The rise of 'Stealthflation'

A well known saying goes ‘there is no such thing as a free lunch”. Buy your lunch in certain branches of McDonalds however, and you will discover there is no such thing as free relish either.

Fast food chain outlets in some countries now charge for condiments like ketchup etc. Yet they are not alone in surprising customers with unexpected charges. A surge of inflation has motivated firms to find several stealthy ways of raising prices. An easily recalled example is the technique of ‘unbundling’, a clever plan pioneered by low cost airlines. A long while ago, they started charging extra fees for things that were included, like checked luggage and food in the flight. Eventually and thereafter came charges for selecting a seat, or for any cabin baggage bigger in size than a small pouch.

Things have gotten out of hand off late, with some airlines now applying a ‘technology development charge’ for the privilege of making an online booking. And oddly still, this charge seems to depend on the distance travelled - the web servers work harder to deliver long haul tickets. Some other flyers charge for printing boarding passes, checkins at airports, or in-flight blankets. Days aren't far when airlines start selling tickets to sit in the shuttle bus to the plane, levying a fee per item of clothing worn, or even a charge to use the loo. (Mr. Michael O’ Leary, Ryanair’s boss, actually suggested the last one once).

The practice has spread outside the aviation industry. Hotels often charge a ‘check-in fee’, takeaway joints and food delivery apps a ‘packing fee’ and ride-hailing apps a ‘safety fee’.

This ‘extra fee’ trend is not limited to services, they are also being applied to physical products. Automobile manufacturers like BMW recently introduced a monthly fees to activate seat warmers on some of their cars. Mercedes Benz charges a periodic fee for the option to boost acceleration on some of its electric vehicles. Where does it end ? Want to use your smartphone’s camera more than 5 times a day ? Pay up. Need your oven for baking at the maximum temperature ? Become a premium subscriber first.

Another way businesses are being sneaky about revenue boosting is through ‘surge pricing’. Ability to track demand in real-time translates into minute-by-minute adjustment in prices. Sounds familiar ? You must be an Ola or Uber user in that case. Surge pricing too, is now infecting other industries. Recently, a European pub-chain announced a higher price for pints of beer in the evenings and on weekends, or during big sporting events. In theory, it can be argued that this is a triumph of the hand of the market : if you wish to pay less, buy when the demand is low. But angry consumers end up complaining that the line between charging what the market finds reasonable and getting fleeced or swindled is a wafer thin one.

Where does this trend go from here ? Falling inflation, increased regulation and a backlash from consumers may all finally break the mania of stealth price-rises in the upcoming year. Firms can also see a new business opportunity if they offer ‘no hidden extras’ pricing. The cross-polination of stealthflation techniques has some way to go. Expect to experience more before it becomes less.