US & Global Economic Impact Analysis and Forecasts

Freedonia analysts and economists are sharing their insights on how major events are impacting different parts of the US and global economies.

Inflation… Shrinkflation… Skimpflation?

The value of goods and services aren’t simply reflected in the price per unit, packaged as sold. We’re all witnessing this trend.

However, price per package can be deceptive, if the size of the package changes. Shrinkflation is a phrase that is being used more to describe situations where the price of the product stays the same, but the size of the package gets smaller. In such cases, we are paying the same for a single box of cereal, for instance, but there is less cereal in that box. So on a price per ounce basis, we are paying more.

However, what if what we’re getting for the price is a lower quality or somehow less feature-rich? This trend, which can be less obvious, is being discussed as “skimpflation.” For instance, many hotels have reduced housekeeping services from every day to just in between guests and as requested, and many others have eliminated shuttle services or what was once a free breakfast. While it is most often seen in the service sector, other examples of skimpflation could be electronics with fewer ports, packaged food or beverage products switching from cleaner labels to the use of more preservatives, or clothing made with thinner or otherwise lower quality fabrics.

Some of the reduction in quality in the service industry is due to insufficient staffing as businesses still struggle to find enough staff to provide the level of service they had provided in the pre-pandemic era. In other cases it’s an attempt to keep costs low. For instance, some businesses discover that the service that is cut or the feature that is reduced isn’t missed all that much by their customers so they keep it in place as a cost cutting measure.

However, it can be hard for government statistics to account for the changes in quality that lead to consumers getting less for their money. While the US Federal Reserve and the US Treasury Department still see this inflationary period as transitory at this time, it is harder to determine if quality degradation or package size reductions will be similarly short term. Package size reductions tend to be stickier as it is often more subtle than changes on the price tag itself. Changes in quality, if it lasts long enough, might be something that consumers get used to as a new normal. That is, until the competitive environment forces change once again.

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  Industry Studies      Packaging