Jody’s Diary: The Big Squeeze of 2023

January 22, 2023

Like cold, dark days, business closures in January are predictable.

This month is no exception, they are one of my least favorite interviews.

But dialogue is important. So when I heard that Tami Lien was closing Stride Rite after 35 years in Sioux Falls, I knew she deserved recognition and we as a business community needed to know what was closing her doors.

“That’s everything,” she told me in an emotional, candid conversation.

“I can’t keep myself in debt because I love what I do and I can’t leave.”

By “everything,” she really means everything. Of course, this being the pandemic, it basically shut down business overnight. Then, there was a supply chain disruption that forced her to wait more than 10 months to receive the shoes.

Naturally, she faced the same staffing challenges and increased overhead as anyone.

But she’s also increasingly unable to compete with lower-cost e-commerce options and customers who browse her store only to buy online.

“Honestly, it’s not a joke,” she said. “They take advantage of us…by making me or my staff take the time to try on various shoes, and then they’ll say they just bought them online and walk away. I can’t even understand doing that to someone, but it’s That’s the world today.”

Equally sad was the conversation with Wendy Haugen, who is closing the Kids & Kaboodle consignment store after more than 30 years. Her already tight margins couldn’t absorb the rise in rents.

“We were running numbers until the cows came home, but it wasn’t feasible,” she told me.

The beginning of 2023 clearly illustrates the stress many of us are under.

Last week’s news that bids for the city’s planned Unity Bridge downtown were well over budget came as no surprise. I’ve spoken to many in the public and private sectors who have experienced the same growth.

Someone commented to me the other day about paying over $20 for a hamburger at the Downtown Burger Battle. Considering some of the ingredients involved, I’m not shocked.

People will pay the price. sometimes. They will accept higher bids because the project is critical. They’ll swallow it and pay more for airfare, a snow blower, or adult beverages.

But in the end, they tend to give up on saying yes.

I recently had a rather illuminating conversation with pricing strategy expert Casey Brown. It’s something we rarely talk about in business, and it’s far from a science.

But getting your price right for your goods or services is critical, and your pricing approach must be continually evaluated. I spoke with Brown to promote her upcoming appearance at the Prairie Family Business Association annual meeting in Sioux Falls.

I told her that I understood that businesses were forced to raise prices to maintain profit margins given the rise in various external costs. But is it really possible to increase profits through pricing today?

Not only is it possible, she says, it’s happening.

“Most first-in-class or best-in-class businesses actually made profits during this time, rather than being profit-neutral, because they were very aggressive in terms of timing, speed and the amount of money they were willing to ask for inflationary pressures,” Brown told me.

“Companies that get the most squeezed are afraid of ruining customer relationships. The whole world is paying more for everything we buy than it was a year, two years ago, or five years ago, so I see this as an opportunity, Because the whole world is re-pricing itself in the market to participate in the realignment and not be left behind. Ask for more, go faster, go bigger.”

I see. It makes sense, thinking about it as a business owner. And I do think there’s been some opportunistic price increases throughout the business.

However, Brown continued, the converse of that is, what happens when inflation goes into a recession?

“If you’re a business owner, and as the market starts to soften, costs are rising, and customers are holding cash and becoming more conservative, what do we do? The very surgical and strategic execution of the pricing strategy. Product by product, customer by customer, service by service to maintain margin neutral without losing market share. You have to do it differently for what is coming Prepare, rather than prepare for what we’ve just been through, where the question isn’t so much “How much did it cost? ” as ‘When can I get it?’”

However, the question becomes “how much does it cost?”

What is the cost of expanding your business? To do the project? Hire extra people? go out to eat? Buy a new car?

What is the cost of even maintaining the business?

When the squeeze gets too tight, the pain can become real. It’s a natural part of the business cycle, but it feels a bit like it’s ending.

The photo I use to illustrate this column is called “Icy Climb” and was kindly provided by Paul Schiller.

Both the picture and title seem to be in keeping with the period.

As it happens, after I wrote most of this column, I spoke with Reggie Kuipers, president of Bender Commercial Real Estates Services, who used the same descriptor.

“This is a year of transition,” he said. “We’ve been talking about 2021 and 2022, and now they’re getting squeezed. Once earnings get squeezed, top management is going to make tough decisions.”

Not just top management. It’s town hall and small business owners and leaders at all levels. The big squeeze in 2023 may have just begun.

Jody’s Diary: The Icy Road Ahead

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