NEW YORK — Gadgets are increasingly being sold without batteries, toys are being packaged in slimmer boxes or even without packaging altogether, and consumers are encountering more household goods that require self-assembly. These shifts are part of a broader strategy employed by consumer product companies to manage costs and avoid price increases amidst rising import tariffs on key trading partners.
The economic landscape has become more challenging as new tariffs take effect, placing additional financial strain on both businesses and consumers. U.S. shoppers are feeling the pinch of ongoing inflation, while companies face increased expenses due to tariffs, which can erode profit margins. Businesses are cautious about passing these costs onto consumers, fearing a potential drop in sales.
In response, many companies are considering various cost-cutting strategies — some of which consumers may notice, reminiscent of “shrinkflation,” while others remain more behind the scenes. These changes aim to alleviate price pressures but may not fully offset them in every case.
Strategies being explored by retailers and brands include addressing the cost implications of recent tariff hikes. The imposition of new tariffs has led businesses to reevaluate their supply chains and product designs. Companies are looking for innovative solutions to maintain competitiveness without sacrificing quality.
Executives in the supply chain consulting sector suggest that companies should focus on immediate savings and collaboration with suppliers during this tumultuous period. This collaborative approach is vital for businesses to mitigate costs effectively.
Smaller businesses, too, are feeling the impact of fluctuating supply costs and tariffs. Many are adapting by sourcing materials locally wherever feasible, reducing reliance on overseas suppliers affected by tariffs.
For many manufacturers, adjusting product components and evaluating the necessity of various features allow them to absorb potential cost increases while maintaining price points. For instance, a toy company may opt for thinner paper in product packaging, thereby avoiding retail price hikes.
As companies consider their manufacturing processes, there is a shift towards simpler designs to streamline production and reduce costs. Retailers are also reexamining packaging options, which could appeal to eco-conscious consumers while helping to offset financial pressures.
Companies are presenting retailers with multiple packaging options, all designed to minimize costs while still engaging customers. In addition, businesses are contemplating the use of alternative materials — for example, switching from plastic to cardboard package inserts — to further reduce production costs.
The trade landscape is rapidly evolving, impacting how products are shipped and assembled. Consumers can expect to assemble more products at home as companies look to cut shipping costs, with items being redesigned for shipping efficiency. Companies are also reassessing which features of their products are essential to deliver effective value without incurring unnecessary costs.
The trend of reducing product size or weight without lowering prices, a practice known as shrinkflation, has been prevalent and is likely to continue as businesses adapt to rising costs in ingredients, packaging, labor, and transportation. Consumer advocates predict that with the introduction of new tariffs, manufacturers may once again resort to shrinkflation strategies, subtly raising prices through reduced product sizes.
