Singapore Management University (SMU) researchers have shed new light on a sneaky economic phenomenon that's quietly affecting shoppers worldwide: shrinkflation. This practice, where companies reduce product sizes while keeping prices steady, effectively raises the cost per unit without drawing much attention. A recent study led by SMU's Aljoscha Janssen reveals how consumers often miss these changes, providing crucial insights into buyer behavior that resonate strongly in Singapore's competitive retail landscape.
In an era of lingering inflation pressures, understanding shrinkflation is more relevant than ever for Singapore households navigating rising living costs. The research highlights why size tweaks fly under the radar compared to blatant price hikes, offering a window into the psychology behind everyday purchasing decisions. As Singapore's universities like SMU continue to drive economic research, such findings equip consumers, businesses, and policymakers with tools to address hidden cost increases.
The Rise of Shrinkflation and SMU's Pioneering Role
Shrinkflation, the subtle reduction in product quantity or size at the same price point, has become a go-to strategy for manufacturers facing rising input costs. Unlike direct price increases, which trigger immediate backlash, downsizing allows firms to pass on expenses discreetly. SMU's School of Economics has positioned itself at the forefront of this discussion through rigorous empirical analysis.
Aljoscha Janssen, Assistant Professor at SMU's School of Economics, collaborated with Johannes Kasinger from Tilburg University to dissect this trend using vast retail data. Their work, published in the prestigious Marketing Science journal, draws from a decade of U.S. grocery scanner data but offers universal lessons applicable to Singapore's market, where similar patterns are emerging. Janssen's expertise in behavioral and experimental economics makes him ideally suited to unpack why consumers tolerate—or overlook—these changes.
This study not only quantifies shrinkflation's prevalence but also explains its persistence. In Singapore, where household budgets are stretched by high import reliance and urban living expenses, such research from local institutions like SMU empowers better decision-making. Universities play a vital role in translating global data into actionable local insights, fostering economic literacy among students and the public alike.
Unpacking the Methodology: How SMU Analyzed Real-World Data
To capture shrinkflation accurately, the SMU-led team examined NielsenIQ retail scanner data spanning 2010 to 2020 across up to 50,000 U.S. stores. They focused on leading brands, which dominate 80% of sales per category, ensuring relevance to major consumer choices. Downsizing was defined as permanent substitutions of identical products (same brand, UPC) with size changes up to 25%, allowing brief overlap periods for smooth transitions.
Demand models used constant-elasticity specifications: log(quantity) = η_price * log(price) + η_size * log(size) + fixed effects for stores, products, and weeks. This isolated size impacts from confounding factors like promotions. Robustness checks included quarterly data, instrumental variables, and alternative size definitions, confirming findings' reliability.
While U.S.-centric, the methodology's scalability makes it ideal for Singapore contexts. SMU's emphasis on data-driven economics equips students with skills to apply similar techniques to local datasets, such as those from the Department of Statistics Singapore (SingStat). This research exemplifies how Singapore universities bridge theory and practice in consumer studies.
Prevalence of Shrinkflation: Numbers Don't Lie
The study uncovered that 1.92% of products underwent downsizing, compared to 1.11% upsizing. In sales terms, downsizing affected 1.89% of total volume versus 0.35% for upsizing—a fivefold disparity. Post-downsizing, price per volume rose 12% on average, without corresponding price cuts.
This trend held steady over the decade, unaffected by economic cycles. Categories like detergents, sanitary products, and cereals saw the highest rates, as multi-use items lend themselves to incremental changes. Paper goods, snacks, and non-alcoholic beverages followed suit, while staples like milk resisted due to standardization.
In Singapore, SingStat's monitoring echoes this: less than 5% of 3,000 tracked household items showed shrinkflation in recent years. Frequent culprits include instant coffee, laundry detergents, milk powder, diapers, and ice cream. SMU's findings validate these observations, underscoring universities' role in contextualizing global trends for local audiences.
Consumer Reactions: Why Size Cuts Sting Less Than Price Hikes
A core revelation is consumers' asymmetric responses. A 1% price increase slashes demand by 1.19%, but a 1% size reduction drops it by just 0.56%—half the impact. For downsized products specifically, size elasticity nears zero, meaning sales barely budge.
One year post-downsizing, sales rose 6%, suggesting inattention or habit loyalty. Shoppers buy more units to meet needs, unwittingly paying more overall. This behavioral gap explains shrinkflation's allure: firms boost margins stealthily.
Psychologically, price tags grab attention more than package metrics. Inattention bias, confirmed by lab experiments, amplifies this. For Singapore consumers, juggling busy lives, this rings true—unit prices often ignored despite pilots in supermarkets.
- Price elasticity: -1.19 (strong reaction)
- Size elasticity: -0.56 (milder)
- Post-downsize sales boost: +6%
Hotspot Categories: From Cereals to Detergents
Multi-serve products dominate shrinkflation. Detergents lead, followed by sanitary protection and cereals—essentials with flexible packaging. Snacks and beverages see frequent tweaks, capitalizing on impulse buys.
Singapore mirrors this: SingStat highlights coffee, milk powder, diapers. Laundry detergent packs shrink, ice cream tubs dwindle, yet prices hold. Consumers switch brands less for staples, sustaining firms' strategies.
SMU's granular category analysis aids retailers in predicting responses, a skill taught in its economics programs. Future Singapore studies could adapt this to hawker centers or wet markets.
Firm Strategies: Profit Without the Pain
Shrinkflation lets manufacturers respond to costs—supply chain disruptions, wages—without alienating buyers. Unlike price hikes sparking switches, size cuts preserve loyalty. Sales upticks post-change indicate perceived value holds.
In Singapore's import-heavy economy, volatile commodity prices amplify this. Firms avoid CPI scrutiny on non-standard units. SMU research suggests labeling reforms could curb it, balancing profits and transparency.
Business schools at SMU train future leaders to navigate such tactics ethically, emphasizing consumer trust.
Policy Implications: Protecting Singapore Shoppers
With consumers underreacting, regulators must act. France mandates size warnings; Singapore could pilot unit price displays broadly. SingStat already adjusts CPI for shrinkflation via fixed units.
SMU advocates clearer disclosures, empowering informed choices. Universities like SMU influence policy via evidence, as seen in past inflation surveys.
Potential measures:
- Mandatory unit pricing everywhere
- Size change notifications
- Consumer education campaigns
Shrinkflation in Singapore: Local Snapshot
SingStat's 2026 analysis confirms shrinkflation's foothold: 5% of fast-movers affected. Coffee, shampoo, milk powder top lists—essentials hitting family budgets. Supermarket scans show frequency, not volume, driving rankings.
Consumers adapt via promotions, private labels, but staples resist switches. SMU's global lens localizes: Singaporeans, price-sensitive yet time-poor, mirror U.S. inattention. Tie to SingStat's insights.
Stakeholder Perspectives: Voices from Experts and Consumers
Janssen notes: "Reducing sizes effectively raises margins, exploiting inattention." Consumers report frustration but inertia; switchers cite apps tracking units.
Retailers defend as cost necessity; policymakers eye fairness. SMU seminars foster dialogue, training economists for advisory roles.
Future Outlook: SMU's Ongoing Contributions
As inflation evolves, SMU eyes Singapore-specific scanner data, AI-driven detection. Collaborations with SingStat could yield real-time monitoring.
For higher ed, this bolsters SMU's rep in applied economics, attracting talent via research positions. Students gain from cutting-edge curricula.
Armed with knowledge, Singaporeans can combat shrinkflation: check units, compare totals, voice concerns. SMU's work paves the way.
Photo by Artem Beliaikin on Unsplash