Products on store shelves are visibly getting smaller, yet the price remains unchanged, a practice referred to as ‘shrinkflation.’ However, in addition to reducing product sizes, businesses are also cutting back on the quality and availability of their services while keeping prices steady. This phenomenon is being called ‘skimpflation,’ by retail journalists and industry experts, and it often goes unnoticed by consumers.
“Skimpflation is when businesses compromise on the quality of their products or services,” explains economist Allan Davis. As inflation drives up the cost of raw materials, businesses cut corners by spending less on materials or services to maintain profitability. These cost-cutting measures are passed on to customers, even as prices appear stable.
Skimpflation is a widespread issue affecting consumers across various industries. It can manifest as labour reductions, such as fewer workers in stores, a downgrade in the quality of offerings by eliminating service tiers, or substituting high-quality ingredients with lower-quality alternatives, especially in manufacturing.
However, most consumers are slow to catch on to this trend because it’s challenging to observe in real-time. Business analyst Claire Fischer says, “Quality is sometimes hard for consumers to observe. Unlike with shrinkflation, where consumers can easily compare the price per unit (e.g., rand per gram or litre), it’s more challenging to notice when your local café stops using organic ingredients.”
The grocery aisles are also experiencing skimpflation, with food manufacturers reducing the size and quantity of products, as well as compromising on product quality to cut costs. This often involves substituting expensive premium ingredients with cheaper, lower-quality alternatives while maintaining the same price tags or even raising them. For example, some ice cream manufacturers have reduced the expensive milkfat content in their products and replaced it with “other ingredients, including water and other components of milk, but also sweeteners,” according to Fischer.
If restaurant service has felt slower, it’s not an isolated occurrence. By hiring fewer cooks or chefs, restaurants can still deliver the food, only slower, leading to less-than-ideal service for diners. In the hospitality industry, hotels are keeping room prices stable but offering housekeeping services only upon request.
As these cost-cutting strategies become more prevalent amid rising prices, they are becoming more noticeable, particularly in the food industry, according to Fischer. While some companies may respond to consumer complaints, many have anticipated some level of backlash and decided that the benefits outweigh the costs.
In a skimpflation economy, consumers must be resourceful and informed to get the most value from products and services. Both Fischer and Davis recommend comparison shopping to identify areas where companies have reduced their offerings.
However, there is still hope for better quality and service. Competition, especially in industries where quality is highly visible and essential, means that there will always be a market for quality products and services. Some companies will choose to provide higher quality than their competitors to stand out.
Nevertheless, consumers may need to accept that higher-quality options might come with higher prices. As the effects of inflation persist, consumers continue to face economic challenges.
