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24 January 2013
The business community is in the business of stimulating consumer demand. They want consumers to buy more and more of whatever it is they are selling. More sales, more profit for the business. Simple, really.
Year by year they also jack up the price of their products so that even with static sales they make more profit.
However, there is another more underhand way in which they stealthily push up profits – and that is by downsizing.
No, not downsizing their businesses but downsizing their products. Literally. They scale down the size, reduce the quantity or depreciate the quality of their products – yet continue to sell them at existing prices.
It’s called “reducing unit costs”.
What a lark!
It’s money for old rope.
We first noticed this practice ourselves in Luxembourg in about 1990 when we traded in our old Peugeot 305 diesel car at a Peugeot dealer’s for the latest model of the same Peugeot 305 diesel car.
It was only when we took delivery of the new vehicle that we discovered that many of the features had been downsized: the glove compartment had been miniaturized, for instance, and the boot likewise had been substantially scaled down.
The result was that we could no longer fit the travel accessories we needed into the glove compartment, while the boot was no longer big enough to accommodate the suitcases with which we normally travelled.
We discover now that this practice seems to be pretty widespread.
A report in the London Guardian on 16 January 2013 gives some examples.
According to the newspaper, brewer Heineken has announced that the alcohol content of its John Smiths Extra Smooth beer has been reduced from 3.8% to 3.6%, whereas the price is being increased by 2.5p a pint.
The report claims that a similar move has been made by brewers Budweiser, Stella Artois and Becks.
The writer, Paula Cocozza, notes that she recently bought a well-known brand of yoghurt with which she was familiar only to find that the taste was unrecognisably watery.
She also noted that a box of tissues which she bought recently was a third smaller than a box of the same tissues marketed previously. This chimes with our own observation that the number of tissues in a box has been falling at warp speed in recent years.
The report quotes a claim by internet commentator Skinz that in August 2012 a well-known confectionery manufacturer reduced the weight of its tins of chocolates from 1 kilo to 820 grams.
Another observer is said to have noticed that a top soft drinks company is now charging the same price for 750ml of its smoothie as it was charging, until recently, for a litre.
In a recently notorious scandal in the United Kingdom, beef burgers sold by supermarket giant Tesco were found to contain horsemeat and pork.
The examples, it seems, are endless.
We draw readers’ attention to this aspect of the market economy as part of our series of posts exposing how capitalism really works.
The customer is always right?
The customer is a sucker – and you never give a sucker an even break.
You might perhaps care to view some of our earlier posts. For instance:
1. Why? or How? That is the question (3 Jan 2012)
2. Partitocracy v. Democracy (20 July 2012)
3. The shoddiest possible goods at the highest possible prices (2 Feb 2012)
4. Capitalism in practice (4 July 2012)
5.Ladder (21 June 2012)
6. A tale of two cities (1) (6 June 2012)
7. A tale of two cities (2) (7 June 2012)
8. Where’s the beef? Ontology and tinned meat (31 Jan 2012)
Every so often we shall change this sample of previously published posts.