As we all know inflation is currently running rampant in the United States economy. Rich countries are facing producer prices that have soared to their highest rates in the last 40 years. Companies are also facing supply chain issues along with a myriad of other problems. The obvious way companies could combat these rising prices and inflation is by raising their prices but it doesn't seem to be that simple. A very recent example would be Netflix, which, tried to raise their prices in the midst of a streaming war and the ending results didn't bode well for them as they saw huge strong price drops and a surge of membership cancellations. So, if raising prices is off the table of most companies they have to turn to other options. One of these other options is using a term called shrinkflation. What this means is that companies are shrinking the products they sell and trying to rebrand them in a cool way that seems fresh and trendy to consumers. The companies can brand the shrinkage as environmentally friendly and it becomes a win-win for companies and consumers.
https://www.economist.com/business/2022/04/30/the-weird-ways-companies-are-coping-with-inflation
Rebranding seems like a clever option to increase prices but I'm not sure how that would translate to basic subsistence items like bread and rice. Can't exactly make bread cool. In that case it might be difficult for firms to adjust prices.
ReplyDeleteOptimization is one of the ways to reduce the cost of a product for many companies. By using new technologies, ways, and techniques many companies can reduce the unit cost of a product. Consequently, there will be no need to raise the price of products.
ReplyDeleteI think that branding the shrinkage as environmentally friendly is smart because consumers won't feel like they are getting the same product.
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