Inflation’s impact on small businesses

 Since COVID-19 began in 2020, small business owners and consumers have been dealing with inflation and supply chain crises that have raised prices.

A small business is “a sole proprietorship, partnership, corporation” that has fewer than 1,500 employees and less annual revenue than a corporation or regular-sized business, according to the U.S. Department of State.

Arrianna Guerra, a psychology senior, is the owner of Crafted by Arri, a small business focused on custom products, such as T-shirts, stickers, tote bags, tumblers and much more. Guerra started her online shop in April 2020.

To continue her business, she had to choose between her dreams and her job.

“I started to work at an office at the beginning when I started UTRGV [and] I started my business at the same time,” Guerra said. “And I quit my job to do my business full time. That was a big step for me. I was really nervous, but I really could not balance everything all together.”

After almost three years, she said inflation is affecting her business.

“Everything has been going up and I try my best not to have my prices too high,” Guerra said. “As of right now, I haven’t yet raised my prices. … I can tell you my profit margins when I first started were much higher than they are right now and I just try my best to keep my prices low.”

Gautam Hazarika, chair of the Economics department and an associate professor, said inflation primarily affects consumers.

“[Inflation] is considered to be hurting consumers,” Hazarika said. “Businesses can pass on the rise in the cost of the materials they buy. However … with rising prices, consumers might become more choosy. They may start to comparison-shop more. So it’s possible [for] a business [to] raise its prices because its own … suppliers are charging more.”

Guerra said it is difficult to manage the increase in prices.

“It’s hard, because you think, ‘Oh, if I raise my prices, it’ll be OK,’” she said. “‘But I don’t know if I’m going to lose the customers I already have.’ Maybe they can’t afford a few extra dollars, and I totally understand that. I’m not going to shame anyone. It’s just hard as a business owner, and also as just a [customer].”

Guerra said her sales have decreased since the City of McAllen changed the restrictions on pop-up markets. Business owners hosting a pop-up market in McAllen are required to obtain a permit that will be valid for  only 10 hours for one day. 

In the City of Mission “people were complaining about [pop-up markets] taking up the parking spots,” she said.

“After the whole [cities] of McAllen and Mission drama … [the pop-up markets] have been really slowing down,” Guerra said. “That’s affected a lot of small businesses, including me. I have only been to maybe three markets since the summer, which is very low because I used to go to one every weekend.”

Lora Martinez graduated from UTRGV in 2016 with a master’s in public administration and is co-owner of Moboba along with her husband, Tony Innouvong and his sister, Emily Innouvong. Moboba is a family-owned specialty boba tea and dessert shop in Edinburg that opened in July 2022.

“So the gist of it is being authentic boba tea to the Rio Grande Valley,” Martinez said. “There is a desire, especially from the younger generation here, [for] more Asian-inspired goods, such as boba tea.”

Martinez said some of the changes Moboba is facing are the cost of goods.

“With the cost of goods going up, we have noticed that … less people have been coming to the shop just because everything is getting more expensive,” she said. “So, I imagine people
have less disposable income to
spend on things such as boba tea or a dessert.”

Moboba had to adapt to rising prices.

“We used to use fresh purees from a company … but we found that if we made it ourselves, it does bring the costs down,” Martinez said. “So that has encouraged us to make our own puree, our own flavorings in house, but that does come with more time that [is] needed to prep those things.”

Hazarika said price hikes affect consumers.

“Inflation basically hurts our consumers,” he said. “If your income does not change, if you get the same dollar amount of income every month, and your cost of living is going up, you are naturally going to be hurt by this.”