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Jesse Reed, owner and founder of sustainable dry cleaning company Green Collar Cleaners in Chicago’s Hyde Park neighborhood, prepares orders for customers to pick up on March 25, 2022. Reed was not eligible for most of the programs. pandemic aid.
In 2018, Reyna González purchased Dulcería La Fiesta, a Mexican party and candy store on Clark Street in Chicago’s Rogers Park neighborhood. About three weeks later, the building caught fire. “We lost everything,” González said.
Gonzalez reopened the store in July 2020. She taught herself how to make the custom piñatas that now make up the bulk of her business. For a time, things were going well; by 2021, she said, her sales will triple. But, last winter, the omicron variant hit Chicago.
“It hit us hard,” he said. “We have been fighting ever since.”
Because the store closed in 2019, Gonzalez was ineligible for most pandemic relief programs, such as the federal paycheck protection program, which require 2019 tax documents. She said she and her husband , who hold down a job outside of the business, have exhausted their savings trying to keep the doors open. Now, rising costs have compounded her problems.
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Piñatas for sale at Dulcería La Fiesta on March 23, 2022, in the Rogers Park neighborhood of Chicago. Owner Reyna Gonzalez purchased the small business and party store after leaving a corporate job in 2018.
In the middle of winter—just as he was losing business—the suppliers of the Mexican candy he has in the store started raising prices. Some items are now 50 cents to a dollar more expensive, Gonzalez said.
González decided to lower the prices of some products to attract customers. But she was soon forced to bring them back up, because she was losing too much. In recent weeks, according to González, it seems that business is picking up again. She is hopeful.
After two grueling years of the pandemic, inflation is moving up the list of challenges for small businesses. The consumer price index rose 7.9 percent in February from a year ago, the highest since the early 1980s. The regional consumer price index for the Chicago-Naperville-Elgin area rose 7.1 percent compared to a year ago, according to the US Bureau of Labor Statistics (BLS).
Some in Chicago’s small business community are hopeful, saying business has picked up in recent weeks. However, costs are rising across the board, leading many small business owners to raise prices while others try to hang on so they don’t lose customers.
In a PNC economic outlook report earlier this year, just over half of small business owners in the United States said they expected to raise their prices in the next six months. The survey was done before the situation with Ukraine, which has exacerbated existing concerns about inflation and supply chain disruptions. Meanwhile, most pandemic-specific aid programs have dried up.
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Reyna González, owner of Dulcería La Fiesta Inc., works on a personalized unicorn piñata on March 23, 2022, in the Rogers Park neighborhood of Chicago.
“Small business owners are really struggling,” said Lotika Pai, the chief financial officer of the Women’s Business Development Center. “They feel the pain much more than the big companies. Because the largest companies have access to the capital markets, they have more cash on hand, they have access to larger lines of credit.”
When supply chains are constrained, Pai said, suppliers tend to favor larger companies over smaller ones.
Teresa Ging, CEO of Loop Sugar Bliss Bakery, has seen a pick-up in business. After working through much of the pandemic on her own or just with a pastry chef, Ging has about 10 employees at the bakery, and is hiring more. She has developed a line of packaged cookies that will launch with Walgreens this spring.
Ging is seeing “high demand” from corporate orders in particular. “They’re not as price-conscious as a consumer buying a cupcake,” he said.
However, inflation and supply chain disruptions are a challenge, according to Ging. The cost of everything has gone up: flour, sugar, butter, eggs, even paper cups and cupcake boxes. “It’s not even 1 to 2 percent,” he said. “It’s probably 10 to 20 percent, depending on what it’s about.”
Ging used to use a certain type of chocolate to cover Sugar Bliss cake-pops; she had to switch brands due to supply chain problems. Sugar Bliss just increased the price of its coffee for the first time in about five years. Ging guesses he’ll have to raise the prices of cupcakes as well.
Martha Razo, CEO of Guero Pallets, a family-owned pallet company in South Austin, says she’s losing about 12 cents per pallet due to rising fuel and lumber costs, which works out to about $10,000 a month. For now, she is bearing the cost so as not to lose customers, including food, technology and packaging warehouses that use her products to store and move theirs. When her losses reach 15 cents a pallet, Razo has decided that she will have to raise prices.
Geri Sánchez Aglipay, administrator of the SBA for the Great Lakers region, said inflation is particularly hard on small businesses owned by women, which she said tend to cluster in industries like food and retail, which have been the most affected by the pandemic. However, inflation and supply chain issues haven’t stopped Americans from opening new businesses, with more than 5 million openings last year.
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Reyna González, owner of Dulcería La Fiesta, works on a unicorn piñata on March 23, 2022, in the Rogers Park neighborhood of Chicago. Gonzales bought that business after leaving a corporate job in 2018.
After falling more than 30 percent in March 2020, the number of small businesses operating in Illinois is approaching pre-pandemic levels, according to the Economic Opportunity Insights Tracker, a project of Harvard and Brown universities that tracks the economic impact of COVID-19. According to the tracker, in January the figure was down 10 percent compared to January 2020.
“I think it’s still tough,” said Sandi Price, the executive director of the Rogers Park Business Alliance. It seems that as soon as business overcomes one difficulty, another appears, she said. Still, Price added, the neighborhood saw more business openings than closings in 2021.
Phil Moy, operations manager for the Hyde Park Chamber of Commerce, said small businesses continue to struggle to find qualified employees, a concern shared by others across the city. Rising costs have kept companies from raising prices, he said. “It’s hard to find a lunch for less than $15 to $20, when it seems to me that lunch was a $10 item years ago.”
Pai said that for many of the small community businesses that work with the Women’s Business Development Center, raising prices is not an option. They are trying to remain accessible to the communities they serve, Pai said. Instead, they are taking a hit to their profits.
In 2021, the average family had to spend $3,500 more than the previous year to purchase the same goods and services, according to an analysis by the Penn Wharton budget model at the University of Pennsylvania (Penn). Low-income and working-class families were hit the hardest, according to the model, because they spend a higher proportion of their income on “needs” like food, energy and transportation. The model found that, on average, for households earning between $20,000 and $100,000 a year, the increase in wages offsets the increase in the cost of living. However, in households earning less than $20,000, wages increased by only a third of the cost-of-living increase.
Relief from inflation won’t come any time soon, said Phillip Braun, a clinical professor of finance at the Kellogg School of Management at Northwestern University. “I think inflation will continue to rise into next year,” he said. Braun said the Federal Reserve would have to raise interest rates more aggressively to have an impact on inflation. “Right now, their policy is not that aggressive,” he said.
Like Gonzalez of Dulcería La Fiesta, Jesse Reed was ineligible for most pandemic relief programs. He opened his sustainable dry cleaning business, Green Collar Cleaners, in Hyde Park in January 2021.
Business picked up from last fall, he said, but things have gotten tough in the last month. He believes that inflation has played a role in slowing down business, as some people are afraid to spend as much as they used to. The products you need, from bill labels to garment bags, are more expensive. Hooks are in short supply, so offer a hook recycling program. Reed hasn’t raised its prices yet, but is considering doing so for its wash and fold services.
Reed says he doesn’t worry about customers leaving him for traditional dry cleaners, which are often cheaper. His clients are environmentally conscious and value his services even if it costs more.
However, he worries that as wages stretch further, people will simply choose to do their laundry at home.
The problem is twofold, says Reed. “People spend less and I have to spend more on products.”
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