In today's competing market, companies are facing cutthroat competition to maintain their consumer base and on the other hand to keep their growth steady. But what if it is not the other companies that are threatening a company's consumer base rather it is the market factors and one of the market factors that threats every company now and then is Inflation.

Companies invest a lot in research and development, technology, etc. to provide the customer with products at lower prices than the other companies maintaining quality and standard. But there are some factors that no technology can overcome that is the rapidly increasing cost of production due to the increasing price of goods for manufacture for example the increasing price of dairy products will lead to increased cost of production of sweets, butter, ice cream, etc.

To maintain the profit margins the companies have to increase the price of products but it may lead to a loss of consumer base if other companies also do not increase prices simultaneously and if all the companies involved in producing the same category of goods increase their prices at the same time it will trigger the competition concern and bringing the companies under the radar of Competition Commission of India that these companies might have entered into an agreement to predetermine the increased price.

There is always a risk for the company to increase the price as if the competing companies do not increase the price and are capable to bear a loss in profit margin for a time the consumer will shift towards them as they will be getting similar products and service at a lower price as it not the companies only that are affected by the inflation the consumer is also affected by it due to increased cost of living and if a consumer finds the product of substitute nature at a lower price they will take no time to shift that product. To overcome this problem and also to survive the increasing inflation companies have entered into the practice of shrinkflation.

Shrinkflation is made up of two terms: shrink and inflation. Shrink refers to the change in product size and volume while inflation means the rise in the level of prices. Combined together shrinkflation means the change in product and size due to the increasing level of prices. It is also termed as hidden inflation because in most of the cases it goes unnoticed by the consumer as the companies manipulate the size and volume in such a way that the consumer feels no change.

For example, a company offering products in a jar usually makes the bottom of the jar a little bumped or thicker before resulting in offering a lesser volume of product maintaining the size of the jar. The consumer often did not pay much attention to this. So to conclude shrinkflation means when companies reduce the size and volume of products without increasing the price of the product.

Reasons for shrinkflation:

Increasing cost of production: with the increasing inflation, the cost of production also increases, and to maintain their profit margins the companies can either increase the product price or offer lesser quantity for the same price but in doing so they might lose their consumer base. To maintain their consumer base and to hold their trust companies many times opt-out for shrinkflation.

Market Competition: The other factor because of which companies opt for shrinkflation rather than increasing price is the tough competition in the market. If the other companies do not increase the price of their products and are ready to bear the loss in profit margins, then it will make the company lose its consumer base and drive them out of the market.

Withhold consumer trust: maintaining strong consumer trust in the company is one of the key factors to survive in the market but this trust is most fragile and can easily shake with the increased price so to maintain their customer trust the companies opt-out for shrinkflation and consumers also trust that the company on which they have placed their trust is not affected by inflation and still offering products at the same price as the consumers are more observant about the change in price but in reality they are not aware that they have been affected by shrinkflation.

When shrinkflation can be employed?

Usually when the sale of a product is dependent upon the price of a product shrinkflation can be employed. For example, most of the consumers buying the products such as biscuit, chocolate, ice cream, chips, and beverages they tell the price of the product rather than the quantity as the consumer usually ask for a ParleG biscuit of Rs 10, chips packet of Rs 20 or coca cola bottle of Rs 40. So in these types of products where the demand is made on the quoting the price of products is made shrinkflation can be employed.

The reason behind the same is that in these type of products the consumers rarely look at the quantity of the product and is more concerned with the price and if there is a slight change in the quantity of product it may go unnoticed for example the weight of biscuit packet reduced by 10 gram to 190 gm from the earlier weight of 200 gm will go unnoticed as the consumer are aware that last time the product was priced at Rs 10 and it is still priced at Rs 10 and might not aware that last time the weight was 200 gm and this time it is 190 gm.

Apart from this when the sale of the product is according to the size of the product such as small, medium, or large then also shrinkflation can be engaged as again in these the consumer is not aware of the product quantity when the same product was purchased last time and more focus of the consumer is on the price of the product. For example, the consumer purchasing tomato sauce usually buys as per the size rather than the quantity of the product, and minor changes in the quantity usually go unnoticed.

When shrinkflation cannot be employed?

In the products when the sale is as per the quantity shrinkflation cannot be employed. If the consumer is demanding 1 Kg of rice then the packet has to contain 1Kg of rice the company cannot make any difference in the same by reducing the quantity. In this scenario, the options that are left to the companies are to increase the price of the product and it is the easiest method to overcome inflation and maintain profit margins or the company can search for a cheaper method of production to reduce the cost of production by using better technology, alternative packaging methods such as shifting from steel can to polythene type material, from glass bottles to plastics, etc.

How shrinkflation can be detected and avoided

It is not easy to detect shrinklation as the consumer do not keep a record of the quantity and size of products they consume but still there are a few cautious signs that may help in detecting shrinkflation such as spotting any change in the product design, shape of packing, or even a new slogan used by the company.

To avoid shrinkflation the consumer if finds that the product they are using is shrinflated then it is better to look for an alternative product that is not affected by shrinkflation or even can look for local products or store brand products as they are generally cheaper than name brand products.

Legal position regarding Shrinkflation

Even though shrinkflation is a concern for consumers but there is no such specific legislation that concerns shrinkflation. Shrinkflation is a phenomenon that is developed to uncover the practices followed by companies to make consumers believe that they are getting the products at the same price even if there is inflation in the market but they are kept away from the hidden fact even though the price is same but the quantity of product is reduced.

There is nothing illegal for the companies to reduce the quantity of product if they face increased cost of production due to inflation but on the other hand, if they do so they are to be made bound to disclose the same facts to the consumers. The Consumer Protection Act 2019 provides the consumer with the right to be informed about the quality, purity, and quantity of the product.

But there is nothing about the duty of companies/manufacturers to inform the consumer about the changes in the quantity of the product and it has to be made a compulsory obligation for companies to inform about the changes in the quantity of the product and also from which date such changes are implemented as when the companies are offering more quantity at the same price they openly advertise it and even make it clearly visible on the product packing so why not information about the reduction in the quantity of product be also made available to the consumer as a right to him.