Shrinkflation is a term used to describe the reduction, the shrinkage, in the quantity of goods/services that can be purchased at the same price as in previous periods. The distinction between shrinkflation and inflation is that inflation is the increase in the money supply, which consequently yields the highly likely consequence of higher prices, and therefore, a reduction in the purchasing power of people’s incomes. Shrinkflation is also different in that unlike resulting higher prices from inflation, shrinkflation is more about reducing the quantities of the consumer goods/services, even while keeping the price the same. For example, let’s say a year ago a jar of Peanut Butter costed $3 and was 5 oz. in size; today, that a jar of Peanut Butter still costs $3 but is only 3 oz. in size per the consequence of shrinkflation. Another example is health insurance. Let’s say a year ago your insurance premium was $50/month; today though, while your premium is still $50/month, your policy provides fewer benefits and services. While the concept of inflation has been around and somewhat well-understood for several decades, the concept of shrinkflation has only recently, as of the time of this writing, become understood on a widespread public level of consciousness.
As commented in this article from Activist Post, a recommended source on this blog, “Yes, the products you’re buying are getting smaller – Even though prices are not”. Why does it matter for people to become fully aware of shrinkflation? Mainly because enterprises know that it is very hard to raise prices on customers, because customers will most likely quit buying products at higher prices, because customers typically can’t afford them as their incomes are either stagnant or declining, especially customers who become unemployed. As such, enterprises still need to cut costs, so shrinking the quantity of goods without increasing the price is the way to cut costs. Without raising the price and repelling customers, enterprises can sell products at smaller sizes; smaller sizes are less costly for enterprises.
The critical question now becomes, will shrinkflation prevail and become more widely practiced? This is hard to say for sure, because official measurements, meaning from any government or private and reliable organization, are not widely available as of the time of this writing. However, given the need to cut costs and the near lack of feasibility in raising prices, shrinkflation is a viable and more importantly, subtle, alternative, as most customers are unaware, many times totally unaware, of shrinkflation, and therefore do not voice any major complaints or opposition to shrinkflation. Given the tendency of most people to lack the alertness and intellectual sophistication to detect, let alone call out, the subtle shrinkflation, the forecast of this post is therefore the following:
The phenomenon of shrinkflation will continue long-term in the economy to some degree, even if the degree of shrinkflation is yet to be overtly, thoroughly and accurately measured.