Inflation comes in waves. The first wave is shrinkflation or skimpflation. That’s when producers start charging more per weight as they try to cover rising costs. You can see shrinkflation with your eyes. There is less cereal in the box. There are deeper dimples in the perfume bottle and less fluid inside. There are three potato chips in a bag pumped with air. The candy bars at the checkout counter keep getting ever smaller. The aperture on the toothpaste widens so you use more of the product faster. But, at some point, the producer can’t shrink it anymore. Now they jack the price up but the producer tries to hide the hike. They engage in the next wave of inflation, which we can call sneakflation. I first spotted this in 2017 when pubs in Britain started offering beer prices in 2/3rd pints. Nobody buys 2/3rds of a pint. You have to work out the price of a half pint or a full pint yourself, which you are probably too drunk to do! Next thing you know, bars start charging you for ice in your drink, too, so shifting to cocktails is no escape.
Consider a car with over 8000 chips. These sensors track everything. That means the car company can charge you much more than ever before. BMW is now selling access to the heated seats by subscription. Having a heated seat for your bum will cost you $18 a month. You can guess what’s coming. You get charged whenever you touch the brakes, open a window or change gears. You paid for the car and expect these things to be included in the price. But they aren’t anymore. Now you face hidden price hikes. These are sneaky ways to raise the price of the car and generate ongoing cash flow and recurring revenue for the car company.
These sneaky price hikes, or sneakflation, is hidden in a series of microtransactions. This term has typically referred to the gaming industry where game developers charge users for access to in-game currencies or items or to unlock secrets. Expiration charges can be paid if you want to keep playing. Today GM is happy to charge you $135 a month for emergency assistance, enhanced maps, and faster acceleration. As the transportation industry moves away from ownership toward charging per inch, per minute, and per mile, we can expect lots of sneaky hidden charges to appear.
Sneakflation will make its way into sports. Want to see what things look like from a camera inside the player’s helmet? You’ll be paying more for that. Want to see a race or a game from a particular camera on a particular turn? That will cost you. ESPN+ may have just raised the price of a subscription by 43%, but you should expect the best views of sports to cost more than that.
Sneakflation is showing up in fashion too. Now you have to pay an extra charge to make a return.
It’s showing up in the travel industry where consumers face “drip pricing”. The HBR describes this as “a strategy whereby a firm advertises only part of a product’s price upfront and then reveals additional mandatory or optional fees/surcharges as the consumer proceeds through the buying process—affects consumer choice and satisfaction.”
In the old days, a consumer could see price hikes. A saunter down the grocery aisle revealed the price movements. Today algorithms drive dynamic pricing. The prices I pay differ from what you pay, so we can no longer compare. Prices change now depending on the demand and the supply and depend on your behaviors as well. If you search for a hotel online, the room price will probably keep rising till you book it. Now prices can move in a fraction of a second. No human brain can process the price hikes brought about by dynamic pricing models. But, companies that do this well, like Amazon, definitely benefit from the fact that you are paying more.
For example, milk prices in the UK are up 20% in two months. Fuel, milk and egg prices have risen at the fastest rate in 40 years. But, when you buy milk online, you may find that the price jumps after you’ve added it to the cart. It’s gone up by the time you get to the online checkout. That price jump is sneaky because you didn’t see it coming and cannot find the milk more cheaply. If you decide to stay in for a pizza, Uber Eats charges you for delivery, but so does the pizza maker. In New Zealand, a Domino’s pizza has a 6% delivery fee on top of the charge paid to the delivery firm, Uber Eats, or equivalent. The pizza costs $15.39. It costs $18.49 if it’s delivered. Then add “the delivery charge of $7.99, and the same order costs an extra $11.09 when delivered.” That’s sneaky. That’s sneakflation.
Hotels are always trying to load clients up with hidden charges. Being required to pay a “resort fee” in a NYC hotel is pretty galling, especially if you are paying 60% more than a regular hotel room price even though there isn’t a pool, gym, or tennis court. An easy way out is to stay in hotels you’ve booked with hotel award points. But, what do those points buy you? Chances are that the value of the points is falling. The hotel charges you more and delivers you less in a sneaky, almost invisible way.
The global heat wave has many heading to buy ice cream. Ice cream prices have screamed upwards because the ingredient costs keep rising. Eggs prices are up 33.1% in a year. Margarine is up 34.5% and butter is up 21.4% from last June. Milk, again, is up 16.4% since June 2021. A sneaky new trick is to charge you for the ice cream, separately for the ice cream cone, and possibly even the cost of keeping the freezers going. The heatwave in Wales saw sufferers paying £5 for a 99 pence ice cream.
According to the Harvard Business Review, restaurants are now charging an “unavoidable 3% “kitchen appreciation” fee” which is not a tip. Tips are extra. Rafi Mohammed spelled the problem out in the HBR in 2019. He explained that the consumer cannot know the charges until they are due. The charges are unknowable in advance, which means they are really really sneaky,
“Why do businesses employ bait-and-surcharge pricing? Let’s be clear: this is a blatantly deceptive tactic designed to mask the real price. This practice also makes price comparisons challenging, which restricts competition. It’s inefficient for travelers to evaluate a listing of hotel prices on online travel sites. Each hotel’s net price is revealed only after clicking additional pages to calculate its unique resort fee.”
The pressure to hide price hikes has massively intensified thanks to COVID’s supply chain damage, Putin’s efforts to drive up commodity prices, and The Fed’s fearful inability to hike interest rates in advance of inflation, among other things.
Inflation is a wave that rolls in slow and big. No one cares when they can barely see it in the distance. Not many care when the shrinkflation wave rolls in. It’s annoying but doesn’t provoke action. Sneakflation is also a long slow wave. Only after time do people add things up. Even inflation is not taken too seriously at the start. We hear the cries of pain when the CPI starts to hit double digits. With the CPI hitting 9.1% in June 2022, we should expect more shrinkflation and sneakflation.
Please report examples of both to me here or at @DrPippaM on Twitter
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Excellent - all this is true and consistent with the concept of “consumer-as- prey” mentality that has seen gouging as a normal business practice. I see a significant opportunity for businesses with a strong customer focus to engage in “honest pricing” and moving away from the “SaaS everything” model with which many are simply disgusted.
Speaking of sneaky illegitimate offspring of unknown father's. I recently had to have some dental work done. And implant. The initial charge I was quoted was in the neighborhood of $5,000. Of course the dental insurance I have does not cover that. So I decided to get some additional pricing options. Some of the dentist wouldn't even talk to me unless I came in for an appointment and they would charge me $125 to $250 just to talk to me. In the end for an implant I got price ranges between $3,000 and $5,000 for what's essentially the same thing. Dental tooth implant. Getting prices from dentists and doctors is nearly impossible in advance. And when people are ill or in pain they don't really question it. So when you get the bill it's an MFer.
One of the main causes of bankruptcy in America is Medical bills. And if you hide the prices in advance and hit people when they're in pain and not really concerned about anything but alleviating the pain, it turns into a real racket. I should also mention the study showed that life expectancy in the United States, while having the highest medical cost per capita, also have the lowest life expectancy in the industrialized nations. So we have a real problem here. I'd be interested in getting any feedback.
addendum:
Medical tourism. I also looked at flying down to mexico for dental work. I recall my grandparents in the 1950s driving down to Juarez for dental work.
after adding in transport and hotels and etc, the amount saved would be minimal for the effort involved.
I did find out that there is huge medical tourism to countries like Mexico and India, so if you got some serious out of pocket work that needs to be done, check that out as well.