ORLANDO, Fla. – What to Know:
- Shrinkflation gives you less. Skimpflation gives you worse.
- The trend often appears as reduced service, lower quality, or fewer perks at the same price.
- Recognizing skimpflation can help consumers decide whether they’re still getting their money’s worth.
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Typo? Nope. Today’s Dollars & Sense is focusing on “skimpflation,” the lesser-known sibling of “shrinkflation.” Think of them like the Kardashians: if shrinkflation is Kim, skimpflation is Kourtney. She may not have been the first one you thought of, but she’s become a force in her own right.
Most people know shrinkflation – it’s when companies keep the price the same but quietly give you less. A 16-ounce package becomes 14 ounces. A bag of chips has fewer chips. Did someone quietly reduce the marshmallow count in my powdered hot chocolate?
Skimpflation is different.
Instead of shrinking the product, companies shrink the experience. You’re paying about the same – but getting lower quality, fewer services, or less value in return.
- Think about hotels that no longer clean your room every day.
- Restaurants with fewer servers and longer waits.
- Retail stores with one cashier and a line stretching down the aisle.
- Airlines charging extra for what used to be included.
- Companies that have replaced a customer service representative with an AI chatbot.
Sound familiar? That’s skimpflation.
Businesses aren’t just responding to inflation by raising prices – they’re also looking for ways to reduce labor and operating costs. Sometimes that means charging more. Other times, it means quietly giving customers less.
More Than Just a Media Buzzword
At first glance, skimpflation sounds like one of those made-up media words destined to trend on social media for a few weeks before disappearing into the internet ether.
And as a matter of fact, the term was coined by the media.
In October 2021, Greg Rosalsky, an economics correspondent for NPR’s Planet Money, proposed the word to describe something consumers were increasingly experiencing: paying the same – or more – for goods and services that simply weren’t as good as they used to be.
Rosalsky called it “skimpflation.”
Technically, it’s a portmanteau – a word created by blending “skimp” (to cut corners or be stingy) with “inflation.” Since then, the term has been picked up by economists, consumer advocates, and the Federal Reserve Bank of St. Louis in discussions about inflation and consumer spending.
But while the word is relatively new, the idea behind it isn’t.
Economists have long recognized that companies don’t always respond to inflation by raising prices or shrinking products. In fact, statisticians routinely adjust inflation data to account for changes in product quality. Measuring declines in service, however, is much harder.
Sometimes, they simply provide less. Less service. Less convenience. Less quality.
And unlike shrinkflation, skimpflation can be difficult to measure.
A candy bar is either 1.5 ounces, or it isn’t. But how do you measure a hotel room that’s no longer cleaned every day, or a customer service line that keeps you on hold for 45 minutes? That’s what makes skimpflation so frustrating for consumers. The price tag may not change, but the value does.
Why Do Companies Do This?
At its core, skimpflation is about protecting profit margins.
When inflation pushes up the cost of wages, rent, insurance, utilities, and raw materials, businesses have only a handful of options. They can raise prices (customers don’t like that), reduce the size of their products (customers like that even less), accept lower profits (stakeholders generally don’t like that), or find ways to cut costs that customers may not immediately notice.
For many companies, reducing service, or finding other ways to cut costs, can feel like the least risky option.
A consumer will notice a $2 price increase right away. They’re far less likely to notice one fewer employee on the sales floor, longer wait times at a restaurant, or a hotel that now cleans rooms every other day instead of every day.
But not every example commonly described as skimpflation is driven by inflation alone. In some industries, labor shortages, changing consumer preferences, and advances in technology have also reshaped the customer experience. Businesses also argue that some of these changes simply reflect what customers want.
Many travelers, for example, are comfortable checking into a hotel using an app, scanning a QR code instead of reading a printed menu, or using self-checkout at the grocery store. In those cases, technology isn’t necessarily reducing value – it may actually be improving convenience.
So where do those savings go?
If a business reduces labor costs through technology, consumers might reasonably expect lower prices, better service elsewhere, or investments that improve the overall customer experience. Instead, if prices stay the same (or go up) while the quality of the experience declines, many economists would argue that’s where convenience starts to look a lot like skimpflation.
Economists generally don’t object to companies becoming more efficient – in fact, productivity is one of the primary drivers of economic growth. The debate is whether those efficiencies create more value for customers – or simply reduce costs for the business.
The challenge for consumers is knowing where convenience ends and cost-cutting begins. Because sometimes they’re the same thing. Sometimes they’re not.
Customers Vote with Their Wallets
Of course, there is a limit to how much companies can cut before customers start noticing.
A hotel can eliminate daily housekeeping. A retailer can replace cashiers with self-checkout. A restaurant can operate with fewer servers. But eventually, consumers begin asking a simple question:
“Am I still getting my money’s worth?”
For businesses, that’s the gamble behind skimpflation.
Every reduction in service saves money in the short term, but if customers begin to feel they’re paying the same for a noticeably worse experience, they may decide to take their business elsewhere.
The problem with skimpflation isn’t that every change is bad. The problem comes when customers feel they’re being asked to pay yesterday’s price – or tomorrow’s price – for yesterday’s service.
Businesses compete on price. But they also compete on value.
Skimpflation works only as long as customers believe they’re still getting enough of both.