Black Businesses Are Being Knocked Hard By Lingering Supply Chain Crisis

Black Businesses Are Being Knocked Hard By Lingering Supply Chain Crisis

From car dealers to beauty supply stores to restaurants, many Black businesses are being struck hard by ongoing supply chain issues that have carried over into 2022.

Intensified by the COVID-19 pandemic and other headwinds, these challenges weigh heavy on how those businesses function, generate revenue, and even plan how to buy what they sell customers.

A few of the supply chain effects have directly affected consumers, coming by way of a lack of products and increased prices. Those forces have worsened existing difficulties Black businesses already face, including boosting market share, gaining capital access, and often having limited funds to deal with developing or unforeseen events.

The supply chain problems that stunned 2021 and remained this year create adversity.

A new survey by Goldman Sachs shows that nearly 70% of small businesses are convinced those hurdles have negatively impacted their bottom line. And some 66% of companies being hit report suppliers are focusing on larger businesses over small ones because the former place bigger quantity orders.

Broad Range of Black Business Hurt By Supply Chain Problems 

Fueled by the pandemic, reports show too that the food service industry—including food service companies—is being impacted. Some of those businesses make up the largest segment of companies on the latest Top 100 BE list. Supply-chain snags are reportedly expected to be a burden this year and even farther for various manufacturers pertaining to such matters as purchasing and capital spending.

Dr. Kenneth Harris, president and CEO of the National Business League, says Black-owned businesses in the hotel, restaurant, retail, and professional services industries find themselves managing significant labor shortages and supply chain disruptions.

He says coupled with the severe devastation of COVID-19, they too are struggling with closing or are one or two paychecks away from shutting down permanently. The NBL calls itself America’s oldest and largest trade group for Black businesses. “In order for local economies to recover, Black and small businesses must have solutions within the supply chain.”

Auto Dealers “Reinventing” Themselves Amid The Challenges 

And the auto industry, one of America’s largest business sectors, is feeling the sting.

Among the biggest challenges that the supply-chain bottleneck is causing Black auto dealers is the lack of access to new cars, says Damon Lester, president of the National Association of Minority Automobile Dealers (NAMAD). It is the nation’s largest minority dealership group representing more than 1,200 dealers, out of which 265 are Black dealers. Overall, there are roughly 18,000 dealers across the country.

Lester said the supply-chain deficit is being fueled largely by the global semiconductor, or computer chip, shortage along with the pandemic. He says those forces are pushing down the inventory for new cars. “Those issues are forcing dealers to go into a reinvention mode and sell more used cars than they typically would this time of year.” In general,  most automakers have delayed or even stopped production lines, as microchips are part of a vehicle’s electronic circuitry like mobile phones and other devices.

Lester explained dealers are still getting 2021 models due to the chip shortage and manufacturers being behind on auto production though consumer demand for buying vehicles is up.

He said the lower new car production is a reason many dealerships’ lots nationwide are empty. Indeed, reports indicate computer chip shortages disrupted the auto industry in 2021, slowing production, trimming inventory, and boosting prices. That trend is present this year. Yet, Lester says people are still buying cars because they trust them more than public transportation given COVID.

“It’s an interesting time now as used car valuations have increased more than ever before,” Lester says.

Black Beauty Supply Stores Among Those Feeling Supply Chain Adversity  

A huge market for Black Americans, the haircare and cosmetic business is being impacted hard.

Sam Ennon, the founder and CEO of the Black-Owned Beauty Supply Association, known as BOBSA, said supply-chain bottlenecks have “really impacted” his business, a trend that has lingered for about a year. He says his organization has helped open around 1,000 Black-owned beauty supply stores nationwide over the last 20 years. He estimates the Black haircare and cosmetic industry is a $ $9 billion business across the United States and nationally.

Buying bundles and braiding hair from China manufacturers, Ennon says before COVID-19 and the emerging supply-chain issues, it would typically only take about 25 days to receive a shipment by ocean. Now, he says it takes about 60 days to get those same shipments.

To help get products to beauty salons faster, Ennon says he is often forced to pay about $1,100 to have the product shipped by air compared with around $650 by vessel before. He added products shipped by vessel could sit in a port for 25 days or more because of a lack of available truck drivers to pick them up.

He said supply-chain bottlenecks are resulting in higher prices for Black beauty supply stores and salons and their customers. He says a bundled hair package, which can account for 20% of products such as hair extensions and wigs a store sells, now cost retailers about $50 to $80 each, versus about $95 previously.

He also said supply-chain problems are pushing up costs for skincare and other beauty products that U.S. consumers pay for at Black-owned stores and those owned by other ethnic groups.

“All of this has certainly affected us but we’re hoping it will loosen up soon,” Ennon said.

Buying Surplus Products When Possible Amid Uncertainty Of Availability  

Antonio Curry, owner of Crown One Beauty Supply in Queen Creek, Arizona near Phoenix, said he sees that many items, including hair edge control, braiding gel, and human hair bundles, are out of stock with his vendors. He explained the inability to get certain items directly impacts what he can sell to customers. He added some customers are understanding and buy a comparative product that is in stock, and others choose to continue their search elsewhere.

He opened his business last August after seeing a void in the Black community where his store is located, providing residents human hair bundles, braiding hair, and wigs.

As a beauty supply store owner, he says you must have multiple sources to purchase your products. He says you cannot depend on one source, which has become more critical with the supply-chain challenges. He says product shortages have negatively affected his revenue but did not elaborate.

He says customers know what products work for them and many are hesitant to change. “When they come to your store and their favorite products are not available, you run the risk of an opportunity being missed to accommodate your customer. That is never good for business.”

Curry says another challenge is when ordering products, you consistently see prices from the vendors inching upward. At some point, he says that increase impacts the customer because it eventually means you may have to raise prices.

The supply chain issues have caused Curry to be more strategic on what type of products he buys. “When certain items our customers love become available, we try to order a surplus because we don’t know when the product will be available again.”