Yahoo Finance Inflation, supply and labor woes a 'triple whammy' for Omicron-hit small biz
The rapid spread of the Omicron variant has hobbled businesses of all sizes and sectors, with some mom-and-pop operations on the brink of shuttering.
Even big retailers like Macy’s (M) have cut hours as coronavirus cases spike and workers call in sick, with the issue magnifying long-running labor shortages and supply chain shortages that continue to bedevil Main Street.
A whopping 98% of small business owners seeking to hire new workers said hiring and retaining their workforces is hurting their bottom line, according to a new Goldman Sachs Survey, conducted between January 10-13, and including almost 1,500 small business owners from 48 states. At least a third found that 2021 was even more challenging than 2020, when COVID-19 first appeared on the scene.
The data found that 84% of operators reported rising inflation as a major concern, with 76% of the respondents saying widespread price hikes are financially crippling. Business owners cited labor shortages as the most significant challenge, with 87% currently finding it difficult to recruit qualified candidates for open positions.
And more than a third of respondents, (37%) said their business had been forced to temporarily close or scale back operations from the recent rise in COVID-19 cases.
“We really see what effectively is a triple whammy of labor shortages, supply chain disruptions and inflationary pressures,” Joe Wall, National Director of Goldman Sachs 10,000 Small Businesses Voices, told Yahoo Finance Live this week.
“If you look at our data back in September [versus] today, what you see is that across the board, everything has gotten worse,” he added.
'Very significant' impact from Omicron
The dour sentiment among small businesses was also reflected in a January survey of over 6200 small business owners from Alignable.
The data found Omicron battered over half of small businesses in the U.S. and Canada, and took a toll on their January revenue. A sliver of those businesses were forced to shut down by the variant, with more calling it a "very significant" impact on their operations.
A lack of staffing and the surge in COVID infections have been a real challenge for Paul Austad, who owns Nela Athletics in Los Angeles.
“We can't get enough staff to help with the demand,” Austad told Yahoo Finance. “We've used two large entity hiring platforms and we have them ongoing [but] the trouble we're having is getting people with the certifications that we need in group coaching.”
Austad noted that there have been plenty of applicants with personal training certificates — but that’s not enough for his CrossFit gym business model.
“We are not finding those types of staff members and that's a big learning curve and right now we don't have the capacity to train people,” he added. Meanwhile, membership has dropped and is slowly creeping back up, which presently is at 60% of where the business was pre-COVID.
Despite new year fitness resolutions that normally drive clients into the gym, Austad said traffic is up a slim 4% from December levels.
Weight loss and working out are among the most common new year trends, even though many fall away within months. But Omicron is worsening the impact.
“People aren't comfortable going back in. We have been able to stay sustainable through personal training,” Austad told Yahoo Finance. However, “our personal training is a revenue generator, not a profit generator.”
Great resignation sparks 'great transition'
Labor shortages show no signs of easing as record numbers of U.S. workers quit their jobs, creating headaches for businesses trying to keep positions filled.
"The labor market going forward is in a period of great transition with workers regaining some of the bargaining power they had lost over the past four decades," Jeremy Schwartz, an associate professor of economics at Loyola University, wrote in an email to Yahoo Finance.
"The labor market in the coming years might look very different from how firms attract and retain workers, to what industries may be hiring, to even the length of the work week,” he added.
Goldman's data also highlighted that supply chain bottlenecks are continuing to put pressures on small businesses. Among respondents, 68% reported concerns with ongoing supply chain constraints and 69% say the issues have negatively impacted revenue.
“Only 13% of small businesses that have been impacted by disruptions to their supply chain think that it's going to ease up in the next six months,” Wall told Yahoo Finance. “Not a lot of confidence in terms of getting better anytime soon.”
Additionally, two-thirds reported that suppliers favor large operators in their space, and are getting priority over them due to their “large volume” of orders. That causes smaller businesses to get “the short-end of the supply chain crisis,” Goldman said.
A majority believe their overall operating conditions will improve in the months ahead, and 73% feel optimistic about their financial trajectory of their business this year.
But given the economic uncertainty and ongoing strains from COVID, "a lot of small business owners just don't feel like they can catch a break,” Wall said.
Meanwhile, an overwhelming number of small business owners, 82%, said they’d like to see the federal government provide additional emergency financial relief.
“If you talked to just about any small business owner, no one wants a handout,” Wall said, saying federal funding would be "a good first step" for cash-strapped entrepreneurs.
Dani Romero is a reporter for Yahoo Finance. Follow her on Twitter: @daniromerotv
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