With inflationary fires raging, home-based small businesses striving not to go up in smoke

In Pakistan, like numerous other issues, inflation stands out as a significant problem in the country. While discussions often revolve around the broader impacts, we tend to overlook the profound effects it has on small home-based businesses operated by women, who are in need of support in these challenging times.

The inflationary environment is putting small businesses in a tough position, forcing them to decide between raising prices, potentially leading to a loss in sales, or taking out loans to manage their expenses and protect their profit margins.

Since the onset of the pandemic, many small businesses have opted to raise their prices as a survival strategy, while others have had to make difficult decisions to reduce costs significantly.

If you are a small business owner, the initial months of 2023 likely presented a formidable and turbulent period for your enterprise. This year, Pakistan experienced yet another severe inflationary crisis that also significantly impacted small businesses run by women entrepreneurs, causing widespread financial hardship among them.

Hilla Shahpur, the proprietor of Artisant, a business specialising in beaded paintings since 2015 acknowledges that inflation has had a severe negative impact on her business this year more than any other year making it impossible for her to afford customizations anymore. “The essential kit we need for our operations is primarily imported from the USA, UK, China, or Dubai, and the cost of these imported items has skyrocketed to the point where the selling price no longer appears to be economically viable to me,” said Shahpur.

Small businesses are grappling with the impact of rising production costs and a fiercely competitive labour market, compelling them to allocate more resources, which erodes any potential profits stemming from their substantial increase in overall revenue.

“Previously, we offered our customised paintings for a price range of Rs3,000-4,000. However, due to the rising cost of materials, labour, and the effort put into each piece, our cost price has escalated to Rs7,000-8,000. Consequently, we have had to adjust our selling price to Rs12,000-13,000.”

Shahpur conveyed her dejection about the customers' reluctance to embrace the higher price point, which ultimately resulted in a decline in sales.

Consumer preferences and behaviours have shifted significantly. Many individuals are now primarily prioritising essential items and reducing their expenditure on luxury goods. Even those who still express interest in such products are actively seeking more affordable alternatives.

“Consequently, we have suspended the acceptance of customised orders and are solely focused on liquidating our existing inventory at its original price. Unfortunately, our products have a limited shelf life and are susceptible to damage over time. Since the beginning of this year, we have not been in a position to place new orders, and our business has reached an extremely challenging point.” said Shahpur.

The proprietor of Artisant shares that despite her best efforts, including innovative social media marketing across various platforms, experimentation with pricing adjustments, and the introduction of trendy products, she has found it increasingly challenging to navigate the turbulent waters of soaring inflation. “To be candid, we are at a point where we must acknowledge the futility of our efforts, and it feels like all our viable options stand exhausted.”

Another inflation-affected individual Rashida Juzer who has been operating a small clothing business named Aneeq for the past decade, said, “Inflation has significantly impacted my business, primarily because of the surging costs of goods and the reduced purchasing power of customers. Our ability to expand or invest further has been severely hampered by the absence of a customer base in the market, directly attributable to inflation.”

Juzer spoke about the shift in customer behaviour and preferences in a way that customers are looking to make purchases but are increasingly seeking more affordable prices. This presents a challenge for small businesses as they must balance maintaining the quality of their products while also ensuring cost-effectiveness to attract customers.

“We are putting in significant effort to convince customers to choose us as their preferred clothing brand. Given the abundance of clothing brands in the market, competition is fierce, and we must consistently work to uphold the quality of our products. To entice our customers, we also provide attractive discount offers and occasionally waive delivery charges as part of our strategy,” explained Juzer.

The owner of Aneeq discussed that her intention is to eventually transition to Meta platforms due to their advanced and user-friendly dashboards. She is actively learning about evolving technologies and staying updated on the latest trends to adapt marketing strategies accordingly.

“This not only enhances our expertise but also reinforces our authenticity and credibility in our profession, ensuring that people recognise our commitment to staying at the forefront of our industry, and even during times of inflation, makes considerable purchases from us,” Juzer added.

Inflation has led numerous small businesses to be cautious about initiating investments.

An industrial source on the condition of anonymity told Geo.tv: “In Pakistan, there are over 5 million small and micro enterprises, most of which have limited assets and struggle to secure bank loans. Disturbingly, according to the Small and Medium Enterprises Development Authority, approximately 2 million micro and small enterprises have faced financial collapse in the midst of inflation. These businesses found it challenging to sell their products due to increased production costs, and with inflation affecting consumers' purchasing power, demand for their goods dwindled.”

As per the industrial source’s perspective, inflation has triggered disruptions within the supply chain, in the current global economic landscape. Manufacturers are grappling with the challenge of procuring raw materials and other essential inputs at affordable prices.

“Hence, this has resulted in delays in the delivery of goods and services to retailers.” The current state of the economy in Pakistan has taken a significant toll on small enterprises, and inflation is causing those even more pronounced hardships and challenges,” the source explained.

While there may not be specific strategies to overcome inflation in the near future, it is crucial for small businesses to adopt a holistic approach to maintain their presence in the overall business market. Through determination and hard work, individuals can achieve remarkable results even with limited resources and capabilities.