Tough times ahead: Small businesses feel the pinch

Monday, 1 May 2023

#OVERFLOW store owner Greg Hall says he is “cautiously optimistic” about surviving the economic downturn.

Small business owners expect a tough winter amid a looming recession, cost of living increases and ongoing supply issues.

But they are cautiously optimistic that shoppers will keep supporting local, and careful planning will see them through, business owners have told Stuff.

OVERFLOW co-owner Greg Hall said the skate gear and clothing at his shop had gone up slightly in price, due to inflation and the cost of living.

But the retail shop had a prime location on Blenheim’s Market St, and did quite well in the school holidays, with “good local support”, he said.

* Unemployment expected to remain near record lows, for now

* Five ways to prepare your finances for a recession

Mette Kirchheiner, owner of Home Love & Mette K, says her business has been suffering.

* At the coalface: How builders are faring in the downturn

He was “cautiously optimistic” about getting through the winter, and was doing careful planning to ensure it, he said. “If you’re not planning, you're planning to fail.”

Taranaki Chamber of Commerce chief executive Arun Chaudhari said planning was essential for small businesses to survive the downturn, as they competed against online businesses such as Amazon.

Businesses needed to be adaptable, by listening to clients, doing research, and be prepared to change.

The World Bank warns the global economy is on a “razor’s edge”.

Mette Kirchheiner, owner of Home Love & Mette K, said her New Plymouth business was “definitely suffering”.

“It’s not that people aren’t buying, but they might not be spending as much, so the average sale might be down.”

Kirchheiner said the business would tighten its belt, and try to stay positive.

“Try and support local because then, you know, we support each other.”

Many cafes and retail stores in Palmerston North had noticed a drop in customer spend as inflation hit record highs.

Brad Olsen, chief executive and principal economist at Infometrics, said Manawatū businesses found themselves in a strange position, with a slower economic period, but strong job activity over the year ending in March 2023.

There was a 2.2% increase in the number of filled jobs, “a very healthy level of growth”.

Fran Huelsmeyer of Ruru Tiny Homes in Nelson says tiny homes can be cost-effective option for those who don’t want a loan or can’t afford a mortgage.

However businesses needed to plan for different scenarios, so they could react faster, he said.

With household budgets under pressure, there was more competition than ever for money.

“That means you’ve got to put your best foot forward.”

Sophie Preen is the third generation of her family’s clothing business.

Craig Taylor, managing director at Taylor’s Shoes in Nelson and Richmond, said the marketplace seemed “reasonable buoyant”.

However, the store had supply issues, with “numerous cases” arriving late or being shipped to the wrong port. He was still waiting on deliveries that were expected to arrive in March.

Taylor said the store now committed to orders earlier in the year, so stock was now ordered up until next summer even if there was slower foot traffic.

Taylor urged people to favour local businesses “as opposed to shopping online”.

The economic crunch had actually been good for business at Ruru Tiny Homes in Nelson.

Managing Fran Huelsmeyer said the cost of living was causing people to look into more affordable builds. Over two years in business, Ruru Tiny Homes had sold 100 houses around the country.

“Buying and owning a tiny house on leased land is a solution for a lot of people, to cope with the rising living costs and with the difficulties of even getting a mortgage or loan.”

Huelsmeyer said it was hard to know what the next 10 to 12 months would bring, but the business had planned for the next 24 months to help them manage any unexpected changes.

Sophie Preen, third-generation manager of Preen Clothing, said foot traffic past the businesses in Timaru and Ashburton had stayed strong, so she was feeling positive about the coming months.

“People are coming into the store a lot, and I think they’ve actually tended to go off online, and come into store again.”

The business was still dealing with supply delays, but things were slowly improving, and the business had plans in place to deal with delays.

Southland Chamber of Commerce chief executive Sheree Carey said businesses were facing pressure from a multitude of rising costs, from rising staff costs as minimum wage increased, to the effect of inflation on goods and services, and operational costs such as freight increases.

Carey said local businesses were becoming more “risk-averse” in preparation for tough times.

“[Businesses] should be working closely with their accountants to ensure they have a plan in place to ride the wave over the next 12 months.”

The Chamber recommended community support, and for people to shop local, to ensure a “strong local economy and job growth”, Carey said.