The hidden costs of commerce: how companies pass on the burden.
In the complex ecosystem of global commerce, tariffs are a political tool with far-reaching economic consequences, and they rarely stay where they are initially placed. While they are a tax on imported goods, the burden of these costs is often passed on to the end consumer in clever, and sometimes deceptive, ways. It’s a game of economic sleight of hand, where companies use a variety of tactics to ensure that their bottom line remains intact while the customer pays the price. Understanding these subtle shifts is the first step toward becoming a more informed and savvy consumer.
1. They are shrinking the product without changing the price.
This is a clever and common tactic known as “shrinkflation.” Companies will reduce the size of a product, whether it’s the number of chips in a bag or the amount of soda in a bottle, while keeping the price the same. The consumer is still paying the same amount but is getting less product, which is a subtle way of passing on the cost.
This tactic is often effective because consumers are more sensitive to price increases than they are to a small reduction in the size of a product. It’s a way for companies to maintain their profit margins without raising a red flag with a price hike.
2. They are switching to cheaper ingredients or materials.
To offset the cost of tariffs, some companies will switch to cheaper ingredients or materials in their products. This can result in a lower-quality product that may not last as long or taste as good as the original. This is a subtle way of passing on the cost, as the consumer is getting a lesser value for their money.
This tactic can be particularly frustrating for consumers who have a loyalty to a certain brand. The brand may look and feel the same on the outside, but the quality has been quietly reduced, which is a hidden cost that consumers are forced to bear.
3. They are delaying the introduction of new products.
Developing and launching new products can be a costly process, and with the added burden of tariffs, some companies will simply delay the introduction of new products. This means that consumers have fewer choices and may be forced to stick with older, less innovative products.
This is a hidden cost that can stifle innovation and limit consumer choice. It’s a way for companies to reduce their financial risk in a volatile market, but it’s the consumer who ultimately loses out on new and exciting products.
4. They are changing the product’s packaging.
Companies can use clever packaging changes to pass on costs. They may switch to cheaper packaging materials, which can be less durable or appealing, or they may make the packaging larger to create the illusion of more product, when in fact the amount inside has been reduced.
This is a way for companies to save on their own costs while still maintaining the same price point. The consumer is not only getting a lesser product but may also be receiving it in a less appealing or durable package, which is a subtle form of a price increase.
5. They are reducing the number of a product’s features.
To cut costs and avoid a price increase, some companies will remove features from their products. This could be anything from a smaller battery in a new phone to a less powerful motor in a household appliance. The consumer is still paying the same price but is getting a less functional or less desirable product.
This is a subtle way of passing on the cost, as the consumer is getting less value for their money. It’s a tactic that can be particularly frustrating for consumers who are loyal to a brand and expect a certain level of quality.
6. They are reducing the quality of customer service.
To cut costs in other areas, some companies may reduce the quality of their customer service. This could mean longer wait times on the phone, less helpful representatives, or a complete lack of a customer support team. The consumer is left with a less satisfying and more frustrating experience.
This is a hidden cost that can damage a brand’s reputation and lead to a loss of customer loyalty. It’s a way for companies to save money, but it’s the consumer who ultimately pays the price with a less-than-ideal experience.
7. They are reducing the number of a product’s options.
To simplify their supply chain and reduce costs, some companies will reduce the number of options they offer for a product. This could mean fewer colors, sizes, or configurations. The consumer is left with fewer choices and may be forced to settle for a product that is not their first choice.
This is a subtle way of passing on the cost, as the consumer is getting less choice for their money. It’s a tactic that can be particularly frustrating for consumers who are looking for a specific product and are unable to find it.
8. They are increasing the price of a product’s accessories.
Instead of increasing the price of a main product, some companies will increase the price of its accessories. This could be anything from a phone charger to a pair of headphones. The consumer is forced to pay more for the accessories, which is a hidden cost that can add up quickly.
This is a clever and subtle way of passing on the cost, as the consumer may not even realize that they are paying more. It’s a tactic that can be particularly frustrating for consumers who have already invested in a product and are now forced to pay more for its accessories.