September and October 2025 told two completely different employment stories depending on one variable: company size.
Private firms under 500 employees shed 91,000 jobs across those two months. Private firms with 500+ employees added 106,000 jobs during the same period. That's a 197,000-job swing based purely on scale.
This isn't coincidence. It's the visible manifestation of a dual economy where size increasingly determines supply chain success, cost absorption capability, and market positioning power.
Steve Beda, EVP at Trax Technologies, frames it plainly: "We're operating in a dual economy where older, more invested buyers are doing better than younger, less invested consumers. This consumer bifurcation maps directly onto the firm-size divide."
The question for 2026: is this temporary or structural?
The Cost Absorption Gap
Here's what happened in 2025. Small upstream firms pulled inventory forward from June through September to hedge tariff risk. They bore carrying costs, storage fees, and working capital burden. They operated with limited pricing power and thin margins.
Then large downstream retailers accepted that inventory in October-November. But they did so on their terms, with leverage, and with the ability to pass costs downstream to consumers.
The financial mechanics reveal the divide:
Small firms (under 500 employees):
- Working capital loans at 8-12% interest rates
- Limited warehouse negotiating leverage (take the rate or go elsewhere)
- Spreadsheet-based forecasting and manual processes
- Dependence on a handful of supplier relationships
- Binary pricing decisions (hold or pass through, no testing capability)
Large firms (500+ employees):
- Commercial paper and credit facilities at 5-6% rates
- Volume discounts on warehousing and transportation
- AI-powered forecasting and demand sensing tools
- Diversified supplier base across multiple regions
- Sophisticated price testing with regional variation and A/B analysis
According to research from the Federal Reserve, small businesses pay on average 40-60% more for working capital than large enterprises, creating a permanent cost disadvantage before any operational decisions are made.
That 3-7 percentage point difference in financing costs translates to millions in annual expenses when you're carrying elevated inventory for 6-8 months. For small firms operating on 3-5% net margins, that cost differential alone can eliminate profitability.
The Technology Divide
Technology adoption correlates directly with firm size. And in 2025, technology determined who could navigate complexity efficiently.
Large firms deployed AI for demand forecasting, automated freight audit systems, real-time inventory visibility, and predictive analytics for carrier performance. They invested in transportation management systems that dynamically optimize routing. They used machine learning to identify invoice errors before payment.
Small firms used spreadsheets. They audited invoices manually. They made routing decisions based on relationships and historical patterns. They discovered overcharges months after payment, if at all.
This isn't a moral failing. It's an economic reality. Enterprise TMS systems require six-figure implementations. An AI-powered freight audit requires normalized data across thousands of transactions—predictive analytics demand clean historical data and technical expertise.
Small firms lack the transaction volume to justify those investments. They lack the technical staff to deploy them. They lack the capital to fund them. The result? They operate at a permanent efficiency disadvantage.
When Trax analyzes freight audit data, large customers recover 5-7% of transportation spend through systematic error detection. Small firms without automated audit capabilities typically recover less than 2%—leaving money on the table every single month.
The Negotiating Power Chasm
Negotiating leverage scales exponentially with volume. A small wholesaler moving $5 million annually has zero pricing power with carriers. A large retailer moving $500 million annually dictates terms.
This manifested clearly in 2025's inventory transfer:
June-September: Small firms pulled inventory forward on their own balance sheets, bearing full cost burden, with no ability to negotiate favorable terms from upstream suppliers.
October-November: Large retailers accepted the same inventory but negotiated extended payment terms, volume discounts, and favorable allocation of freight costs.
The employment data confirms this power dynamic. Small firms compressed costs by eliminating 91,000 jobs. Large firms maintained operations and added 106,000 positions. When margins compress, negotiating power determines who absorbs the pain.
The Consumer Parallel
The firm-size divide mirrors an equally stark consumer divide.
Older, invested consumers:
- Home equity up 40-50% since 2020
- Investment portfolios up 25-30% in the same period
- Lower mortgage rates locked in (3-4% range)
- Reduced sensitivity to price increases
- Driving luxury goods, travel, and experience spending
Younger, less invested consumers:
- Priced out of housing market (median home price up 50%+ in many markets)
- Limited equity accumulation opportunities
- Credit card debt "much higher than normal" entering 2025
- High sensitivity to price increases
- Trading down to value brands, reducing discretionary spend
According to data from the Bureau of Labor Statistics, households under 35 reduced discretionary spending by 8-12% in 2025 while households over 55 increased spending by 3-5%. This divergence creates a tiered retail market.
Large retailers serving affluent demographics can pass through cost increases. Small firms serving price-sensitive segments face immediate demand destruction when they raise prices.
The Capital Access Problem
When inventory costs remained above 70.0 for eleven consecutive months, capital access became survival-critical. Large firms tapped credit facilities and commercial paper markets at favorable rates. Small firms maxed out credit cards and took expensive term loans.
Seasonal hiring patterns reveal this constraint. Overall seasonal hiring hit 265,000-365,000 positions in 2025—the lowest in a decade and down from 442,000 in 2024. But that decline wasn't evenly distributed.
Large retailers hired seasonal workers (at lower levels than historical norms, but still hired). Small firms skipped seasonal hiring entirely, stretching existing staff or reducing service levels during peak demand.
The long-term impact? Large firms maintained customer relationships and service quality. Small firms lost customers they couldn't serve adequately and may never win back.
Three Structural Advantages That Compound
1. Data as a Moat Large firms generate millions of transactions annually, creating rich datasets for optimization. Small firms generate thousands, which is insufficient for meaningful pattern recognition. AI and machine learning require volume—and volume creates a competitive advantage that's nearly impossible for small players to replicate.
2. Risk Distribution Large firms spread procurement risk across dozens of suppliers and hundreds of lanes. One supplier failure or lane disruption impacts 2-3% of operations. Small firms depend on 3-5 key relationships. One failure can affect 20-30% of operations and be existential.
3. Brand Leverage Large retailers gain "shipper of choice" status with carriers, securing capacity during tight markets. Small firms become the marginal customer—first to lose capacity when markets tighten, last to receive favorable pricing when markets soften.
Is This Permanent?
Steve's assessment cuts to the core question: "The question for 2026 is whether this bifurcation is temporary or structural. If it's temporary, we'll see convergence as interest rates decline and consumer confidence rebuilds. If it's structural, we're looking at a permanently tiered freight market where size determines survival."
Three indicators that would signal temporary bifurcation:
- Fed rate cuts reducing financing cost differential
- Small firm employment stabilization by Q2 2026
- Margin recovery for firms under 500 employees
Three indicators that would signal structural bifurcation:
- Continued small firm job losses through 2026
- Accelerating consolidation as small players exit
- Technology adoption gap widening rather than narrowing
Early 2026 data will be telling. If small firms can't stabilize employment despite potential rate cuts, the dual economy may be permanent.
Strategic Imperatives for Small Firms
Survival for smaller players requires ruthless focus on differentiation.
Specialization over scale: Dominate a narrow vertical rather than competing broadly. Be the essential partner for a specific customer segment, product category, or geographic region.
Technology leverage through partnerships: Can't afford enterprise TMS? Partner with 3PLs who can. Can't build AI capabilities? Work with providers like Trax who deliver freight intelligence as a service rather than requiring internal build.
Capital efficiency: Minimize inventory holding periods. Optimize turnover velocity. Negotiate extended payment terms aggressively. Every percentage point of working capital cost matters.
Relationship depth: Compete on service, responsiveness, and expertise that large firms can't replicate due to bureaucracy. Make yourself too valuable to lose despite higher costs.
The firms that try to compete on the same dimensions as large players—scale, price, broad portfolio—won't make it. Differentiation is the only path forward.
What Large Firms Risk
The dual economy poses risks for large players as well. Bureaucracy slows decision-making. Complexity creates blind spots. Success breeds complacency.
The most dangerous assumption: that current advantages are permanent. Technology becomes commoditized. AI tools become accessible. Nimble competitors find angles that scale players miss.
Large firms that assume their size guarantees survival will discover—too late—that competitive advantage requires constant renewal. The graveyard of retail is filled with once-dominant players that stopped adapting.
Ready to understand whether your supply chain economics align with your actual firm size and negotiating power? Contact Trax to learn how freight audit intelligence reveals hidden cost structures before they become unmanageable.