Potato chip bags are the king of the air. This is a meme that the potato chip consumers of Lays created. Lays used to have a lot of chips inside its bag but after release the amount of chips inside the bag soon began to decrease. When the consumers realized it, the content of the bag was half air and half chips. However, they still had to pay the same price. This is Shrinkflation. Shrinkflation is the reduction of the size of the product while its sticker price remains. Shrinkflation began the fight between the consumers and the producers.
Shrinkflation happens because the production cost of the product rises. Production costs can rise due to, the increased cost of raw materials, labor costs, overhead costs, and shipping costs. For the producer, if the price of the potato rises and they sell the same amount of product at the same cost, they will lose some of their profit. To avoid this, they have two choices which are to increase the price of the product or decrease the amount of product sold. If the producer increases the price of the product because most companies are not a monopoly, they will have substitute goods. For example, a substitute good for Lays could be Doritos. With substitute goods, if they increase the price of their product, the consumers can simply not choose to buy their product and buy the other one. So, the producer chooses to decrease the number of products.
The choice of decreasing the amount of product will allow the producers to maintain their profit but they will lose consumer loyalty. Consumer loyalty is an emotional relationship between the customer and the brand. Loyal consumers are willing to repeatedly purchase the firm’s product versus the competition. When the amount of the product decreases, the consumers would ask for an increase in the amount of the product. However, because the producers want to secure the profit, they will not. This leads to consumer dissatisfaction. Consumer dissatisfaction is when the consumers are not happy with what the company is doing. When the dissatisfaction continues the consumers will no longer be loyal to the company; they will purchase other goods.
This indicates that the demand for the product will decrease and low demand forecasts profit loss. Whenever the products feel that they have lost too many of their consumers, they release new products more amounts of products than they had before. This pleases the consumers. They will buy the newly released product. The newly released product will have a higher sticker price because it has more amounts. But people will still purchase them because they got what they wanted, more products. Some producers understand this relationship. So, they tend to decrease the amount of product and then release a new product with a higher price even though there was no change in production cost. This is because the producers earn profit from the original product and earn more from the newly released product.
Till now there is no solution for the extinction of shrinkflation because it is a strategy that producers use to avoid profit loss due to shifts in production costs. Unfortunately, the only thing that can be done is to avoid shrinkflation. To avoid shrinkflation, consumers can check the unit price. Unit price is the price for one item or measurement. Unit price shows the actual price for the product and if the sticker price is higher, don’t consume the product. Shrinkflation happens due to the economic cycle. It cannot be vanished. So, we must avoid it.
Work Cited
BBC. (n.d.). 인플레이션: 양 줄이고 가격 그대로…’슈링크플레이션’ 일시적 현상 아닌 영구적 문제. BBC News 코리아. https://www.bbc.com/korean/articles/c88e39zz67vo
Benveniste, A. (2023, September 25). The costly economic trend here to stay. BBC News. https://www.bbc.com/worklife/article/20230922-shrinkflation-isnt-a-trend-its-a-permanent-hit-to -your-wallet#:~:text=’Shrinkflation’%20%E2%80%93%20reducing%20a%20product’s,brunt%2 0of%20spiking%20production%20expenses.
Liberto, D. (n.d.). Shrinkflation: What it is, reasons for it, how to spot it. Investopedia. https://www.investopedia.com/terms/s/shrinkflation.asp#:~:text=Shrinkflation%20is%20the%20 practice%20of,face%20of%20rising%20input%20costs.
By. Jiheon Ryu