‘Shrinkflation’: The sneaky way some companies are trying to rip off customers

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LONDON, ENGLAND – FEBRUARY 19: A cashier at a Travelex Bureau de Change counts U.S. Dollars in exchange for British pounds February 19, 2004 in London. (Photo by Ian Waldie/Getty Images)

(NEXSTAR) – Consumer experts say there’s a recent trend among retailers trying to offset increased costs. It’s nicknamed “shrinkflation,” and it means that some companies are charging the same amount for a product in a smaller package.

“Consumers are paying more for a growing range of household staples in ways that don’t show up on receipts — thinner rolls, lighter bags, smaller cans — as companies look to offset rising labor and materials costs without scaring off customers,” the The Washington Post reported this week.

Experts told the Post that “shrinkflation” affects everything from paper towels to diapers and potato chips. They say it will become more pronounced as inflation increases across the U.S.

“It’s a sneaky way to raise prices on shoppers,” Consumerworld.org Founder Edgar Dworsky told Nexstar’s WFLA.

“They know most shoppers are not going to realize it because shoppers are price sensitive, price conscious but they’re not net weight conscious,” he said.

The cuts can save companies millions, Dworsky said, and it’s not necessarily an effect solely of the pandemic.

So what’s to blame for “shrinkflation”? Business Insider says it’s a combination of “shipping delays, supply chain disruptions, and changes to demand because of the pandemic.”

And “shrinkflation” is hardly a new phenomenon, as Insider notes. The UK’s Office of National Statistics published a 2019 report that found 206 product packages shrank from 2015 to 2017, with breads and cereals the most likely to shrink over time.

Inflation occurs when prices for most goods and services not only rise but accelerate, making the cost of living steadily more expensive and shrinking the purchasing power of Americans’ earnings and savings.

In May, the government reported that consumer prices for goods and services surged 0.8% in April — the largest monthly jump in more than a decade — and that year-over-year inflation reached its fastest rate since 2008.

Any significant acceleration of inflation would exert a drag on the market and potentially imperil the economic recovery.

In the past, rising inflation has usually led to higher pay as workers have demanded and received raises to keep pace. In fact, inflation can’t really accelerate for long without sizable wage gains. Yet pay raises — if they do occur — typically lag behind price increases, thereby squeezing consumers, at least temporarily. And eventually, pay gains themselves will fuel further inflation: Companies raise prices further to offset higher wages for their employees. 

Some companies, including Amazon, have recently raised or said they plan to raise wages.

Not since the late 1960s and early ’70s has the United States endured chronic high inflation, with consumer prices rising at or near double-digit percentages from one year to the next. In fact, the reverse has been true for about a decade: Inflation has remained persistently below the 2% annual target set by the Federal Reserve. Under Chair Jerome Powell, the Fed is betting that it can keep rates ultra-low even as the economic recovery kicks into high gear — and that it won’t have to quickly raise rates to stop runaway inflation.

Few economists think the nation is on the verge of uncontrollably high inflation. But worries among businesses, consumers and investors about uncomfortably high inflation are growing.

The Associated Press contributed to this report.

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