Small businesses are feeling the pressure of rising costs and are turning to a new strategy called “shrinkflation” to combat the financial challenges. This tactic involves offering smaller sizes or quantities of goods and services while keeping prices the same. According to a study by Clarify Capital, 12 percent of small businesses have already implemented shrinkflation, and 20 percent are considering doing so in the future.
Consumers are not oblivious to this strategy, with 81 percent reporting that they have noticed shrinkflation in products and services. However, a staggering 96 percent believe that businesses are not transparent about this practice. As a result, 68 percent of consumers have switched brands or companies, and 45 percent have opted for generic alternatives to avoid shrinkflation.
The lack of transparency surrounding shrinkflation has raised concerns among consumer groups and government officials. Some countries have even taken action by requiring companies to label products that have decreased in size while maintaining the same price.
For small businesses considering shrinkflation as a cost-saving measure, it is crucial to communicate openly with customers about the changes and the reasons behind them. Alternatively, businesses can explore other strategies such as budgeting, waste reduction, or slight price increases to navigate the challenging economic landscape.
In a time where consumer trust is paramount, small businesses must tread carefully when implementing shrinkflation to avoid alienating loyal customers and damaging their reputation.