“Shrinkflation” May Cost Small Businesses Loyal Customers


Many small business owners feel forced to try out new strategies to combat rising costs – including the newly coined phrase “shrinkflation.”

Shrinkflation refers to businesses charging the same prices for goods and services instead of raising prices, but offering a smaller size or quantity of said item. According to a recent study from Clarify Capital, about 12 percent of small businesses have tried this strategy as a way to control costs. And even more businesses, about 20 percent, are planning to try this strategy in the future.

So, what do consumers think about this strategy? So far, 81 percent of consumers in the Clarify Capital study said they have noticed shrinkflation. And 96 percent believe that businesses are not transparent about using this strategy. In fact, 68 percent said they’ve switched brands or companies because of it. And 45 percent said they’ve opted for generic alternatives to products they used to buy.

Of course, rising costs are a very real concern for many businesses. So it makes sense that many entrepreneurs are looking for creative solutions. However, consumers seem especially wary of this strategy in the current economy – especially for companies that aren’t upfront about the changes. Small businesses may even face extra negative consequences due to shrinkflation if their changes drive away once-loyal customers.

It’s this lack of transparency that has grabbed the attention of consumer groups and even government officials. In fact, countries like France and South Korea are now requiring companies to label products that have shrunk in size while retaining a higher price.

So what are small businesses to do? Each company is different, but it may be worth looking into other strategies like careful budgeting, reducing waste, or even raising prices slightly. For those who do determine that shrinkflation is the best option, being upfront with customers and explaining why the change is necessary may help you retain as many customers as possible.

Image: Depositphotos

Annie Pilon Annie Pilon is a Senior Staff Writer for Small Business Trends and has been a member of the team for 12 years. Annie covers feature stories, community news and in-depth, expert-based guides. She has a bachelor’s degree from Columbia College Chicago in Journalism and Marketing Communications.