Inflation Takes Mixed Toll on Main Street Small Business

Twelve percent of Main Street SMBs are concerned about whether they will survive the next two years, and 37% say inflation has been their greatest challenge this year. Despite these grim realities, 54% of Main Street SMBs expect revenues to increase, and 25% of online Main Street SMBs have increased their margins.

For “Main Street Health Survey Q3 2022: SMBs Battle Inflation,” PYMNTS surveyed 533 U.S. Main Street SMBs to determine how inflation impacts these organizations and detail the challenges — and opportunities — they currently face.

• Weaker consumer confidence is reining in some SMBs’ ability to adjust prices. Consumer services firms are the most likely to report cost increases and the least likely to say they are adjusting prices, although a similar gap is measurable across segments. The average cited price increases are generally commensurate with declared cost increases, with product prices increasing 11% and business costs rising by 12%.

• Personal and consumer services firms are approximately twice as likely as the average firm to consider themselves at risk of needing to close. The smallest and youngest firms are also particularly likely to be at risk. Personal and consumer services firms are far more likely than any other business segment we surveyed to consider themselves at risk, with 12% saying they are sincerely concerned they will be going out of business in the next two years.

• Large players and online sellers have experienced relative success in these rough market conditions, with a significant share raising prices and increasing margins. Thirty-six percent of firms that increased prices said their margins increased as a result. Overall, nearly six out of 10 Main Street businesses saw profit margins drop over the last year. Approximately two-thirds of hospitality firms report a drop in profit, leading all segments.

Times are tough across the board, but Main Street SMBs are also proving to be resilient and find inventive ways to survive and thrive.

To learn more about how Main Street businesses are fighting the war on tough market conditions, download the report.