Tuscaloosa small businesses struggle against high inflation

Ethan Henry, Contributing Writer

The word “inflation” has been unavoidable in the news for the past year. High inflation, or a sharp increase in average prices due to elevated demand and supply-chain shortages, can profoundly impact the way the economy functions.  

According to the Consumer Price Index calculated by the U.S. Bureau of Labor Statistics, as of July, year-over-year inflation is around 8.5%, leading many to wonder how local businesses in Tuscaloosa will be impacted. 

Soroush Ghazi, an assistant professor of economics at The University of Alabama, said politicians and government entities often create messages surrounding inflation to benefit their respective parties.  

“Inflation, at the end of the day, is just average prices rising,” Ghazi said. “The reason that it is sensationalized is because the more aligned you are with the administration, the less you want to admit that it is the demand side, because the demand side is potentially coming from the government spending.” 

In the eyes of those opposed to government spending, consumers have been given excessive amounts of money, causing companies to raise their prices. Proponents of government spending have countered this narrative by pointing toward corporate greed and supply chain issues. 

According to Ghazi, economic literature suggests that small businesses are disproportionately impacted by high inflation. 

“If you are a small business, the cost of borrowing goes up, which means the cost of doing business goes up,” Ghazi said. 

This is partially because large companies can build “markups” into their prices, setting them higher in order to give themselves a higher profit margin. 

According to the U.S. Small Business Office of Advocacy, around 46.7% of employees in the state of Alabama work for small businesses. 

Jessica Watts, owner of local plant store House Plant Collective, has dealt with rising costs for years. 

“Over the past two years of me really being in this business, the cost of plants has almost doubled for us,” Watts said. 

The House Plant Collective initially began as a passion project for Watts, who was working as a full-time staff member at the University of Alabama at Birmingham when she started it. In 2019, Watts bought a school bus and converted it into a mobile plant shop, but it was only last September that she was able to quit her job at UAB and commit to her business full-time. 

“We buy from South Florida growers, basically, for tropical plants. We do have a couple of local suppliers. There is one that we have outside of Gadsden, so we do buy local plants from them as well,” Watts said. “For our goods, we try to buy as much from small makers and creatives as possible. So, we do use a wholesale model with them and purchase their goods, and we use wholesale sites to connect with them. 

Because Watts depends on other small businesses and creators who are also facing inflation, rising prices can have a compounding effect. Unfortunately, not only has the price of plants increased; the price of transporting them has as well. 

“We’ve seen approximately a 50% increase with plant prices, but we’ve also seen a lot more in freight charges going up. So, we’ve seen anywhere from 10 to 20% increase in freight charges,” Watts said. “With large shipments of plants, we have to pay for the truck lines to bring them to us. But even with our smaller goods, even if they’re not coming on a full semi-truck of plants, we also are seeing a 15 to 20% increase on shipping and freight as well.” 

With such dramatic increases in costs, some of the burden falls on consumers. 

“Yeah, unfortunately, there are chances where we do have to raise our prices on the plants to make it feasible for us to stay afloat,” Watts said. 

Watts, like many small business owners, has been placed in the uncomfortable position of having to raise prices to keep up with her costs. 

“Inflation has been huge for us because as much as possible, I want to keep plants accessible to all and not have to raise our prices. The more expenses we have, though, we do have to adjust a little bit accordingly,” Watts said. 

Jeff Farmer of Guitar Gallery, a local guitar and record store that was founded in 1989, said that his store has also been placed in a tough position. Farmer said that the store’s suppliers, which are located “all over the continental United States” have been raising prices over the past two years. 

“It’s to the point where a lot of these companies aren’t even printing a catalog with prices in it anymore. Because the prices have been changing so frequently, by the time you get the catalog, the pricing is already starting to be obsolete. So, at this point, you just reference their website, and they keep the prices updated there,” Farmer said. 

Guitar Gallery, like many other Tuscaloosa businesses, has needed to raise prices to keep up with costs. 

“We still try to keep prices as low as we can, and we certainly try to be competitive. Online, though, we try to keep our prices in line with what’s going on,” Farmer said. 

Rising costs have also been a consideration for Ismael Arroyo, the owner of the local bakery Mi Casita, which he opened two years ago around the beginning of the COVID-19 pandemic. 

Because flour suppliers are located around the world, including Mexico, Canada, and across Europe, Mi Casita’s costs are directly related to global supply chains. Unfortunately, these supply chains have seen major disruptions over the past few years. 

“Flour would usually be like a 50-pound bag of flour for $13 to $14. Right now, it’s about $30,” Arroyo said. “For a small business like me, it really, really hurts but we make it happen. We try to keep all our products fresh. We don’t increase our prices like crazy like other stores.” 

Arroyo, like many others, is frustrated that small businesses like his seem to be bearing the brunt of inflation. 

“Big companies, they don’t get affected at all. They’re making a whole bunch [of] money,” Arroyo said. 

Despite this sense of injustice, Arroyo is focused on staying competitive and moving forward. 

“It was tough, but we just got to keep bringing good customer service, good product[s] to the people, and I think we’re going to be alright,” Arroyo said.