Small business owners hit hard by gas prices - East Valley Tribune: News

Small business owners hit hard by gas prices

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Posted: Saturday, June 21, 2008 6:10 pm | Updated: 10:34 pm, Fri Oct 7, 2011.

If anyone has a right to grumble over the high cost of gas, it's J.B. Cortez. The manager of Scottsdale's The Main Ingredient - a tiny kitchen supply store tucked away in a strip mall near McDowell and Scottsdale roads - said the Valley's record high gasoline prices have peeled away about 50 percent of his normal customer traffic.

As if that wasn't enough, Cortez is also facing rising shipping bills when replenishing his inventory as transportation companies pass their added gas costs to vendors.

"Man, it's big," he said of his shipping bills.

He's not alone in his worries.

No official estimates or figures exist illustrating the financial strains that energy prices are taking on mom-and-pop entrepreneurs' purse strings, but talk to just about anyone operating these small stores and chances are they'll tell you they're struggling like Cortez.

A new study released by the National Federation of Independent Business reports the cost of fuel is among the top 10 concerns small-business people are facing, along with the expense of electricity, supplies, inventories and worker's compensation insurance.

With the price of gasoline at more than $4 a gallon in the East Valley, experts say independent businesses face a myriad of challenges that can include high turnover among workers strained by costly commutes, increased shipping fees and shrinking revenues as customers cut back on driving.

"The pressure on the small-business person, at least initially when this starts to happen, is to try and keep their prices stable to retain their customers. As the pressure builds, they can't do that," said Stephen Hart, southern Arizona's senior manager for the Small Business Administration.


Elaine Chatwin, co-owner of University Lock & Security - a locksmith and security products store at Hardy and University drives in Tempe - said she's increased prices on service calls by $10 to $20, depending on the amount of travel her four employees must undertake.

"It's bad," she said. "My gas bills have tripled basically for my trucks. They're filling up every day. The (costs) are just astronomical."

Chatwin said she doesn't believe prices will ever decrease significantly, so she's expanding her services to increase revenue.

"We've actually diversified our business, so we're not just doing your typical locksmithing," she said, adding she now sells and installs security systems and alarms for homes and businesses to pull up her revenues.

"It has helped," she said.

After seeing his foot traffic drop by half, Cortez said he's gotten the hint that people aren't going to make special trips to his store for something as novel as a mandoline slicer - a French cutting instrument used by professional chefs and weekend-warrior cooks.

"One of the things I noticed last week is people are calling ahead," he said. "They don't want to make a wasted trip. They want to make sure the item (they want) is in stock."

The planned solution is to revamp the store's Web site, using it more as a shopping tool than an advertising portal. When the site launches, Cortez said customers will be able to search the store's inventory and have their purchases shipped directly to their homes.


Experts say the business owners who are most likely to overcome the challenges are those who are doing what Chatwin and Cortez are - looking for ways to absorb higher costs and retain customers.

Entrepreneurs struggling with rising fuel prices should focus on two groups of people - their customers and their employees, said Joan Koerber-Walker, CEO of the Arizona Small Business Association.

That means acknowledging that workers and patrons are also getting squeezed by high gas prices and trying to find ways to help them.

One solution to ease the pain for customers is to advertise hyper-locally to residents who are within a short driving or walking distance.

"If I'm a business (owner) ... I'm going to come up with a market strategy to let my neighbors know I'm here," Koerber-Walker said.

Also, employers should realize they risk losing workers or paying them higher wages if their employees have long distances to commute, she said.

One way to avoid those added costs is to consider modifying work schedules so employees don't waste fuel sitting in rush-hour traffic.

"Be flexible and figure out how you can help your employee be more successful," she said.


Some entrepreneurs like Bob McDonough, co-owner of Wild Birds Unlimited at Guadalupe Road and McClintock Drive in Tempe, haven't been as fortunate as others.

McDonough said gas prices aren't the only reason he's closing his 12-year-old business by the end of the month.

The store, which sells food and other supplies for bird lovers, has faced sky-high costs for seeds as the increasing demand on corn for human food and alternative fuel takes over land once dedicated to growing bird seeds like sunflower, safflower, millet and thistle.

But gas prices added an additional burden on McDonough because the store ships its main product - bird seed - from the Midwest. McDonough said his transportation costs in addition to the higher demand for grains created a one-two punch that has knocked his business to the floor.

"The transportation costs have been a more recent issue," he said.

McDonough said he's not sad to be closing the store, and he feels ready to move on.

"We are going back to working for somebody else," he said. "It's been enjoyable doing it (but) you just get to the point where you've got to say, 'Over the last year it's not fun anymore, and it's not profitable either,' " he said.


Cortez is optimistic about his store's future and is quick to point out that although he doesn't have all the benefits his larger rivals enjoy, running a small business means he's also more nimble without a huge corporate bureaucracy to negotiate. Among the advantages he said he has is the ability to be more flexible with customers.

Many salesmen working at large chain retailers are constrained by rigid policies preventing them from doing little things to satisfy a customer.

He pointed to one example involving a patron who was considering buying a special 20-quart bowl at his store. "We sort of sealed the deal by giving a small discount," he said.

Although it was a small gesture, Cortez said it helps sales, makes the customer feel good and ensures repeat business.

Best of all, it's something that low-ranking retail employees often can't do, he said.

"We're able to be more hands-on," he added. "You're dealing with the owner, not just a salesman."

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