has changed consumer behavior is that they prioritize convenience, whether that’s shopping online or visiting a big-box retailer where they can make a variety of purchases in one stop.
That’s one reason why she’s trying to offer an experience shoppers can’t get online or at these big-box stores by offering custom embroidery, for example. She said customers will visit Not Sorry Goods to personalize gifts they’ve purchased somewhere else.
“We’re not expecting people to just support us because we’re a small business anymore,” Minnick said. “I don’t see that as being at the forefront of customers’ minds.”
… and being there for customers when Amazon can’t be
Still, there’s one way in which online shopping can’t quite compete with in-person shopping, and that’s when it’s the last two weeks before Christmas and it might not be possible for a purchase to be delivered in time for the holiday.
Begola said Amazon and other online retailers have led consumers to have the mentality that they can have anything they want at any time.
“I think that mentality is going to catch up with people eventually,” he said. “There’s only so many deliveries that UPS, FedEx or Amazon can make, quite frankly. So those last two weeks we really do 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: amroberts@freepress.com.
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