Shrinkflation is generally defined as the act of reducing the size, volume or weight of a commodity while keeping its price at the same level. The term is a combination of two terminologies which are shrink and inflation respectively, which implies that reducing the size of an item automatically translates to inflation when prices are maintained. In this case, customers tend to pay more on less quantity of a products. For instance if a consumer was initially paying 2 sterling pounds for a 50g bar of chocolate and later pays the same amount for 40g of the same chocolate bar, that is shrinkflation since the price has been maintained but the quantity of the products has been lowered. Shrinkflation is a strategy rather, practiced in many regions by traders whose main intention is to maximize on profits by reducing the cost of production or rather spending less. The paper is focused on analyzing this economic phenomenon in the United Kingdom laying more weight on Confectionary industries as they seem of be the most affected industry. This industry is most susceptible to shrinkflation because its products are quite visible and close to the consumer constantly. The paper is also aimed at establishing the core reason why most traders prefer shrinkflation in lieu of inflation, and on the same note identifying its impacts on the state of European Union market and the Confectionary industry in the United Kingdom.
Why Confectionary industry? Shrinkflation mainly focusses most on the small quantity and most frequently bought products like Candies, Chocolates, Snacks and Sweets. There must be a reason behind this. One is that consumers pay little attention to the size, weight or volume of these products in the market, the only thing they look at is the value and the utility of the product. Therefore, alteration of the size of these commodities becomes really hard to notice especially when demand for the same is very high. One thing that traders cannot do is to tell consumers that the price of an item has gone higher, as this might spark a lot of disharmony which may eventually affect sales. Aware of that, shrinkflation becomes a priority. Customers will not easily notice that the product size has been reduced unless they pay very close attention on it. One of the reason that has made shrinkflation successful in the confectionary industry is because consumers are driven by the ability of these products to satisfy their wants and not necessarily size. When one walks into a Candy shop to buy a chocolate bar, he or she will not bother weighing the item to confirm its correct weight or size, the governing factor will be the taste and value of that chocolate bar.
The trend is regarded as a fraudulent activity. In as much as shrinkflation is a strategic approach aimed at maximizing on profit, it has defrauded many customers who are oblivious and ignorant of products’ weight and size considerations. It can be firmly asserted that, traders, manufacturers and marketers have ganged to take advantage of the innocent and naïve consumers who have not time to complain of size of products. On this note, the paper will as well focus on establishing the big winner and loser in this phenomenon there is a sense in which manufacturers have resulted to use of heinous approaches targeting consumers in order to make more money from them by offering little or less satisfying service or products and shrinkflation is one of them. The trend has taken the better part of the international market, United Kingdom being a major consideration. One party is celebrating an unethical behavior while the other one is innocently suffering and being financially siphoned unaware. When shrinkflation is compared to inflation, it appears more of a criminal activity and ought to be treated as such, as there is no transparency and awareness.
The trend has extremely taken shape in the international market and the target victims are the consumers. A lot has been done with respect to consumer protection but the trend is still practiced up to today. What could be the reason behind constant perpetuation of this activity? There are still challenges when it comes to combating the practice of shrinflation in the United Kingdom. First of all, it is difficult to notify all the food industries that are operating using this phenomenon and secondly it if not easy to detect. This has been the main challenge in containing this issue with regard to food industries in UK among other nations. The confectionary industry sector being the most affected, there are still other food companies which are doing shrinkflation on their products. In this paper, we shall find out the major reasons which do promote shrinkflation in the market and how they have affected the economic set up of the United Kingdom.
Shrinkflation is a form of fraud that is fast rising in marketing as the major manufacturers and service providers seek to increase their profit margins even with the upsurge in the cost of operations. The practice denies the customers the value of the prices they pay for products as they get little for large amounts of money. The study presented seeks to explore some of the reasons that have led to the extensive reliance on the practice by firms as well as the economic impacts it has on the consumers of the products manufactured by the companies in questions. The study also seeks to provide some of the solutions to the issue which has engulfed the whole marketing field (Golmaehcva 20m. p. 3-"). There have been cries from some of the customers who realized the calamities and sizes of the products they purchase from the shops are no longer how they used to be. The situation has been experienced even with the maintenance of the prices of the same products despite the reduction in their quantities. Shrinkflation is an act that must be avoided as it leads to the exploitation of the customers by the manufacturers. In such situations, the companies are keen on increasing their profit margins without the notice of the general public. Shrinkflation covers the cases of possible fall in the demand of the product of a company as a result of the increase in the cost of commodities.
Proposed Plan of Work
Aim of research
To research is aimed at establishing parameters that cause the perpetuation of shrinkflation and the various dynamics which result from the same. It will also focus on identifying some of the reasons for the emergence of this phenomenon within the United Kingdom, industries affected and the likelihood of the phenomenon to arise from any other nation in the future.
Hypotheses
l. Shrinkflation has no significant economic importance to the companies and consumers.
2. Shrinkflation has no significant impacts on the inflation rates of a country.
3. Shrinkflation does not significantly affect the buying behavior of consumers.
Research objectives
1. To determine the economic impacts of shrinkflation on consumers and the profits and
sales of companies.
2. To determine the implications of shrinkflation on the inflation rates.
3. To determine the effects of shrinkflation on consumer buying behavior.
Research Paradigm
The study was approached from a pragmatic angle which acknowledged the fact there may exist multiple realities regarding truth. In such cases, the realities are created by the specific members. Therefore the research focused on the issues that are regarded as the reality and truth of the research questions which provided a guideline for the completion of the study (Besier 20l5. p. 32l). Therefore, interpretation of the reality is critical as it can be utilized in the discovery of the underlining meanings concerning activities and events. Adoption of such paradigm necessitates the fact that all sorts of to be collected such as qualitative and quantitative research. As a result, the methods that were used to collect the data for the study were the use of questionnaires, surveys and interpretation of the existing data.
Causes of shrinkflation
Shrinkflation is caused by many factors. These factors determine the decisions made by a firm to reduce the quantities of the commodities they provide while maintaining a constant price.
Sticky prices
These refer to those costs of commodities that the producers cannot easily pass down to the consumers. In this case, the manufacturers suffer from their inability to transfer the inflation costs to their customers. Transferring such costs to the consumers may be perceived as overpricing by the customers and therefore affect the sales of the companies (Restuccia and Rogerson 2008. p. 717). The goods that their costs cannot easily be transferred to the customers include soft and hard drinks. Increasing the cost of such products may lead to the change in the behavior of the consumers and some loyal customers may opt for the products manufactured by the rival companies.
Commodities
There are some services and products that are highly competitive in terms of prices. Therefore. the companies that manufacture such goods find it easy and convincing to alter their quantities while maintaining the cost of purchasing them (Boardman. 2011. p. 296). An example may include an airline company which decides to reduce the size of seats to increase the capacity of an airplane instead of increasing its price. Such decisions are made based on the behavior of the consumers (Besier 2015, p. 321). When the customers prefer to purchase products of low costs in disregard of their quality a company may use that to its advantage and increase its customer base as well as its sales. Therefore, the firm can decide to cut on the quality of the products it produces and maintain the prices.
Affordability
There are cases where firms are faced with the dilemma of providing customers with cheap and affordable products and services even with the increase in the prices of the inputs. In such cases, the companies must develop strategies that will ensure that their profit margins do not fall as a result of the upsurge in the cost of production (Crispim et al. 2014, p. 98). Customer maintenance is critical to the success of any business venture and therefore, it is the role of the firm to ensure that it provides commodities at prices that are appealing to the customers.
Dematerialization
There are cases that innovation and improvements in the designs of commodities may lead to a reduction in their sizes. One example of such case is in the manufacture of flashlights and mobile phones. Over a long period, the sizes of these commodities together with some electronic gadgets have tremendously reduced in a move aimed at making them better and more efficient (Chamoun-Nicolas et al. 2018. p. 97). However, the problem comes in the fact that despite the reduction in their sizes, the prices have continued to rise as opposed to the expectations of the users who feel that fewer materials have been used to make them. Such are some of the situations that have led to an increase in the cases of shrinkflation.
Costs and revenue
There is always a need for the workers of a given organization to provide justification to their salaries. The process can only be possible with an increase in the revenues of the firm while at the same time reducing the costs it incurs (Dominguez 2015, p. 121). One of the easiest methods of doing that without raising other marketing and financial concerns is through reducing the sizes of the commodities in a manner which is not easily visible to the consumers of the products. An example is a move by some of the companies to redesign the packages used for holding shampoo in a way that the customers do not realize the reduction in the quantities of the products (Muendler and Becker 2010, p. 2000). The practice has a greater potential of reducing the cost incurred by companies while at the same time increasing the revenues it gets from the sale of its products.
Impacts of shrinkflation
Difficulty in the calculation of inflation
The measures used in the determination of inflation vary with the average level of prices. The measures assume that the quantities of the goods remain constant with a constant, decreased or increased the price of commodities (Malpass 2007, p. 219). The guide provided by the price levels is often misleading especially when the quantifies and sizes of goods decrease. There is always a difficulty in accounting for the 5% to 10% decrease in the number of products (Bernard et a1. 2018, p. 120). There is also a different case for example in the manufacture of electronic products such as mobile phones which may have the same size but experience an increase in their qualities.
Decreased consumer trust
As reported by economists, there are several cases of shrinkflation that may go unnoticed for an extended period However, eventually, consumers may, later on, realize the reduction and term it as a fraud. As a result, such consumers will feel like they have been exploited by the manufacturers (Dominguez 2015, p. 115). There are situations where companies significantly reduce the number of their products which can be detected by the consumers. In such situations, the customers may decide to shift to the products of rival companies due to the loss of trust emanating from the revelation about the decrease in the quantity of the products.
Inflation in some products
Shrinkflation does not contribute to a significant amount of inflation. However, the change of the size of the packets of some products such as sugar, chocolates, jam, confectionery, and syrups led to an increase of 1.22% in the inflation rate in Britain (Domitrovic 2014, p. 381). The agency that deals with statistics in the country noted that the companies that manufacture such products had associated it with the increase in the cost of the raw materials used to make them.
Reduction in the efficiency of organizations
Shrinkf'lation reduces the efforts made by companies to ensure that they find long-term solutions to the challenges they are facing in the course of their production operations. The organizations may become inefficient and avoid coming up with effective means of battling the economic crises being faced as well as the increased manufacturing cost (Estrada and Park 20l8, p. 15). The organizations may find themselves in such a situation since if the price of raw materials increases, the only thing they have to do is reduce the quantity and sizes of the products produced to cover the extra cost spent on the purchases.
Research Process and Methods of Data Collection
Methodology
The research was done in the United Kingdom to establish the change in the volume and quantities of products in comparison to the price. During the study, the prices of specific commodities were considered against the change in their quantities. To establish the impacts of shrinkflation, interviews were conducted on a sample population of thirty people who acted as a representative of the number of consumers in the United Kingdom who are affected by the process. Questionnaires were provided to the respondents who were required to answer all the questions to the best of their knowledge (Appleyard and Field 2014. p. 219). The questionnaires consisted of queries whim-c related to the perception and sentiments of the customers regarding the decrease or increase in the price of commodities. Some of the questions were constructed to inquire from the customers the levels of decrease in the size or quantities of the products that they can accept without opting to use the commodities from other companies. The interviews and the questionnaires focused on establishing the rates of reduction of the programs which are acceptable to the consumers (Allegrezza 2016. p. 134). They were also required to give their views regarding the reduction and if they would continue purchasing a product even after the revelation that their quantities have been compromised. The tolerable percentage of reduction in the quantities and sizes of commodities were also established through the response of the customers.
In line with the objective of the research, the study concentrated on establishing the impacts of shrinkflation on the buying behavior of the consumers. The behavior was collected by asking questions regarding the decisions by most of the consumers to shift from using one product to the other (Boardman, 2011, p. 296). In this respect, the questions were also directed towards establishing the number of respondents who have shifted their loyalty to use products from rival companies. For the determination of the impacts of shrinkflation on buying behavior of the customers as well as their shift from one product to another, the study focused on both the primary and secondary data which was analyzed for acceptable results to be achieved. The patterns were a representative of the population of consumers in the United Kingdom (Allegrezza 2016, p. 134). An in-depth analysis of the relevant literature on the topic was considered during the collection of data for the study.
Data collection
Surveys were done to establish the reality of shrinkflation in the markets of United Kingdom. The research aimed at the finding of shrinkflation is real in the market of the country and what the views of the consumers are towards the practice which has been rampant since the country exited from the European Union (Nicholson and Stephenson 2010. p. 228). The surveys also aimed at giving the data on the number of products that have experienced changes in their quantities and the percentage of citizens who are unaffected by the revelations of possible exploitation as a result of shrinkflation. The questionnaires were used to provide information on the perception of the consumers and the effects of shrinkflation on their activities.
Data analysis
Data analysis involves the inspections and transformation of obtained data. Such information is then modeled to help in the discovery of useful information and support the process of making decisions. For the study, the data were analyzed both qualitatively and quantitatively. For the quantitative data analysis, figures were considered in regard to the number of respondents and the factual values that shrinkflation has on the economic situation in Britain (Crispim et al. 2014. p. 98). From the analysis of the market reports, the figures were determined to determine whether shrinkflation has any significant impacts on the revenues and profit margins of different companies in the United Kingdom.
Results
During the study. 90% of the respondents (27 people) maintained that the change in the weight of commodities affected their perception regarding the purchase of products. The feedback from 27 people revealed that they would allow a reduction of two percent in the total quantity of the products they purchase from the stores. The respondents maintained that beyond such levels can be considered as exploitation. 10% of the respondents (3 people) were unaware of shrinkflation and therefore they had little information to give regarding the practice. However, they maintained that a little adjustment of the quantity of their favorite products without making alternate alterations to the price of such commodities cannot shift their preference to the other commodities or brand such people maintained that there are always errors that occur in the packaging of products even without shrinkflation. Therefore, they were adamant about the fact that shrinkflation may result in the exploitation of the consumers (Boardman. 20l1. p. 296). Therefore, they also reveal that such changes would make them shift from using one product and adopting the utilization of the others from the rival companies. On the relationship between shrinkflation and inflation. it was established that the practice does not have any significant impacts on the rates. From the study, it was revealed that shrinkflation has significant impacts on the economies of the manufacturers. The reason for that is because shrinkflation helps in the reduction of the cost of operation and production incurred by the companies. The reduction in the sizes of the commodities is critical in controlling the increased cost of purchasing raw materials. The reduction in the size of packages can lead to an increase in the number of goods produced by companies which in mm helps in increasing the sales and revenues of a firm. However, the practice has negative impacts on the consumers of the products which have been affected by the reduction.
Discussion
From the results obtained, it was evident that shrinkflation has significant impacts on the behavior of buying of the consumers. A significant percentage of the consumers who were interviewed maintained that the reduction in the size of products reduces their urge to buy in large quantifies. Twenty seven people maintained that a reduction in the quantities of products that manufacturers give to the consumers without reducing the cost of purchasing such commodities amount to fraud. From the answers obtained by the use of the questionnaires, it was established that many people were ready to change their loyalty in case they realize that the quantities of the commodities they are buying have been reduced without necessarily decreasing the cost of purchase. Often, the consumers feel exploited when they do not get value for the goods they purchase. Shrinkflation leads to the exploitation of consumers as they get fewer quantities or sizes of the products at an increased price per unit volume or weight. Recent research has shown that not all the consumers are rational (Estrada and Park 20 [8, p. 15). There are behaviors that have emerged among the consumers that are not in line with the argument of the neoclassical economics as the customers of the products have developed the classification of products based on the gains and losses as opposed to the status quo that was once considered. As a result, the producers have chosen to reduce the quantities of products they package rather than increasing the price (Chamoun-Nicolas et al. 2018, p. 97). The reason for this is because such increase is perceived by the consumers as financial losses. However, it must also be realized that the behavior is not found in all the consumers. There are others who are extremely on the watch for the increase in the price per unit of the products they purchase while others are only concerned with the quality they receive. However, the options that can be ad0pted by the consumers are always limited in case all the product brands they use have been shrunk.
From the study, it was established that shrinkflation has a significant economic impact on the operation of companies. The practice only benefits the companies as they are able to use less raw materials to produce commodities at higher prices. The practice amounts to exploitation of the customers as they get little quantities of commodities while at the same time paying more for the same products. In such case, the customers may purchase products which not only have low quantities but also the qualities. On the side of the companies and manufacturing firms. They benefit from the practice (Restuccia and Rogerson 2008, p. 717). That explains why most of the companies have readily adopted the technique in their operations. Shrinkflation helps them to increase their revenues and the profit margins of companies due to the increase in the price per unit of the products manufactured by a company. Often, the manufacturers of the commodities utilized by the general public use shrewd strategies to ensure that the consumers to do realize that the quantities or sizes of the goods they purchase from the shops have been compromised (Domitrovic 2014, p. 381). There is always difficulty in establishing whether the masses or sizes of such products have been reduced. For example, there are cases where cans of drinks have been reduced from their normal sizes of 340ml to 330ml. Other products that have been altered include tomato sauces which some were initially sold in 750ml bottles and currently, they are sold in 700ml containers. Search reductions are sometimes insignificant to the consumers of the goods. As a result, they may fail to notice the difference. The extent in which most of the companies in the United Kingdom have adopted shrinkflation policies makes it seem like the practice is legal and acceptable. However, that is not the cases as there are certain quantity reductions that sum up to be exploitations to the consumers of the products. The situation has been made worse by the fact that the manufacturers in the country have no laws that bind them to provide the customers with the exact quantity of products as indicated in the packages or the bottles. The major aim of manufacturers is to maximize the profits they gain from the production of goods. Therefore, they often go to the extremes to ensure that they achieve all the goals they have by increasing their revenues.
According to the neoclassical economies, people learn the fact that consumers are always rational people. Such populations often make decisions that lead to the full maximization of the utilities they prefer (Dominguez 2015, p. 121). Their choices and preferences are based on the particular goods of interest. Therefore, rational consumers have the ability to notice the changes that occur in the reduction of the quantity of products due to shrinkflation and as a result, they are able to make adjustments their purchases accordingly. When the consumers of the “shrunk” products continue to purchase them willingly from the manufacturers, the producers get an opportunity to justify their actions. The reason for this is because such companies are in the business of availing the products demanded by the consumers (Nicholson and Stephenson 2010. p. 228). The earlier research in the field reveals the fact that their customers are always unable to readily perceive the increase in the price of purchasing a unit of the products. As a result. There are different reactions of the consumers to such changes as some may just accept it and continue making the purchases while others may shift from using the products.
A decrease in the size or quantity of products ordinarily leads to the reduction in the demand for the same commodities. As a result, the total revenues and the profits of such goods eventually falls. However, sometimes the fall in the revenue collected by a company due to the shift in the demand for its products may be insignificant. An inelastic demand for goods results in the increase in the revenues collected by a firm. The companies are always familiar with the patterns of demand of the products by the consumers. The shrinkage of the quantity of goods offered to the customers may lead to an increase in the number of products purchased by the consumers due to the need to fill the gap left by the reduction in size (Crispim et a1. 2014, p. 98). An example of such practice is the reduction in the size of the bread sold to the customers. In such cases. a rational customer will go a long way in foregoing some of the essential purchases such as that of meat in order to increase the number of loaves he or she purchases. The kind of the response is adopted by the customer in order to achieve the same sustenance level.
Conclusion
Shrinkflation is a practice that has a lot of impact on the purchasing behavior of consumers as well as the economic aspect of companies. The practice has different results due to the variations in the approaches adopted by the consumers regarding the act of reducing the prices of commodities while maintaining a constant price. The research also established that shrinkflation has no significant impacts on the rates of inflation in a country. However, there are specific products that have their economies affected by the practice. These products include chocolates, sugars, and syrups. The National Statistics body of the United Kingdom recorded 1.22% inflatiOn on the products. Therefore, for companies to remain successful in their activities, they must be able to address the issue of increased cost of purchasing input since not all the consumers of their products are rational. In business, shrinkflation should come as the last resort for the manufacturers. Firms should not entirely depend on the practice to manage some of the losses they incur as a result of economic hard times in a country. There are several other strategies that the companies can use to help them in overcoming the financial crises that arise from the economic problems realized in a country. Since the Brexit, most of the manufacturers have been affected by the rise in the price of inputs. The breaking of the ties with the other countries in the Eur0pean Union has affected the nation both negatively and positively. The negative impacts have been signified by the scrapping off of some of the benefits the United Kingdom enjoyed for being a member of the European Union (Chamoun-Nioolas et al. 2018, p. 97). The free import duties have been recalled and therefore, the traders in the United Kingdom have been forced to pay taxes for the raw materials they purchase from the other nations which are members of the European Union. The action has seen most of the companies in the country resort to using shrinkflation as a strategy of covering the extra costs incurred in the operations and purchase of the raw materials.
The companies in the United Kingdom have been faced with the difficult decision between increasing the prices of products and reducing their sizes and quantities. Due to the fear of losing their customers, most of these manufacturing firms have opted to adopt shrinkflation as it is not easily recognizable as price increments. From the study, it has been found that the consumers are getting more vigilant about the quantity of products they are given in relation to their prices. There are a few rational consumers that are existing as most of the customers are becoming stricter on their spending due to the financi
