Inflation is a pressing concern for large and small businesses around the globe right now. Over the past year, inflation has skyrocketed. It hit its highest rate in forty years in January 2022, topping out at 7.5% (AP News). The result is a stressed economy and equally stressed households and businesses. Interestingly, examining inflation’s effects on craft businesses can provide a holistic view of the effects of inflation on the overall economy.

There are several factors currently contributing to rising inflation rates, the most prominent of which may be the ongoing pandemic. The pandemic in particular created a volatile crucible of conditions and the perfect admixture to produce high inflation rates. 

The Great Resignation

First, businesses felt the harsh impact of “The Great Resignation,” a term coined by Texas A&M University Associate Professor Anthony Klotz to describe the mass exodus of workers from their jobs during and after the pandemic. Employers met the challenge of The Great Resignation and the reduced workforce it produced by raising salaries, creating wage inflation.  

The Supply Chain

Second, the pandemic placed tremendous pressure on the supply chain. High demand for products and services coupled with a shortage of workers and raw materials—along with an unprecedented reliance on online shopping versus brick and mortar shopping—produced untenable conditions for the global supply chain. The pandemic closed ports, grounded more commercial planes (which historically also carried cargo in the hold), created a shortage of containers, and as a result furloughed truck drivers and other cargo employees—many of whom still haven’t returned to work. 

As a result, bottlenecks exist all along the global supply chain, creating higher freight, salary, and storage costs. With longer lead times and fewer products breaking through these barriers, supply is down but demand is still high. Unsurprisingly, costs have risen and contributed greatly to rising inflation. When major producers like China prioritize the goal of “zero-COVID” over their worsening economy, choosing to shutter export operations to prevent the spread of COVID-19, the supply chain is only further hobbled. 

The Invasion of Ukraine

Finally, Russia’s invasion of Ukraine greatly impacted the cost of crude oil. Oil prices were steadily increasing even before the war in Ukraine. However, the United State’s ban on imported Russian oil has driven the cost up substantially. When Russia invaded Ukraine on February 24, 2022, the price of a barrel of oil was $97.93. A little over a week later on March 8, 2022, it hit a record high for the year, at $127.98 a barrel (Markets Insider).

Insights from the Craft Industry

The craft industry in particular relies on a large number of imported goods—raw and manufactured— all of which have felt the sting of rising inflation rates. The price of wool has increased 4.57% since the beginning of 2022, and rising demand for cotton coupled with lower production created an 11-year high for the cost of cotton in early May (Trading Economics).

David Schmidt, President of Kraemer Yarns, offers a look inside the particular cascade created by inflation that has led to rising costs all along the chain. It’s an insightful example of inflation’s effect on the crafting industry.

“This is a difficult time for a manufacturing company or any other. Every cost that goes into a product is increasing exponentially.”

“We can start with labor. Due to the shortage of employees in the labor market, all businesses have raised labor rates. Next is freight. With diesel fuel over $6.00 per gallon and a shortage of truck drivers, freight costs have risen dramatically. We have to ship raw materials several times, producer to dyer, dyer to our plant; so the effect is doubled. Higher fuel costs are increasing our electricity rates. Heating fuel prices have doubled. Shall I mention that raw material prices are going up almost every time we place a new order? Rising interest rates are increasing our costs to borrow to finance our business.”

“The combination of all the above leaves most companies with no choice but to raise prices if they wish to stay in business. The best weapon we have to control price increases is to sign contracts that go out as long as possible at fixed prices. Yet even this avenue is being blocked, as most suppliers will only quote today’s price, and will only hold it if you ship the product right away.”

Babs Ausherman of Miss Babs Hand Dyed Yarns and Fibers has dealt with similar issues related to the increased cost of oil. “Like everyone, we have experienced increased expenses due to gasoline, which has affected the cost of going to shows. There are increased gas surcharges by delivery companies of goods coming to us. Another impact is that customers have less disposable income than they have had due to the fact that gas and food costs have risen for them.”

Thimbles owners Jane Hartl and Tammy Newton report price increases on notions, tools and fabrics.

Kimberbell has increased the prices for all products in their offering. Sewing machines usually increase slightly each year; this year, the costs increased by $8 for smaller machines and up to $600 for larger machines.” She also adds that the store has experienced a significant slowdown in sales of sewing machines: “The number of units sold is down 50%, with the total purchase price down 60%.”

Methods for Counteracting the Effects of Inflation

To no one’s surprise, craft business owners have proven remarkably crafting when combating the effects of inflation on their business. As mentioned above, Kraemer Yarns has pursued lengthier contracts at fixed prices to reduce costs. Miss Babs has sought a similar solution, offering distributors current yarns in sufficient quantities at fixed prices. However, she expects to see yarn prices increase by the fall and winter.

Thimbles has crafted alternative services that don’t rely as heavily on products and goods. “We offer tickets to in-person UFO (Unfinished Objects) sessions and have seen a significant increase in attendance from our pre-Covid UFO dates. We have a large classroom we can utilize to allow more people to attend. In the future, we’re also looking to offer a ‘Sleep in Your Own Bed’ retreat, which will be less expensive than renting space at a hotel.”

Thimbles has also focused on projects and quilt kits that use less costly fabrics, such as solids. “We now offer more kits using solid fabrics, as solids are a few dollars less than printed and batik fabrics. This will allow us to offer attractive quilts at prices that are lower than our normal printed kits.” 

Thimbles has also recently focused on creating designs that use up fabric scraps to encourage scrap busting among their customers.

“We have implemented a class that allows customers to use their stash. This keeps us at top of mind for our customers and allows them to feel good about using up what they already own,” says Tammy Newton.

The scrap busting projects often require the purchase of additional materials, but as they use a majority of fabric scraps, the projects are still fiscally enticing for their customers. “They most likely will need to purchase a coordinating or contrasting fabric to finish their stash quilt, along with backing, batting and binding.”

While inflation has created challenges for craft businesses, many are hopeful, in no small part because of the craft industry’s inherent durability. People will always turn to crafting, and most craft businesses saw an increased interest during the pandemic. Says Babs Ausherman, “We often find that challenges provide opportunities, but this is yet unclear. Knitting will continue to be a good pastime even in economic downturns as it provides a good return on time spent and dollars spent. You get a lot of entertainment for your dollar.” 

Craft businesses should take the long view to offer and pursue lengthier contracts, which can help counteract the effects of inflation by securing products at a fixed price. Craft businesses should also cast a keen eye towards the services they can provide that don’t rely on raw materials or products, but rather on the interpersonal relationships they’ve long fostered with their customers. We are all feeling the effects of inflation, whether as a craft business owner or a crafty consumer, but this industry has proven its versatility, adaptability, and tenacity time and again.