February survey data from the Federal Reserve Bank of Dallas revealed 64.7% of Texas business owners experienced supply chain disruptions or delays in February with 26.9% reporting they do not expect the supply chain to go back to normal until more than a year has passed. Many business owners also noted in a March survey from the Federal Reserve Bank of Dallas that the Russia-Ukraine conflict has added to their supply chain issues.
Matthew Ferraro, president of the Katy Area Chamber of Commerce, said businesses in the Katy area have struggled in their own ways during the pandemic.
“Obviously, supply chain shortages are causing a lot of headaches for everyone,” Ferraro said. “It’s hard to pinpoint anyone who [it has not affected]. Even new cars are taking months to get built because you can’t keep them in stock. I think it’s affected everybody in every industry [in] one way, shape or form.”
Houston’s economy has recovered and rebounded from shutdowns, oftentimes resulting in more demand than there is supply, said Patrick Jankowski, senior vice president of research for the Greater Houston Partnership.
“We shut everything down in March and April of 2020, and we realized we didn’t need to shut it down,” he said. “So things started opening back up, and that’s when we saw the first surges in growth. The last quarter of 2021 was just incredibly strong. It was the strongest quarter on record for job growth.”
With businesses fully operational, they need as many hands as they can get, meaning less flexibility in scheduling than there was a year ago, he said.
Costs for goods and supplies are higher for these mom and pop shops as well, making it more difficult to raise wages and leaving a gap in production as more people go out to shops and eat at short-staffed restaurants.
A February inflation update from the GHP reported a 7.9% rise in consumer prices nationwide compared to February last year. The GHP also reported Houston’s unemployment rate fell to 5.3% in February, down 0.2 percentage points from the last month.
This influx of job opportunities has left many businesses struggling to find enough employees with some people choosing to work for themselves instead of going the traditional route of working a 9-to-5 role, Ferraro said. However, when faced with these hardships, local Katy businesses have adapted and persevered, he said.
Ongoing challenges
Many of the issues businesses are facing are related to the supply chain—the flow of goods from the producer to the customer—which was essentially halted when the pandemic first hit and nations ceased trading and shipping, Jankowski said.
Although many ports have opened back up, variant outbreaks still pose a threat to this system, leaving business owners wondering when they will get their next shipments in. One such local business is Clean Juice Morton Ranch, which has struggled to get organic produce for its products as well as plastic lids and straws.
“I think every business has a unique challenge in this—and ours is the fact that we’re certified organic,” franchise owner Melissa Bonesteel said. “We have to actually show that we’ve gone to multiple suppliers in order to try to find organic first, and because we’re newly open, it’s very, very important to me that I provide certified organic products.”
Bonesteel has been able to find produce at places such as Trader Joe’s and Whole Foods, but she said the products are more expensive since she is not buying from a supplier.
Jankowski said other businesses have turned to Walmart or Target to stock their coolers with sodas and their shelves with cups as their usual providers limit distribution.
Alongside supply chain disruptions are staffing shortages. Local business leaders agreed people have come to expect higher pay for what are coined “behind-the-counter” jobs. Jankowski said he believes this is due in part to people becoming accustomed to working from home or having more flexibility during the peak of the pandemic.
Jankowski reported there are around 92,000 fewer workers in the Houston region now than there were a year ago.
Ferraro said businesses have to work harder to be fully staffed during the pandemic, saying many potential workers decided to become a one-income household or have now embraced the idea of being an entrepreneur.
“If they didn’t want to be in those industries anymore, a lot of entrepreneurs popped up new businesses,” he said. “They wanted to work for themselves. So everybody’s having difficulties finding employees, and that’s the direct effect from the pandemic.”
Ferraro also noted many businesses, such as consulting firms, closed down their physical storefronts if they were able to as a way to save money when the majority of their employees began working from home. Despite these struggles, businesses have found a way to adapt, he said.
“I don’t think anybody’s just waiting for the end of the year to flip the switch and adjust their business practices,” he said. “People are being flexible and proactive now to maintain business.”
Businesses adaptingCurbside, takeout and delivery services became staples of the food service industry when the pandemic began. Clean Juice Morton Ranch does have a drive-thru, which increased to-go orders, but it also provided an issue when Bonesteel was running out of lids and straws.
“I’ve had paper bowls that we use for our acai bowls, and we use a particular lid [for them]. It was actually the lid that was out of stock when we opened,” she said. “I didn’t want to sell an acai bowl to go without a lid and hand it through the drive-thru. I was going from store to store looking for a lid that would fit that hole. Thankfully, another Clean Juice location had some to spare when we opened and was able to give me some until we could get some in stock.”
Wildflower Threads, a locally owned Katy clothing boutique, credits its loyal customer base and a pivot to online sales as what kept the business afloat during the pandemic.
“People really care about us [and] other small businesses being here,” owner Alex Orlando said. “They really helped promote that to their friends. I really focused on online sales and social media. Me and my husband hauled [the merchandise] to our apartment, and we just really worked our butts off.”
The business has also been able to pull from a large pool of vendors if one supplier was unable to ship products.
“We have a lot of different vendors in here,” she said. “I think that’s the sweet thing about boutiques is that if we can’t get a shipment from [a specific vendor], we can find another vendor that’s maybe selling things in the U.S. and already has a shipment.”
Looking ahead
While staffing shortages and access to supply lines are unfavorable, they are parts of the growing pains the economy is facing as it bounces back. Jankowski said he believes the economy has made an outstanding recovery. The GHP reported about 316,700 of the region’s 361,400 jobs lost had been recovered as of the end of 2021.
“No one thought the economy would rebound as strong as it has,” Jankowski. “A year and a half ago, when we talked about the recovery, people talked about it looking like a hockey stick, sharp drop and a slow, gradual increase; it looks like it’s been more like a check mark.”
All the while, businesses are facing higher operating costs and are starting to have to divert some of that burden onto the customers. This can be seen in price increases of certain items or limits on menu options as the availability of certain goods varies. According to the U.S. Bureau of Labor Statistics, the cost of plastic products increased 23% from February 2021 to February 2022.
Moving forward, Jankowski predicted the community will not see the same exponential growth that happened in 2021, and businesses such as Clean Juice Morton Ranch and Wildflower Threads will continue to implement their pandemic changes for the sake of their customers and employees.
“They’re simply going to go and do what it takes to keep the doors open,” Jankowski said. “So the small business by nature tends to be what the small business lacks in financial wealth with all the makeup for nimbleness.”
