Let’s start with a few words about inflation
What does inflation mean? “Inflation” is simply the gradual increase of consumer prices over time. And here’s something that many people aren’t aware of: While often thought of negatively, inflation is, within a certain range, actually an indicator of a strong economy. Prices that rise slowly over time can lead to job creation and higher wages.
What gives inflation its bad reputation are those periods where prices rise significantly faster than wages do. When that occurs, as it did in the early 1980s, it can signal an economic downturn, or even a recession.
Over the last few years, we’ve been experiencing a new era of rapid price increases due, in large part, to the labor shortages and supply chain issues that were a result of the Covid-19 pandemic. The good news is that recent data is indicating that the rate of inflation as of today has slowed down significantly and is almost back within the normal range of 2% - 3% year over year.
Is shrinkflation real?
Shrinkflation has been around since the 1980s and was rampant in 2016, but consumers really started noticing it once the pandemic hit, even though by that time it had slowed down.
Simply put, shrinkflation is the practice of reducing a product’s size or quantity while maintaining the same sticker price (i.e., consumers pay the same price for less product). Companies can engage in shrinkflation for a number of reasons, including increased market competition and rising production costs.
It’s important to note that many products, especially food products, are sold by weight, which will be clearly reflected in the product’s label.
That said, the changes are usually so subtle that many consumers won’t even notice that they are paying the same price for less product. For those who do notice, however, reactions often include feelings of betrayal, anger and frustration.
Is anyone tracking shrinkflation?
Several government agencies, including the Bureau of Labor Statistics, track shrinkflation as part of their inflation monitoring efforts.
What industries are most impacted by shrinkflation?
As noted above, shrinkflation practices are often applied to products that are sold by weight. One of the earliest examples of shrinkflation dates back to 1988 when coffee roaster Chock Full o’Nuts reduced its one-pound can of coffee to 13 ounces. Many of its competitors soon did the same.
Shrinkflation isn’t just limited to food and beverage products, however. Categories such as laundry and dish detergents as well as paper products like toilet paper and paper towels have been impacted by it as well.
How does shrinkflation affect you?Using the example of laundry detergent, with less product per unit, consumers often find themselves needing to repurchase detergent more frequently. This can add strain on household budgets and impact a family’s cash flow.
Shrinkflation v. skimpflation
As if shrinkflation wasn’t bad enough, it has an ugly duckling cousin, skimpflation. Skimpflation is not tracked by any government agency but it is very real. Like shrinkflation, skimpflation is all about giving consumers less for the same price, only this time it is quality, not quantity, that is affected.
Skimpflation is the practice of replacing a product’s ingredients or components with cheaper, lower-quality versions. An example would be a food manufacturer substituting cheaper, chemically derived ingredients for more expensive natural ingredients.
How to avoid shrinkflation
Shrinkflation is all about giving you less for your money. Fortunately, it’s possible to avoid if you know how. Here are three easy things you can do to help you get more from your shopping dollars.
1. Switch brands
If you notice that your favorite brand has reduced the quantity or size of their product, look for competitors who are still willing to give you more.
2. Buy store brands
Many store brands are comparable to their brand-name counterparts. Costco’s Kirkland brand, as well as the store brands at Walmart, are good examples. And, because they aren’t burdened with expensive marketing budgets, they are often cheaper than national brands. As a result, they are usually slower to repackage and downsize their products.
3. Compare per-unit pricing
Most stores display the per-unit price on a shelf label directly below the product. Comparing the unit pricing of similar products can help you find the cheapest and best option.
Shrinkflation isn’t going anywhere
Chances are, shrinkflation is here to stay, making the well-worn but always useful adage of “caveat emptor,” or buyer beware, more appropriate than ever.