Independent Retailers are aware that Memorial Day unofficially signals the start of summer—one of the busiest seasons for selling paint. However, they also know that consumers who are looking for the kinds of sales and deep discounts available pre-pandemic may face sticker shock and be disappointed with the assortments. Like other industries, paint manufacturers have also experienced disruptions in their supply chains and shortages of raw materials.
These continuing problems have significantly driven up costs and created uncertainty about when paint products will be available to meet the growing demand fueled by builders, pros, and DIYers.
- Winter power outages in Texas damaged supplier’s plants
- Shortages of petroleum limit the flow of an essential ingredient in paint
- Surging industrial demand for raw materials in short supply
- Limited availability of critical resins, additives, and solvents
Data from the U.S. Bureau of Labor indicate that paint and coating manufacturing production costs rose 10.6 percent between August 2020 and August 2021. Price increases have continued into 2022. When speaking to CNN, John Morikis, Sherwin-Williams CEO, said, “The reality is there’s a tight supply chain market, there’s a strong demand, and we expect raw materials costs will stay elevated for a period of time.”
Retailers Seek Solutions
The surge in home improvement projects has benefited independent retailers and paint stores. However, many are finding it challenging to navigate the paint shortage. A store owner in Pennsylvania says, “Sure, it has impacted us, in the sense that just certain products you can’t get. So, you start selling certain products, and then you’ve got to switch to another one. Since the pandemic started, so many people have been painting and doing home construction along with all the other construction. Things were just where you couldn’t handle the amount of inventory pulled out.”
Inflation Fuels Supply and Demand
Small Business owners are worried about inflation, which has reached its highest level since 1981. In response, owners increase the average selling prices of goods to levels not seen since 1974. Their concerns are reflected by the U. S. Chamber of Small Business Index for Q4 2021. Seventy-four percent of small business owners said they are concerned about inflation. At the same time, 71 percent responded that higher prices have significantly impacted their business.
- Disruptions in the supply chain make it challenging to obtain inventory for specific products.
- Paying higher prices for the same supplies and products limits cash flow and makes it difficult to be profitable.
- Customers may be unwilling to pay higher prices
Experts Debate When Problem Will Improve
Some government experts in the Federal Reserve believe the supply chain issues that fuel the high inflation rate are slowly improving. They point to the prices for hardware and building materials that peaked at the height of the pandemic but are gradually falling. Other analysts in the private sector disagree. Vincent Andrews, an equity analyst at Morgan Stanley, anticipates high inflation rates until mid-year, followed by deflation in the second half. Reducing the current paint shortage will require a functioning supply chain for the chemical industry that is fully capable of producing epoxies, acrylics, and solvents.
“Companies seem to be most confident in the current solid demand environment persisting through 2022 but are watching production levels like the rest of us related to the raw material environment,” Andrews said.
Passing Costs on to Consumers
With inflation at record highs, it’s difficult to avoid raising prices. Consumers feel the pinch at grocery stores, gas stations, and airlines. Small businesses have a real need to share rising costs with their customers. Rather than raise prices without explanation, communicate the problem to customers. They are dealing with the impact of inflation in their everyday lives and understand the continuing challenges small businesses have faced in the past few years.
Check Into Options
Although businesses can’t control inflation, they have options to combat the effects. The actions to be taken will depend on the specific situation. Whether owners need a loan to receive more working capital or reduce overhead costs are options to consider.