Satya Organic Skin Care founder Patrice Mousseau has been having a hard time sourcing certified organic calendula flower, a key ingredient in some of the plant-based products she produces in North Vancouver.
Although the plant can grow in many parts of the world, it has become nearly impossible to come by during the pandemic.
“We looked into getting them from Egypt, India and anywhere we could … and we were out of luck,” says Ms. Mousseau, who runs her business from her home on Tsleil-Waututh First Nation.
Eventually, she found the product in France – for nearly four times the price – which put pressure on the company’s margins and cash flow. “It was so expensive, but we had to do it,” Ms. Mousseau says.
It’s one of many supply-chain issues her company has experienced in recent months: Ms. Mousseau says there’s less warehouse storage space, the price of the jars her products go in has risen by 50 per cent and shipping costs have also increased. Shipping has also become less reliable, which has forced her to order supplies well in advance, creating a cash-flow crunch.
These factors combined have given Ms. Mousseau little choice but to increase the price of her products by an average of about 30 per cent – just as the holiday shopping season kicks off. She’s planning to offer a 20-per-cent-off Black Friday weekend sale, incentivizing people to shop early, and typically runs another smaller sale on Boxing Day.
“It’s just been really key to be as transparent as possible with our consumers and let them know why we have to do price increases,” she says. “All we can hope is they’re not too mad.”
Many small businesses have been pushed to the back of the line with suppliers amid global supply-chain challenges, says Shannon Pestun, the Calgary-based co-founder of the Finance Cafe, which advises female entrepreneurs on financial literacy.
This holiday season, she’s advising her clients to sell as much as they can, when they can, as opposed to ignoring Black Friday in favour of saving products for Christmas. Still, she says the key to success for entrepreneurs this holiday season will be maintaining their inventory while sustaining cash flow.
“As a retailer, you want the sales,” Ms. Pestun says. “Your inventory is like little dollar signs stacked up on your shelf.”
With so much discussion about consumer demand outstripping supply, she warns that entrepreneurs are rushing to buy inventory without always considering how they will pay for their other expenses.
“Can you still pay for your rent? Do you have enough cash flow to sustain the operations? A lot of entrepreneurs don’t have the financial literacy to be thinking about that. They may be just panicking, thinking about getting all this inventory.”
Ms. Pestun recommends business owners take a hard look at which products are selling well and focus on getting more of those, instead of doing a broader holiday restock. She also suggests owners ask customers what they want, and be transparent about how many items they have in stock. It’s also a good idea, she says, to encourage consumers who know what they want to make the purchases early in the season.
And if supplies run out, Ms. Pestun suggests promoting purchases that encourage a longer-term relationship, such as gift cards and subscription boxes. “I would expect to see a surge [in those categories] this year,” she says.
Despite expected shortages and higher prices, 86 per cent of Canadians still plan to shop at small businesses this holiday season, according to a recent survey commissioned by business-management platform Ownr, a Toronto-based subsidiary of RBC.
The survey, conducted among 1,538 Canadian members of Angus Reid Forum in October, shows that 44 per cent are willing to pay up to 10 per cent more at a local small business for an identical item also sold at a large retailer. It also says 41 per cent of respondents are expecting higher prices this year. Of those who plan to spend more, just over half attribute it to supply-chain issues.
“Despite lower purchasing power, the overwhelming desire among consumers to support their local economy could be a much-needed lifeline for small businesses,” Derek Hopfner, Ownr’s chief revenue officer, stated in a release.
The renewed focus on shopping local is also happening with small businesses and their suppliers, Ms. Pestun says, which is an opportunity for companies with smaller-footprint supply chains.
Sarah Nagué, owner of Montreal-based houseplant business Miss Boon, says supply challenges pushed her to find local suppliers. The last straw was a shipment from southeast Asia worth US$2,000 that arrived with all her plants frozen.
“I stopped importing after that,” she says.
It took a while for growers in Quebec and Ontario to catch up to the trends her customers are interested in, but now that they have, she has been saving money on shipping that translates into lower costs for customers. For example, she sells alocasia dragon scale plants sourced in Canada for $26.95, while last year, she was selling them for $140.
Keeping in touch with vendors about what they have on the horizon has enabled Ms. Nagué to keep popular plants in stock, but also helps her get access to exclusive products that aren’t widely advertised.
“The plants I want to get are not the ones you can get at the Superstore or Walmart,” she says. “You need to have good relationships with your vendors.”