Half of SMEs Fear Losing Customers by Passing on Higher Costs

This article was last updated on June 5, 2023

Canada: Oye! Times readers Get FREE $30 to spend on Amazon, Walmart…
USA: Oye! Times readers Get FREE $30 to spend on Amazon, Walmart…

Many SMEs afraid to pass on higher costs due to fear of losing customers as per research by the Central Bureau of Statistics.

A recent study by Statistics Netherlands in collaboration with the Chamber of Commerce, the Economic Institute for the Construction Industry, MKB-Nederland, and the employers’ organization VNO-NCW has revealed that almost half of small and medium-sized businesses are hesitant to pass on the higher purchasing costs to customers, for fear that they will walk away or spend less. Many entrepreneurs also said that they are not allowed to pass on higher costs because of price agreements made with suppliers and buyers.

Worries of Entrepreneurs in Different Sectors

The fear is strongest among catering entrepreneurs, who are particularly worried that higher prices will be at the expense of visits to the café or restaurants. Almost half of them, therefore, say that they cannot pass on the higher costs regarding the price of beer or meals. Over 25% of them are also scared of losing their customers to the competition or have them drink at home.

The fears are not exclusive to the hospitality business only as SMEs in the culture sector, sports, and recreation, are also scared of customers not being interested in their services due to higher prices. About 30% of agriculture, forestry, and fishing companies do not wish to increase their prices, fearing that it will lead to lower sales in their businesses.

Inflation Situation

The research showed that the higher purchase prices are not problematic yet. Merely 5% of SMEs revealed that their debts are currently the same or higher than last year and are bothering them. In recent times, there have been discussions about companies driving up prices secretly in times of crisis, which has been referred to as ‘grayflation.’ Rabobank economists disclosed that inflation would have been less severe last year if companies had not raised the prices of their goods and services more than needed.

Rabobank economists are unsure if there was genuinely a case of grab inflation. The experts speculate that most companies increased their prices to afford a wage hike for their employees.

Minimum Five Employees

To conduct the study into the cost increases in SMEs, Statistics Netherlands collaborated with the Chamber of Commerce, the Economic Institute for the Construction Industry, MKB-Nederland, and the employers’ organization VNO-NCW. The study group comprised companies with at least five employees.