After months of shouldering increased costs, customers are pulling back.
That's according to small businesses surveyed in May by The Wall Street Journal. Some say that sales have decreased over the past few weeks--and the majority aren't optimistic about things getting better anytime soon. More than half (56 percent) of the 600 small businesses surveyed say that they expect economic conditions to worsen over the next year--up from 42 percent in April.
Businesses across industries have raised prices to accommodate increasing costs, which have been ticking up for months thanks to supply chain snags and wage increases. To this point, customers have mostly been willing to pay those increased prices because they had no other alternative. As New York University economics professor Lawrence White told Inc.com in November, "If everybody's prices are going up, customer retention is less than an issue."
But there is a limit to how long customers are willing and able to pay elevated prices--and WSJ's latest survey may indicate that consumers are reaching that limit. Especially with the possibility for a recession on the horizon, small businesses need to prepare for a drop in demand as consumers make cuts or look for cheaper alternatives.
As Jorge A. Guzman, associate professor of business management at Columbia Business School recently told Inc.com, businesses that offer value over quality will have the upper hand as consumers start to limit their luxury or unnecessary purchases. Enterprises of all sizes should prepare for economic hardship sooner, rather than later.