Many small business owners across Massachusetts say 2023 is shaping up to be a challenging year, with disappointing sales this past holiday season, rising interest rates, and inflation at 40-year high.

Despite high expectations going into the holidays, the Retailers Association of Massachusetts announced last week that November and December sales increased only 1.2%, a sharp drop from the average 4% seasonal increase seen in past years. The association's president Jon Hurst also said that 75% of the businesses they surveyed reported that overall sales remained flat or dropped in 2022, and that 43% saw lower profits. He said inflation, in particular, had hit consumers and small businesses hard over the past year.

“The bottom line costs for small businesses, everything from energy to health insurance to, of course, the price of their goods to be sold to their inventory … all those costs have really gone up, in most cases, double digits over the course of the last year,” Hurst said.

For many stores, sources of revenue have been particularly hard to predict, especially in the past few years. John DePietro, of Johnny D’s Fruit and Produce in Brighton, said that his customer population has been in flux since the pandemic.

“You know we’re an old school business here. It’s a small mom and pop fruit and vegetable [shop] … I opened it myself 30 years ago. All I can say is it’s never ending change,” DePietro said. Surrounded by college students, as well as an increasing number of new residents from abroad, DePietro described how it’s been difficult to keep up with the specific product demands of his changing customer base.

He also blamed an increase in people buying fast food during the pandemic for eating into some of his sales.

“I have to keep an eye on the weather to see what kind of day we’re gonna have. You just never know. Just when you think you got it figured out, forget about it,” he said.

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A woman rings up a purchase inside Henry Bear's Park, a toy store in Arlington, MA
Sam Dieringer GBH News

While some businesses saw their holiday sales exceed projections, their overall 2022 sales were more erratic than in past years. Jessica Going is the manager at Henry Bear’s Park, a toy store in Arlington, and said the uneven sales makes it difficult to plan for the coming year.

“2022 definitely had a slower start. But by the time December rolled around, we saw those numbers again that I think we were expecting,” Going said. “What's been hard the last couple of years for retail in general is that we can't quite predict one year to the next anymore … I think people are kind of resuming normal shopping habits from what I'm seeing, which is going really big right around the holidays, but are not necessarily planning as far in advance as maybe they have in the last couple of years.”

Still, some businesses called their past year successful. Scott Hamilton, manager of Chatham Jewelers Inc., said they were hit hard in 2020 with the impact from the COVID-19 pandemic, but that turned around in 2021 as restrictions eased and people started getting out more.

“If you're within a tank of gas of [Chatham], that's our clientele — as opposed to people being able to spend money on trips to Europe or other places abroad. They weren't doing that, so they were coming to us,” said Hamilton. He said they weren’t sure if that would last.

“But it played out that the friends we made in 2021 came back in 2022 and we exceeded year-over-year by about 6%,” he said. Hamilton attributed his success to the rebound in local travel and tourism which helped boost foot traffic.

Despite some isolated success stories, many economists are predicting weaker economic growth this year, and Jon Hurst has urged businesses and consumers to prepare for something that’s likely going to get worse before it gets better.

“I don't want to be a doom and gloom guy. I mean, [2021] was a very good holiday season. It was up double digits — 16% — so just to even meet and barely beat that is a positive thing. But you start looking at the trends of where we were earlier in the year versus the last two months in the profitability numbers and the drop in transaction numbers — it's starting to show some cautionary yellow flags, moving into 2023.”

Sam Dieringer is a student at Tufts University.