Study: Price Hikes Top Cost Cuts Among Main Street Merchants

Hurting Main Street SMBs have had little choice but to meet inflation with price hikes.

PYMNTS analyzed this in the “Main Street Health Survey Q4 2022: SMBs Brace for A Recession,” where we see price increases as the inevitable SMB response to lower sales that result from consumer belt-tightening that’s been a theme all year.

“With more than half of Main Street SMBs already operating on narrower margins, most firms continue to deal with rising costs by marking up prices, while fewer do so by cutting costs,” the study states, as 58% of small and medium-sized businesses (SMBs) surveyed said profit margins decreased in the last year.

Main Street Health Survey Q4 2022: SMBs Brace for A Recession

As SMBs fought a sale-heavy climate created by large retailers with excess inventory, for many (if not most), the only way to stay solvent was to increase prices. It’s not unexpected in a year of runaway inflation, and price hikes were fairly evenly distributed among Main Street SMBs.

Per the report, “Marking up prices has been the primary strategy to fend off inflation’s effects, with 31% of firms saying this was the most important action, up from 29% in July. Fewer firms reported lowering business costs in October 2022, at 11%, compared to 16% in July 2022. Meanwhile, 13% mentioned working on improving productivity in October 2022 and July 2022.”

Main Street Health Survey Q4 2022: SMBs Brace for A Recession