After months of bearing higher costs, customers are withdrawing.
That’s according to small businesses surveyed in May by the Wall Street Journal† Some say sales have fallen in recent weeks — and the majority aren’t optimistic that things will get better anytime soon. More than half (56 percent) of 600 small businesses surveyed say they expect economic conditions to worsen in the coming year, up from 42 percent in April.
Companies in several industries have raised prices to meet rising costs, which have been mounting for months on the back of supply chain problems and wage increases. Until now, customers were usually willing to pay those higher prices because they had no other alternative. Lawrence White, a professor of economics at New York University, told businesstraverse.com in November, “If everyone’s prices go up, customer retention is less than an issue.”
But there’s a limit to how long customers are willing and able to pay high prices — and the WSJ‘s latest research may indicate that consumers are reaching that limit. Especially with the possibility of a recession on the horizon, small businesses need to prepare for a slump in demand as consumers cut back or look for cheaper alternatives.
As Jorge A. Guzman, associate professor of business management at Columbia Business School recently told businesstraverse.com, companies that offer value over quality will gain the upper hand as consumers limit their luxury or unnecessary purchases. Companies of all sizes should prepare for economic hardship sooner rather than later.