Style [Global Market Trend] Shrinkflation & Skimpflation, The Age of Hidden Downsizing

12 Nov 2024
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Shrinkflation is not a new phenomenon, having been coined by British economist Pippa Malmgren in 2015. This term particularly draws attention when companies struggle with profitability and consumer demand declines. It gained significant attention in the late 2010s and early 2020s, and as the recent economy worsens and raw material costs surge, it is once again in the spotlight.


Meaning of Shrinkflation: Shrinkflation is a strategy where companies maintain the same price but reduce the size or quantity of a product, or even slightly raise prices. The term combines "shrink," meaning to reduce, and "inflation," referring to the general and sustained increase in prices. It’s also known as "package downsizing." This type of price inflation gradually occurs over time, making it difficult for consumers to notice. It’s a clever tactic to avoid criticism for price hikes while still saving on costs. This trend is increasingly used in the food and beauty industries. 

Meaning of Skimpflation: Skimpflation is a term combining "skimp," meaning to cut back, and "inflation," referring to price increases. It describes a phenomenon where, due to inflation, companies charge the same or more for goods or services but reduce the quantity or quality provided. This term was first used in the United States in 2021 on the NPR podcast Planet Money. Skimpflation often involves subtle changes, such as ingredient modifications or minor service adjustments, making it harder for consumers to notice compared to shrinkflation. 
Mintel noted that several chocolate brands have adopted shrinkflation to offset declining sales volumes. For example, the average serving size of everyday chocolate bars, including single bars, blocks, and multi-packs, decreased by 3.5%, from 101.5g in 2021 to 98g in 2024. However, in some cases, prices have increased significantly to cover rising costs. The size of the Galaxy bar was reduced by 10%, and the Cadbury Dairy Milk pack also got smaller, as did Quality Street products. Interestingly, many consumers showed a positive response to chocolate reductions, with most UK consumers preferring smaller sizes over price hikes. However, no consumer expressed a preference for price increases with quantity reductions; rather, they would prefer quantity reductions if prices must rise, not simply welcoming price hikes.


As of August 2024, the hashtag #shrinkflation recorded 86 million views on TikTok. Consumers are identifying brands that use shrinkflation or skimpflation, comparing them with competitors and sharing information on social media. It’s a strategy known mostly to companies, making it difficult for consumers to detect. While companies hide it, consumers continue to seek it out. Ultimately, consumers must uncover the truth about pricing. If quantity reductions go beyond the limits of what’s justifiable by raw material costs, companies will face consumer backlash. When unavoidable, transparent communication is needed to help consumers understand price hikes or quantity reductions.

To prevent arbitrary price increases, government regulations are also being implemented. In Korea, as a follow-up measure to address shrinkflation, unit price labeling will become mandatory in large online shopping malls from November 2025. This unit price display will show prices in formats such as "100g, 100ml, 1 piece for OOO won." Currently, unit price labeling is enforced in offline stores like department stores, shopping malls, and corporate supermarkets (SSM). The scope of this labeling will expand to major online shopping platforms with an annual transaction volume exceeding 10 trillion won, including Coupang, Naver, 11st, and Gmarket. The number of items requiring unit price labeling will also increase from 84 to 114.

However, consumers want more transparent and accountable pricing rather than just regulated price disclosures. The most affected by shrinkflation are food brands reducing product quantities, but recently, beauty product sizes have also become a significant factor. Consumers may not realize that the quantity has changed until they notice faster replacement cycles for products they bought at the same price. If the price remains the same but the effectiveness drops, they eventually find out. According to global accelerator Fastercapital, price transparency has become crucial in the beauty industry. Some brands have started providing detailed cost breakdowns for each product. For instance, a $50 skincare serum may display costs as $5 for ingredients, $2 for packaging, $10 for marketing, and $8 for distribution, with the remaining amount covering profits and overhead. Additionally, comparing prices with other brands, ethical sourcing, regulatory compliance, and price models based on supply and consumer behavior can enhance price transparency from multiple angles. 


Shrinkflation and skimpflation cannot be considered inherently negative strategies. If they are done at reasonable levels that allow consumers to perceive the changes sufficiently, they could be a smart approach during economic downturns rather than raising prices outright. However, as companies struggle with rising costs, consumers are also becoming more cautious and sensitive to price changes, spending less than before. The psychological expectation for purchase satisfaction has increased, as they now think more carefully before making a purchase of even 100,000 won. Therefore, if brands do not consider price transparency, the effects of shrinkflation and skimpflation could be linked to a negative brand image. Of course, shrinkflation and skimpflation are intended to subtly adjust without consumers noticing, but transparency is key to avoiding misunderstandings.




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