Understanding Hidden Price Increases

Understanding how, when and why manufacturers use "stealth" prices increases โ€“ raising prices without (they hope) you noticing.

Understanding Hidden Price Increases

In most cases raising prices is relatively simple – the manufacturer raises the amount shown on the price tag.

There are however times they are reluctant to do that. In times of recession for example – retailers hesitate to raise prices when people are more aware of them and sensitive to them. And sometimes retailers of products that have undergone a steady succession of visible price increases are reluctant to introduce yet another that may alienate customers.

In these situations sellers may resort to what is sometimes referred to as a hidden or "stealth" increase. Rather than raise the price of the package, they reduce the contents of the package. It doesn't feel like you are paying more, you don't feel it at the cash register, but you are getting less. It's still a price increase.

One example is known as de-sheeting – removing sheets from rolls of toilet paper or boxes of tissue.

With food the package stays the same size but with more empty space inside it. Famously this happened when canned coffee sellers started shipping reduced the contents of the standard one pound can to 16 ounces.

This is often referred to as "slack fill". Since selling a product whose package size suggests greater content could easily be used to mislead consumers there are some regulations about slack fill and when and why it is allowed. The general idea is that if you can't see the actual amount of the content (empty space in a clear glass jar is OK) there better be a good reason for it, and the FDA lists six of them. Otherwise that empty space is misleading "nonfunctional slack fill" and it's against the rules.

To avoid the slack fill penalties sellers may move to suitably smaller packaging, but try misdirection. The smaller package may be referred to as the "convenience" or "eco-friendly space-saving high-efficiency" packaging... anything to distract you from the fact you are actually getting less.

This is not a one-time thing – it tends to be part of a cycle. The pack size that we consider standard today becomes smaller during the next recession. When things get better a new, larger "economy" size is introduced, but it's really just the same size everyone was accustomed to before the recession and shrinkage.

In time the "economy size" part gets dropped, and it becomes the standard size – until the next recession when the pack size is decreased again.

Don't focus on price tags as much as the per-unit prices shown on the shelf. Those tell the real story.

Raising Prices