Why ‘skimpflation’ is the hidden risk to your budget
There’s a new economic pressure in town putting even more strain on household budgets – skimpflation.
We all know that inflation means rising prices, which hurts everyone. And ‘shrinkflation’ is a well-known side effect of inflation, where businesses avoid hiking unit prices by instead shrinking the amount of the actual product that you get for your money.
But this cost of living crisis is so serious and widespread now that it’s causing skimpflation – which is harder to spot but just as bad for your wallet.
This is where prices stay the same or even rise, but the quality of what you’re buying gets worse. It happens as businesses try to cut their own costs or even just can’t get hold of the goods and labour that they need.
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Laura Rettie, Editor-in-Chief of the comparison website Finance.co.uk, explains: “It's an equally difficult time for businesses as well as consumers. Many small businesses just scraped by during the pandemic in 2020, only to be hit with massive rising costs this year.
“As consumers struggle with rising living costs, firms are forced to choose between passing on the increase in expenses to their customers, making less profit or skimpflation.
“Bottom line is we're getting less for our money. Hotels are reducing daily housekeeping, deliveries are taking longer, and our snacks are shrinking.”
Skimpflation can be very damaging for your pocket but also very hard to spot. And the bad news is we’re likely to see a lot more of it.
A hidden problem
Skimpflation happens in lots of different, subtle ways and across pretty much every sector so you have to watch carefully to spot it.
Rettie says almost all businesses will be tempted to skimp when times are so tough: “Consumers are most likely to notice it when customer service suffers or goods are obviously poorer.
“For example, consumers may have noticed it's taking longer to get through to their energy company or bank to speak with customer services because their providers have reduced the number of customer service agents answering the phones.
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“When buying clothes, people might have noticed the quality of items has reduced – jumpers bobble quicker, jeans aren't lasting as long, or multipacks of underwear have shrunk.”
So it’s any way that a company selling goods or providing services cuts corners, resulting in a less good outcome for their customer. And what is really tricky is that sometimes it’s the businesses who are supplying ingredients or parts that skimp, rather than the company you end up buying from.
Whatever the cause, it always leads to worse outcomes for the consumer.
Why is it happening?
It’s not just the result of rising prices, although they are a big factor. There are other issues at play, like supply chain disruption causing businesses to use substitutes.
“Industries experiencing frequent worker strikes are very prone to skimpflation,” says Julian House, managing director of the website www.myfavouritevouchercodes.co.uk.
“The recent airport and train strikes caused delays for commuters across the world as a lack of staff led to them only being capable of offering a substandard service, though the cost of travel hasn’t decreased at all and almost certainly won’t decrease anytime soon.
“One of the biggest causes of skimpflation is shortage of labour, which has been a massive issue across multiple sectors beyond just worker strikes amid the ongoing Great Resignation.”
“The pandemic meant many companies lost tens of thousands of pounds, and they're still clawing back losses from the past couple of years,” adds Rettie.
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"Secondly, the rising cost of natural gas means it costs companies much more to keep the lights on in factories and shops… Thirdly, the rising cost of food caused by several events, including climate change, the pandemic and Russia's invasion of Ukraine, are all reasons grocers and restaurants have been forced to skimp on the quality of their produce.”
But once you know that it’s happening, is there any way to avoid it?
How to avoid skimpflation
A lot of skimpflation is simply inescapable. You can’t get through to your bank’s helpline without a long wait, you have to wait a bit longer for service in a restaurant or shop – these are frustrations that make everything a little bit harder but don’t necessarily hit you in the pocket.
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But some of it hits household budgets directly because the items you buy don’t last as long or the food you purchase isn’t as nutritious or filling. You may find you need to pay for extras that were previously included. And in the current situation where most people’s wages are not keeping up with rising prices, that’s just not affordable.
So what do you need to know to deal with skimpflation? Here’s a checklist:
Be understanding
Before you kick off at a business, consider its own position. Rettie says: “Always do your research before complaining about skimpflation. Suppose you're purchasing from a local, independent trader or restaurant – the likelihood is they'll be making very little profit and barely able to keep trading, so it might be best to adjust your expectations and accept it.
Read reviews
Before you tell a provider or business that you’ve finished with them and you’re cancelling the service, check out the reviews of its competitors to see if they are having similar issues. It may be that there genuinely are issues affecting an entire industry. Make sure you read the most recent to understand if standards have recently slipped.
Vote with your feet
The easiest way to avoid skimpflation is to vote with your feet and, if possible, find a different provider that isn’t making the same cutbacks.
Complain if you're not happy
If you’re experiencing skimpflation at the hands of a big business with big profits and big bonuses for its leaders then it’s time to consider complaining. If you're unhappy with the service or goods you've purchased, your first action should be to complain. Write an email, make a phone call, tweet. Ask for your money back, for money off or for compensation depending on exactly what has happened.
Leave reviews
If you’re not satisfied and the business has not resolved your complaint then leave a review explaining what has happened. Equally, if you notice a business has done a really good job at maintaining standards then leave a review praising it. This will help other customers decide where to spend their money.
But as prices rise and supply chains continue to struggle, paying more or the same and getting less could be a 2022 trend than none of us want but all of us should brace for.
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