What affects prices at small retail businesses?

Key takeaways

• National Retail Federation interviews with small retailers show that supplier costs, tariffs, freight expenses and customer demand all influence the prices consumers see at checkout.

• Small retailers report that rising shipping costs and tariff uncertainty are making it harder to keep prices affordable while maintaining already thin margins.

• Many customers continue to shop but are spending less per visit as household budgets face pressure from essential expenses.

• Small retailers often absorb part of their higher costs rather than passing every increase on to consumers in order to remain competitive.

• According to retailers interviewed by NRF, long-term affordability depends on stable supply chains, predictable business costs and strong consumer demand.
  
  

Affordability concerns are top of mind for consumers trying to make every dollar stretch. While shoppers see a price tag, they rarely see the countless decisions, investments and regulatory challenges behind keeping that price as low as possible. For small business retailers, affordability is a daily focus and balancing act. 

The National Retail Federation spoke with small business retailers across the country about affordability, the challenges they are facing today and what they want policymakers and the public to know about everything that goes into the number customers see on a price tag. 

Which costs are putting pressure on small retailers? 

Small retailers told the National Retail Federation that rising and unpredictable costs are challenging their ability to keep prices affordable. Small retail businesses deal with a variety of factors including shifting supplier costs, tariff uncertainty, increased shipping costs and pressure from competitors. 

Alfred Mai, founder of family game retailer ASM Games in San Francisco, says tariff uncertainty and shipping costs have created significant challenges for his business. “Our biggest headache running ASM Games is the total unpredictability of landed costs, and a big part of this is the uncertainty regarding tariffs,” Mai says. 

Kjersten Klein, owner of outdoor recreation store Willis Ski and Board in Pittsburgh, also cites increased shipping costs and protecting her already razor-thin margins as challenges. “Between absorbing freight spikes and managing narrowing margins, keeping gear at an accessible price point for local families requires constant effort,” she says. 

Also feeling the squeeze from increased shipping costs is Erica Campbell, owner of faith-inspired gift retailer Be A Heart. Campbell says her shipping expenses have jumped this year from her suppliers due to increased fuel prices because of instability in the Middle East. One of her products saw a significant increase in landed costs from $10 to $18, forcing her to raise prices to offset the added expense. “I had to raise my price exponentially to even be able to sell it and now I am unsure if it will even be affordable or desirable for the customer,” she says. 

How are affordability concerns affecting customer behavior? 

Small retailers tell NRF they are seeing significant shifts in customer behavior as affordability concerns continue to influence purchasing decisions. Many independent retailers sell products and services that consumers consider discretionary rather than essential. As household budgets tighten, price-conscious shoppers are increasingly prioritizing necessities such as groceries, housing and healthcare over nonessential purchases. 

Queen City Creamery owner Rhiannon Brown reports customers are still shopping but are spending less at her specialty ice cream store in Cumberland, Md. “Our sales are down about 5% from last year, however, our number of sales are up about 10%,” she says. “That tells me that people are still coming in, but they just aren’t spending as much.”  

“Shoppers are super sensitive to price right now,” says Mai, who is also seeing more cautious consumers. “Card games are fun, discretionary purchases, so when household budgets get tight, folks think twice before checking out.” 

Campbell said Be A Heart experienced strong sales at the beginning of the year, but business has slowed substantially in recent months and is down significantly compared with 2025. The shift has made it increasingly difficult to forecast demand, plan for growth and determine how to price products. “We know that our customers are families and everyone is having to pay more for essentials, leaving less to spend on non-essentials like gifts from Be A Heart.” 

Why can’t small retail businesses pass along every cost increase? 

Small retailers are constantly battling to remain competitive by working to keep costs low. Retail is a hyper-competitive market, where margins are often thin and customers can quickly take their business elsewhere if prices rise too much. 

“Our biggest challenge is trying to be competitive and maintain prices that are affordable to our community,” Brown says. Queen City Creamery serves one of the poorest counties in Maryland, making raising prices on already premium products a challenge. “I always ask, how much will someone pay for an ice cream cone?” 

Mai says he knows his customers have limits on what they are willing to pay for family games like he offers. “When you sell in a competitive market like ours, customer expectations set a strict price ceiling. You rarely will find card games over $25, so you can’t just slap a price bump on the box to match our increased costs and call it a day.”

For Klein, balancing rising costs and remaining competitive comes down to labor and operational sacrifices. “We refuse to price our community out of the gear they need, and we end up absorbing cost increases that should go toward our bottom line. This leads to reduced headcount and increased strain on existing staff,” she says. 

What do small retail businesses want policymakers and consumers to understand? 

These small retailers want the public and policymakers to know that cost pressures impact everyone. While they are doing their best to keep prices low, conversations with NRF reveal that the many factors that go into pricing are forcing them to make difficult business decisions. 

Mai wants to clear up the misconception that brands can keep absorbing higher costs. While he absorbed some of the added costs from things like tariffs and shipping costs hikes, there is a limit. “We’re constantly eating extra costs just to keep game nights affordable for families,” he says. “But we can’t keep absorbing all these increased costs.” 

“We wish people understood that small retailers do not operate on massive, flexible margins, Klein says. “When prices rise at the grocery store or at the gas pump, we feel the strain directly.” 

“I want policymakers to know that most retailers are barely making it,” Brown says. “I am always thinking of the next marketing plan to get more people in the doors. It is a never-ending hustle.” 

Learn more about how retail works to deliver savings and make consumers’ lives more affordable at our Data-Driven Pricing and Retail policy page.