Shrinkflation: Are you paying more for less?

***************************************************************************

Subscribe to Economics In A Nutshell if you enjoy reading articles like this!

***************************************************************************

Everyone notices when prices go up. But few notice when packaging sizes go down.

Introducing Shrinkflation - a subtle but widespread phenomenon where sellers sneakily reduce the size, weight or quantity of products while keeping the prices same (or sometimes even raising the prices!). This practice is a common strategy for manufacturers and retailers to manage rising costs without alarming consumers by outright raising prices.

The root cause of shrinkflation is often due to inflation. Let's face it, businesses need to make money, and when the cost of producing goods increases, they need to find ways to make a profit. So rather than risking customer backlash with visible price hikes, companies often opt to quietly shrink product sizes, and keep their fingers crossed that consumers don't notice.

From chocolate bars to cereal boxes and rolls of toilet paper, examples of shrinkflation are abundant. A family pack of biscuits might quietly drop from 20 pieces to 18, or a bottle of orange juice could slim down from 1 litre to 900 millilitres while still boasting the same bright label. These changes play on consumer psychology, as shoppers often fixate on price tags rather than the subtle reduction in product size or quantity. After all, other than the cookie monster, who really counts how many cookies there are in a tin?

The impact of shrinkflation, however, extends beyond consumer wallets. People will eventually realise they're getting less for their money, and lose trust. In the long run, this may lead to reputational risks.

Consumers can combat shrinkflation by staying vigilant. Check unit prices (cost per kg, for example) to make sure that your favourite foods aren't secretly burning a hole in your pocket. Governments have also gotten in on the action - France and South Korea have laws now that require companies to put signs on products which have shrunk in size, so that consumers can be alerted.

Ultimately, shrinkflation highlights the need for transparency in the marketplace. While it serves as a temporary solution for businesses facing economic pressures, its long-term consequences on consumer trust and loyalty may prompt companies to reconsider how they navigate rising costs. For consumers, awareness is key to safeguarding both budgets and confidence in the brands they support. And governments / industry watchdogs need to ensure that consumers are protected from sneaky business tactics.