The increasing cost of essential goods and services, along with unplanned-for expenses, are choking small stores' growth and threatening employment levels, Convenience Store has learned.
A report from business adviser Make It Cheaper also found that 60% of small retailers fear closure because of rising overheads.
Independent retailer Vince Maloney, who co-owns three Budgens stores in Surrey, said he believed costs would be the industry's biggest challenge in this year and next eclipsing even supermarket competition.
"Rates, rents and premiums are all going up, but margins from the wholesalers aren't. The shortfall could be disastrous for many," he said.
I'm having to spend far more time shopping around to avoid being hit by the rising costs of goods and services . My waste contractor has recently put its prices up considerably and I simply refuse to pay the new levels."
Wealdon Stores, Cuckfield, Sussex
"Costs are rising in all directions, ranging from insurance and energy bills to staffing and licensing. But banking is now one of the biggest financial and bureaucratic burdens. My bank RBS/ Nat West now asks for quarterly management accounts, which means more paperwork and the extra cost of employing a financial adviser. More recently, they've been asking for a monthly account, which I've refused to supply."
Nisa Local, Bedfordshire
Rising costs have forced others to dismiss staff or leave vacancies unfilled, leading to a 0.4% fall in retail employment in the first half of 2011, latest BRC data says.
Iris Penney of The Store in Badminton, Gloucestershire, said that rising energy costs were preventing her from recruiting new staff and offering promotions, making it difficult to compete.
"As a local shop you want to be able to respond quickly to local demand, but these days you can't make snap decisions you have to sit down and do the maths first," she said.
The Make It Cheaper report shows that small business overheads have jumped by a quarter since 2007, and that 73% of local shops have seen their profit margins hit.
Red tape is also adding to the pressures. The Forum of Private Businesses found that 67% of small businesses are now paying external consultants to help them negotiate legal requirements.