Shrinkflation: The Hidden Inflation Consumers Need To Know
In today's competing market, companies are facing cutthroat competition to
maintain their consumer base and on the other hand to keep their growth steady.
But what if it is not the other companies that are threatening a company's
consumer base rather it is the market factors and one of the market factors that
threats every company now and then is Inflation.
Companies invest a lot in research and development, technology, etc. to provide
the customer with products at lower prices than the other companies maintaining
quality and standard. But there are some factors that no technology can overcome
that is the rapidly increasing cost of production due to the increasing price of
goods for manufacture for example the increasing price of dairy products will
lead to increased cost of production of sweets, butter, ice cream, etc.
To maintain the profit margins the companies have to increase the price of
products but it may lead to a loss of consumer base if other companies also do
not increase prices simultaneously and if all the companies involved in
producing the same category of goods increase their prices at the same time it
will trigger the competition concern and bringing the companies under the radar
of Competition Commission of India that these companies might have entered into
an agreement to predetermine the increased price.
There is always a risk for the company to increase the price as if the competing
companies do not increase the price and are capable to bear a loss in profit
margin for a time the consumer will shift towards them as they will be getting
similar products and service at a lower price as it not the companies only that
are affected by the inflation the consumer is also affected by it due to
increased cost of living and if a consumer finds the product of substitute
nature at a lower price they will take no time to shift that product. To
overcome this problem and also to survive the increasing inflation companies
have entered into the practice of shrinkflation.
Shrinkflation is made up of two terms: shrink and inflation. Shrink refers to
the change in product size and volume while inflation means the rise in the
level of prices. Combined together shrinkflation means the change in product and
size due to the increasing level of prices. It is also termed as hidden
inflation because in most of the cases it goes unnoticed by the consumer as the
companies manipulate the size and volume in such a way that the consumer feels
For example, a company offering products in a jar usually makes the bottom of
the jar a little bumped or thicker before resulting in offering a lesser volume
of product maintaining the size of the jar. The consumer often did not pay much
attention to this. So to conclude shrinkflation means when companies reduce the
size and volume of products without increasing the price of the product.
Reasons for shrinkflation:Increasing cost of production: with the increasing inflation, the cost of
production also increases, and to maintain their profit margins the companies
can either increase the product price or offer lesser quantity for the same
price but in doing so they might lose their consumer base. To maintain their
consumer base and to hold their trust companies many times opt-out for
Market Competition: The other factor because of which companies opt for
shrinkflation rather than increasing price is the tough competition in the
market. If the other companies do not increase the price of their products and
are ready to bear the loss in profit margins, then it will make the company lose
its consumer base and drive them out of the market.
Withhold consumer trust: maintaining strong consumer trust in the company is one
of the key factors to survive in the market but this trust is most fragile and
can easily shake with the increased price so to maintain their customer trust
the companies opt-out for shrinkflation and consumers also trust that the
company on which they have placed their trust is not affected by inflation and
still offering products at the same price as the consumers are more observant
about the change in price but in reality they are not aware that they have been
affected by shrinkflation.
When shrinkflation can be employed?Usually when the sale of a product is dependent upon the price of a product
shrinkflation can be employed. For example, most of the consumers buying the
products such as biscuit, chocolate, ice cream, chips, and beverages they tell
the price of the product rather than the quantity as the consumer usually ask
for a ParleG biscuit of Rs 10, chips packet of Rs 20 or coca cola bottle of Rs
40. So in these types of products where the demand is made on the quoting the
price of products is made shrinkflation can be employed.
The reason behind the same is that in these type of products the consumers
rarely look at the quantity of the product and is more concerned with the price
and if there is a slight change in the quantity of product it may go unnoticed
for example the weight of biscuit packet reduced by 10 gram to 190 gm from the
earlier weight of 200 gm will go unnoticed as the consumer are aware that last
time the product was priced at Rs 10 and it is still priced at Rs 10 and might
not aware that last time the weight was 200 gm and this time it is 190 gm.
Apart from this when the sale of the product is according to the size of the
product such as small, medium, or large then also shrinkflation can be engaged
as again in these the consumer is not aware of the product quantity when the
same product was purchased last time and more focus of the consumer is on the
price of the product. For example, the consumer purchasing tomato sauce usually
buys as per the size rather than the quantity of the product, and minor changes
in the quantity usually go unnoticed.
When shrinkflation cannot be employed?In the products when the sale is as per the quantity shrinkflation cannot be
employed. If the consumer is demanding 1 Kg of rice then the packet has to
contain 1Kg of rice the company cannot make any difference in the same by
reducing the quantity. In this scenario, the options that are left to the
companies are to increase the price of the product and it is the easiest method
to overcome inflation and maintain profit margins or the company can search for
a cheaper method of production to reduce the cost of production by using better
technology, alternative packaging methods such as shifting from steel can to
polythene type material, from glass bottles to plastics, etc.
How shrinkflation can be detected and avoidedIt is not easy to detect shrinklation as the consumer do not keep a record of
the quantity and size of products they consume but still there are a few
cautious signs that may help in detecting shrinkflation such as spotting any
change in the product design, shape of packing, or even a new slogan used by the
To avoid shrinkflation the consumer if finds that the product they are using is
shrinflated then it is better to look for an alternative product that is not
affected by shrinkflation or even can look for local products or store brand
products as they are generally cheaper than name brand products.
Legal position regarding ShrinkflationEven though shrinkflation is a concern for consumers but there is no such
specific legislation that concerns shrinkflation. Shrinkflation is a phenomenon
that is developed to uncover the practices followed by companies to make
consumers believe that they are getting the products at the same price even if
there is inflation in the market but they are kept away from the hidden fact
even though the price is same but the quantity of product is reduced.
There is nothing illegal for the companies to reduce the quantity of product if
they face increased cost of production due to inflation but on the other hand,
if they do so they are to be made bound to disclose the same facts to the
consumers. The Consumer Protection Act 2019 provides the consumer with the right
to be informed about the quality, purity, and quantity of the product.
But there is nothing about the duty of companies/manufacturers to inform the
consumer about the changes in the quantity of the product and it has to be made
a compulsory obligation for companies to inform about the changes in the
quantity of the product and also from which date such changes are implemented as
when the companies are offering more quantity at the same price they openly
advertise it and even make it clearly visible on the product packing so why not
information about the reduction in the quantity of product be also made
available to the consumer as a right to him.
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