Last Updated on by Tree of Wealth
Have you noticed that some of your favourite products are getting smaller lately? Maybe it’s your favourite Cadbury bar that has shrunk. Or your bottle of shampoo getting tinier. How about each of your caifan side dishes reducing in quantity?
No, you’re not imagining things – this phenomenon is called shrinkflation. But what is it and why is shrinkflation happening? Let’s take a closer look.
What Exactly is Shrinkflation?
Shrinkflation is a cost-cutting measure used by companies to reduce the size of products and services while keeping prices the same, or even increasing them.
Shrinkflation happens when companies try to combat inflation, which refers to a general increase in prices. When products and services cost more to be produced, companies make less profits. They then either have to raise prices or cut costs.
However, raising prices is more difficult as price-sensitive consumers may flee. Instead, these companies sneakily reduce the quantity of your cereal or milk, while keeping the original price the same. You effectively end up getting less for your money. In fact, you will have to spend more now to get back the same amount of goods and services. This can be really frustrating for consumers who are already struggling to make ends meet.
Examples of Shrinkflation in Singapore
Shrinkflation is everywhere, affecting all industries.
The most obvious example of shrinkflation is an outright size reduction in packaged products, such as your toilet roll getting smaller or bag of chips containing more air. More sneaky ways businesses try to hide their penny-pinching methods include changing the design of their product, cutting down the number of promotions, or reducing the amount of discounts.
Services are not spared either. Food stores reformulate dishes to remove expensive ingredients, hotels make housekeeping services “optional”, and buffet restaurants reduce the amount of time a customer can be in the store.
5 Ways To Combat Shrinkflation
As a consumer, what can you do to fight back against shrinkflation? Here are five ways to tackle shrinkflation in Singapore.
1. Make the switch to household brands
When shopping for groceries, which usually make up the bulk of household spending, opt for household brands instead. They are more affordable than their branded counterparts without sacrificing quality.
2. Purchase more non-packaged products
Consumers cannot control the amount of goods inside a packaged product. They can, however, control how much to buy if the products are non-packaged, such as fresh fruits and vegetables. This can help minimise wastage as well since you only pick what you need.
3. Diligently compare prices
When shopping, always read the fine print on the size or weight of a product and calculate how much you’re paying per unit. By diligently comparing prices online and in-store, you can find better deals and ensure they’re getting the best value for their money.
In Singapore, you can make use of the Price Kaki mobile application by Consumers Association of Singapore (CASE). Under this app, you can compare the prices of groceries, household items, and hawker fare across different retailers based on location. Discounts are also reflected in the app so you know where to find the best deals. This is good news for shoppers looking to cut down on their essential expenses.
4. Buy only what you need
Identify your essential expenses and the “good-to-have”. One way to save money is by being mindful of what you buy and only purchasing the items you actually need. Make a list of the items you need before heading to the store. This will help keep you focused while shopping and avoid impulse buys. Also, resist the temptation to buy things on sale unless they are actually on your list.
5. Increase your income
If you don’t like to cut back on your products, consider earning more money instead so you can still buy the same amount of goods, even with increasing prices. There are plenty of ways to bring in more money, such as getting a raise at your current job; finding part-time work or starting a side hustle; selling your belongings on Carousell, or investing in stocks, mutual funds, and endowment plans.
Don’t Forget To Protect Your Money Against Inflation Too
Other than combating shrinkflation, protecting your money against inflation is more important than ever in the current economic situation.
In February, Singapore‘s headline inflation rate rose to 4.3 per cent, which is higher than the usual rate of 2-3 per cent. Headline inflation covers all goods and services, including energy and transport. With the Goods and Service Tax (GST) hike that will be implemented in January next year, inflation in Singapore is likely to remain high and not come down anytime soon.
This is why hedging against inflation is more important than ever. To protect your money, you may wish to consider investing in an endowment policy with one to three years of commitment. By buying an endowment policy, investors give their money to an insurance company in exchange for a fixed monthly payment and, potentially, a lump sum payout upon maturity.
While these policies usually don’t return the same kind of high yields as stocks or bonds, they are much more reliable and tend to increase in value at a rate that outpaces inflation. It also gives you the benefits of basic insurance coverage. This makes them an ideal choice for those who want to ensure their purchasing power stays constant over time.
Even better, given the rise in cheating cases in Singapore lately, it ensures your money stays safe from scammers.
However, It is also important to consider other alternatives for your spare cash and ensure you have sufficient emergency funds set aside. You’ll not be able to touch these invested funds during the endowment lock-in period.
In summary, endowment/ retirement plans are best suited for individuals:
- Who are risk-averse and cannot stomach volatility
- With spare cash
- Wish to hedge against inflation
- Looking for basic insurance coverage
You may be interested: Best Retirement Plans Singapore 2022 – The Ultimate Guide
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