Money Management

Are you thinking about using “shrinkflation” for your small business? See which product categories are shrinking — and why it can be a bad strategy. [[{“value”:”

Small businesses are trying their hardest to cope with high inflation. Whether it’s supply chain disruptions, inventory problems, material shortages, or other challenges, many small businesses have seen their costs of doing business go up during the past few years.

Unlike big corporations that have scale and bargaining power to raise prices on consumers, small businesses get stuck in the middle. Small businesses are often reluctant to try to pass their higher costs on to customers.

A recent survey from Clarify Capital found that 12% of small businesses have implemented “shrinkflation” as a way to navigate higher costs and price-sensitive customers. With shrinkflation, businesses find ways to repackage, reformulate, or otherwise sell products in smaller amounts or quantities, but at the same (or slightly higher) price. Instead of raising sticker prices on customers, shrinkflation can be a subtle way to control costs and maintain profitability.

Let’s look at some consumer survey data from Clarify Capital to see which product categories are most likely to “shrink” in 2024.

Top 10 products affected by shrinkflation

The Clarify Capital shrinkflation study interviewed consumers to see how people feel about shrinkflation, and which products are noticeably “shrinking” the most. A whopping 81% of consumers said they have noticed shrinkflation, 78% said they’re “worried” about it, and 82% believe that shrinkflation will increase.

Here are the product categories where consumers say they have noticed shrinkflation happening most often:

Snacks (noticed by 80% of consumers) Candy (55%)Personal care (46%)Cleaning (41%) Produce (34%) Coffee (28%)Meat/fish (26%)Dairy (22%)Chewing gum (11%) Eggs (9%)

There is some room for debate about how accurate these consumer perceptions of “shrinkflation” really are. After all, some products cannot reasonably be “shrunk.” One pound of ground beef still weighs one pound, even if it gets packaged differently. Eggs are regulated by the USDA and labeled as “Grade A” or “Grade AA;” it seems hard to believe that there’s any way for eggs to get “smaller,” even if the price of eggs recently reached painfully high levels for many grocery shoppers.

But it’s clear that many consumers feel like they’re seeing smaller sizes and packaging amounts on grocery store shelves. And “the customer is always right,” right? Small business owners need to be aware of this price-sensitivity and skepticism that consumers are bringing to the conversation — the Clarify Capital survey also found that 96% of consumers do not believe that businesses are transparent about shrinkflation.

How shrinkflation is playing out for various industries

If your small business is in the snacks, candy, personal care, or cleaning products industries, you might feel price pressure to offer smaller sizes (but without reducing the retail price). A common strategy might be to offer slightly smaller bottle sizes of shampoo or soap, or offer packaging with one fewer item in the box.

It’s also interesting to note that some of the product categories where consumers are noticing the most “shrinkflation” are also the categories where small businesses are under the most pressure from rising costs of supplies and materials.

Snack industry (shrinkflation noticed by 80% of consumers)

Consumers aren’t the only people noticing shrinkflation in snacks — politicians are noticing too. U.S. Senator Bob Casey’s office released a report in December 2023 which claimed that snack prices have gone up by 26.4% since January 2019, and 9.8% of that price increase is attributable to “giving families fewer chips and cookies for their dollar.” President Biden even posted a video on social media in February 2024 where he called upon companies to stop shrinkflation for snacks.

Candy industry (55% of consumers noticed shrinkflation)

The candy industry is facing a huge global crisis in 2024 due to skyrocketing prices of cocoa. Cocoa shortages have made all mass-produced corporate brand candy bars and small-batch artisanal chocolates much more expensive to make (and less profitable to sell).

Coffee industry (28% noticed shrinkflation)

Coffee prices are also surging, due to poor crop yields in major coffee-producing regions of Indonesia and Vietnam. This can make it harder for restaurants and coffee shops to be profitable while charging their usual price for a cappuccino.

How your small business can handle “shrinkflation”

Here’s the biggest problem with “shrinkflation” as a pricing strategy: consumers don’t like it. In fact, 68% of consumers told Clarify Capital that they have switched brands because of shrinkflation, and 45% chose generic alternatives. The way your business handles shrinkflation is an opportunity for your business to build trust with customers — or lose customers.

Shrinkflation isn’t just about pricing, it’s about small business marketing. Instead of sneakily giving customers less food, coffee, or chocolate for their money, your business can be a leader and build stronger customer relationships. If you run a small confectionery business or chocolate shop or personal care products company, now is a good opportunity to be transparent with your customers about pricing. Show them how hard you’re working to keep prices low, or if you have to increase prices, show them why your business is getting squeezed by larger forces in the global economy.

Bottom line

Using shrinkflation might not be a smart strategy for your business. Shrinking the size of your products or packaging while keeping prices the same can leave your customers feeling short-changed and deceived. Instead, more small businesses should consider raising their prices in a fair, transparent way that builds trust with customers.

Go deeper into your customer relationships. Deliver more value. Show your customers why they don’t want to replace your product with a cheaper brand. Avoiding shrinkflation might be an opportunity to stand out from your competitors and build customer loyalty.

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Costco has built its reputation on the strength of its Kirkland brand. Learn how product changes have made one item hard to use. [[{“value”:”

If you aren’t a Costco member, you might look at items from the Kirkland Signature brand and think, “What’s the big deal?” After all, it’s just a store brand, right?

Not exactly. While it’s true that the term “store brand” has become pretty synonymous with “cheap knockoffs,” Costco has managed to be one of the few exceptions to the rule. On the whole, Kirkland Signature products are considered to be great quality — often because they are made by the same factories as name-brand items.

However, it’s definitely not safe to assume that every single Kirkland product will be a winner. Sometimes, you wind up with something that simply isn’t up to standard. That’s what happened to me when I tried the Kirkland Signature Bath Tissue.

Hard pass on the Kirkland Signature Bath Tissue

I’m not sure if it’s an aging thing, but somewhere over the last decade I’ve come to realize I have strong opinions about the toilet paper I use. And, as it turns out, so do my family members.

And we have collectively agreed that the regular Kirkland Signature bath tissue (that comes in a blue package) is utter junk.

To really put this opinion in perspective, let me put it this way: Last summer I spent a solid week on the highways moving multiple households across the country. I have visited nearly every rest stop in 13 states. And at least two of those states offered better quality toilet paper than this stuff from Costco.

What kind of adds insult to injury is that I know Costco can do better. That’s because I’ve also used the Kirkland Signature Ultra Soft Bath Tissue (in a purple package). That stuff is thick, soft, and much more pleasant to use (if a little prone to tearing). While it’s still no Member’s Mark, it’s at least comparable.

But the regular stuff in the blue package? Hard pass from our household.

What to do with 28 rolls of TP?

Other than the bad experience, there’s another major drawback to getting a Kirkland product that is below standard: You now have a ton of it. In the case of the toilet paper, it only took us two rolls to realize we absolutely didn’t want to keep using this stuff. So, what do we do with 28 rolls of terrible TP?

If I lived closer to a Costco warehouse, I would happily just go return it. Costco has an excellent return policy, and I know customer service would refund my money without issue.

Alternatively — and what we’ll probably do — I could pay it forward somewhere. Our hineys may be too posh for it, but it’s at least as good as the thin commercial stuff in most public restrooms. So, the local shelter, senior center, or even a daycare would probably be happy to receive a donation of (sealed) toilet paper.

How to avoid another major fail

Whenever I face such a disappointing purchase, I always try to ask myself how I could have avoided it. Sure, I know they can’t all be winners, but you can definitely lower your risk.

Here are a few ways I could have avoided buying low-quality TP.

Shopped in person

The nearest Costco is far away, so I tend to shop online when I can. Had I waited to check out this item in person, instead, I may have noticed the lower quality before going home with 30 rolls.

Read online reviews

While I nearly always try to read reviews before buying something, I didn’t this time, mostly because Costco.com doesn’t actually have any reviews on its site — at least, not for toilet paper. (Some items will have ratings, but I’ve never been able to figure out the rhyme or reason behind which have reviews and which don’t.)

If you do a general search for the Kirkland toilet paper, you do find a bunch of third-party Amazon listings with reviews. However, many of the reviews are old, the results are inconsistent across listings, and, well, it’s Amazon. You can never really trust Amazon reviews not to be fake or paid.

What I could have (and probably should have) done was a bit of social media recon, such as browsing Reddit forums, to see what people are saying about the product. And, doing that now, I quickly find a post talking about how the product has changed recently and the quality went down (though this may depend on location?).

You win some, you flush some

It’s impossible for any store or brand to offer nothing but amazing products. We all have different likes and standards, so what is great for one shopper may be terrible for another. (I’m positive there will be folks who read this and think, “I love that TP, what is this person on about?!”)

In general, I’ve had far more wins with Kirkland products than losses. And Costco’s return policy is so good that even the losses aren’t actually hits to my budget most of the time. With its current record of mostly hits, I’m still perfectly happy to take my chances on new Kirkland products — and I’ll be sure to let you know if I find any more duds!

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Brittney Myers has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon and Costco Wholesale. The Motley Fool has a disclosure policy.

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CDs can be a good investment choice. Read on to learn the most popular reasons investors choose them. [[{“value”:”

Certificates of deposit (CDs) have recently attracted investors’ attention due to their high annual percentage yields (APY). But you might be wondering if a CD is right for you and why you should consider committing your money to one.

Here are five reasons why CDs are so popular among investors and how you can benefit from them.

1. The interest rates are great right now

One of the best reasons to choose a CD right now is that their rates haven’t been this high in many years. It’s easy to find CD rates of 5% or higher right now through some online banks.

Putting $5,000 into a 12-month CD that earns 5% would earn you $250 at the end of the CD’s term. That’s easy money for doing nothing more than opening and funding an account.

2. The rates are (mostly) guaranteed

In addition to CD rates being high right now, they’re also the closest you’ll get to a guaranteed return on your investment. Even high-yield savings accounts don’t guarantee their APYs.

Just know that if you take your money out early, you’ll have to pay a penalty fee. CD early withdrawal fees are typically three months of simple interest for CD terms of two years or less and six months of simple interest for CD terms longer than two years.

As long as you leave your money in the CD for the entire length, you’ll receive the advertised APY for your CD.

3. You don’t need a lot of money to open one

If you have a lot or just a little money to invest, there’s a CD for you. Many high-yield CDs have $0 or $1 minimum deposits.

Of course, the more money you deposit, the more interest you can earn. But if you want a decent return on your money and don’t have a lot of cash, you’ll have plenty of CDs to choose from.

4. Your money is safe

Many people invest their money into a CD because they’re relatively risk-free. All of the money in a CD is FDIC-insured, so if a bank fails with your money in it, you’ll get it back, up to $250,000.

While bank failures aren’t common, a few have occurred in the recent past. When you put your money into a CD, you can be confident you’ll get it all back if something goes wrong with the bank or credit union (credit union accounts are insured by NCUA, rather than the FDIC).

5. You don’t need to know about investing

Many people find opening a brokerage account to buy stocks intimidating. CDs don’t have the same earning potential as stocks, but they’re certainly easier to invest in.

And if you already have an individual retirement account (IRA), you may be able to add a CD to it. Putting a CD into your IRA means you won’t be able to collect your earnings until you retire, but it could help you offset some tax liabilities.

While CDs aren’t right for everyone, they can be a safe and steady place to invest your money. If your goal is cash preservation, then a high-yield CD is a great choice. Just keep in mind that CD rates will likely start falling soon, so lock in your interest rate now if you’re interested.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
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The rate on your mortgage can spell the difference between an affordable balance or not. Read on to learn more. [[{“value”:”

Home prices have been on the rise in recent years. And the more money you’re forced to spend to buy a home, the higher a mortgage balance you’re likely to end up with.

Experian reports that the average mortgage balance in 2023 was $244,498. If you’re trying to buy a home today, you may be looking at a similar balance, a higher one, or a lower one. But how do you know if the mortgage balance you’re looking to take on is affordable? There’s actually a pretty simple way to figure it out.

See what interest rate you qualify for

Let’s say you’re looking at a mortgage of $245,000 (which is roughly the average balance from last year). Whether that’s affordable for you will largely hinge on the interest rate you qualify for.

Right now, the average 30-year mortgage rate is 7.22%, reports Freddie Mac. But if you have an excellent credit score, you may be able to snag a rate that’s slightly lower. And if your credit isn’t great, your rate might, unfortunately, be a lot higher.

It’s important to shop around with different mortgage lenders when you’re looking to sign a mortgage. Each lender ultimately sets its own criteria, so the offer you get from one may be notably different from another.

See what your fixed housing costs amount to

Let’s say you shop around with different lenders and find that the best mortgage rate you can qualify for is 7.2% right now. For a $245,000 mortgage being paid off over 30 years, that results in a monthly payment of $1,663 for principal and interest on your loan.

But is $1,663 a sum you can swing? That depends on what your remaining fixed housing costs look like and what your monthly paycheck amounts to. Let’s say that in addition to $1,663 a month, you’re facing a $250 monthly property tax bill and $87 a month for homeowners insurance. That brings your housing costs to $2,000.

As a general rule, you should aim to keep your fixed housing expenses at or below 30% of your take-home pay. So if you bring home $6,667 a home or more, then you’re generally okay to take on a monthly housing expense of $2,000. However, if you only bring home $5,400 a month, then you’re looking at spending 37% of your pay on housing. That puts you at risk of falling behind on that expense or other bills.

Whether you’re looking to take on a mortgage that’s roughly in line with the average balance or not, it’s important to make sure you’re committing to payments you can truly afford. So make an effort to shop around with different lenders for a good deal on a mortgage rate, and then run the numbers to make sure you’re not spending more than 30% of your income on housing. Going through these steps could help you approach homeownership with a lot more peace of mind.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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Is an adjustable-rate mortgage right for you? Read to see why it may or may not be. [[{“value”:”

It’s hardly a secret that today’s mortgage rates are the highest they’ve been in years. So if you’re in the process of trying to buy a home, you may be inclined to sign an adjustable-rate mortgage, or ARM.

In a recent survey of first-time home buyers by TD Bank, 23% of respondents said they’re considering an ARM, up from 12% in 2023. But should you go that route if you’re looking to buy? Here are a couple of pros and cons to be aware of if an adjustable-rate mortgage is on your radar.

Pro No. 1: You can get a lower starting interest rate

The average 30-year mortgage rate as of this writing is 7.22%, according to Freddie Mac. With an ARM, you might end up with a lower interest rate initially. That could result in a world of savings on your monthly payments.

And while your initial interest rate isn’t guaranteed, if you sign a 5/1 ARM, for example, you get a five-year period where your initial interest rate is fixed. That gives you a lot of time to explore options like refinancing your mortgage before your rate has the potential to rise.

Pro No. 2: You can get a break from higher monthly payments at a time when you may be grappling with other costs

Moving into a new home can be an expensive prospect. First, there’s the cost of hiring movers themselves, which could be substantial depending on the amount of stuff you have and the distance it’s being transported.

Also, you may have to make some initial repairs when you first move into your home. And so at a time when you might be facing temporary but substantial expenses, it can be helpful to have lower monthly mortgage payments to deal with.

Con No. 1: You risk seeing your mortgage rate climb after a period

When you sign an ARM, you run the risk of your mortgage rate rising to a level that’s higher than your initial rate. The result? Higher monthly payments than you’re used to. However, this risk may be lower right now due to where interest rates are.

The Federal Reserve is expected to start cutting interest rates later this year, which could lead borrowing rates across the board to start falling. In the coming years, we may see a general decline in mortgage rates so that by the time your home loan’s rate starts to adjust, it won’t adjust for the worse.

Still, no one can predict the future. If you’re going to sign an adjustable-rate mortgage, you must brace — and save — for the possibility of ending up with a higher rate.

Con No. 2: You’ll have less peace of mind

When you sign a 30-year fixed mortgage, you know what your monthly payments will look like for the next three decades unless you make a change, like refinance. That could not only make it easier to plan out your finances and save for different goals, but it might give you more peace of mind in general.

With an ARM, you don’t get the same peace of mind. You might hesitate, for example, to pump more money into your kids’ college fund in the coming years knowing that your mortgage payments might start to cost more down the line.

All told, an ARM could be your ticket to lower mortgage payments in the near term. But consider the risk you’re taking on before moving forward. If you can afford your monthly payments based on what a fixed 30-year mortgage will cost you, you may want to go that route and then plan on refinancing when the time is right. That way, you’ll get the comfort of knowing you can manage your payments even if they never get better, but you also won’t run the risk of them getting worse.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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Choosing between a hybrid car and EV doesn’t have to be tough. See which types of drivers are a good fit for hybrids vs. electric vehicles. [[{“value”:”

If you’re in the market to buy a new car, choosing between hybrid vehicles and electric vehicles (EVs) could be part of your decision process. EVs have gotten a lot of headlines in the past few years, with generous EV tax credits helping buyers get an immediate discount at the dealership. New EV charging stations are being built nationwide to help EV drivers fuel their vehicles with the power of electricity.

But not everyone is ready for the “range anxiety” that can come with a fully battery-powered car. If you’d rather have the simplicity of a gas-powered car — while still saving money on gas — buying a hybrid car can be a good option to tide you over until the fully electrified future of transportation.

Let’s look at a few situations where buying a hybrid vs. EV can be the right choice for your driving style.

Who should buy a hybrid car instead of an EV

If any of these examples sound like you, you’d probably be better off buying a hybrid vehicle.

You can’t charge an EV at home

Probably the biggest deal breaker for when to buy a hybrid instead of an EV is if you don’t have a garage or other access to an outlet to charge your EV at home. Yes, you can still use nearby public charging stations, but most people prefer to charge their EVs at home, so it’s a convenient part of their everyday (overnight) routine.

You need to make long drives through rural areas

EV charging stations are getting more common across America, but they’re still often easier to find in densely populated urban areas, where lots of people drive EVs. If you just want an EV for everyday city driving or suburban commuting, you might have plenty of charging stations nearby to avoid “range anxiety.”

But if you drive a lot in the countryside, small towns, or sparsely populated rural areas with few EV chargers, you might need the reassurance of good ol’ gasoline in the engine. This would make a hybrid car a better choice.

You don’t want to pay extra for EV car insurance

EVs are more expensive than regular gas-powered cars, and they can be more expensive than hybrid cars. Sometimes by thousands of dollars. The extra costs of EVs are also reflected in the cost of EV car insurance. EV car insurance might cost about 10% extra compared to a regular car insurance policy — or about $320 more per year.

Hybrid car insurance might also be more expensive than a typical gas-powered vehicle of the same make and model — maybe around 7%-11% more costly, according to the insurer Lemonade. Shop around for cheap car insurance before you start shopping for a new car (hybrid or EV). And think carefully about your options to get a cheaper car insurance premium by raising your deductible, pursuing discounts, or other strategies.

Who should buy an EV instead of a hybrid

Hybrid vehicles can be a good “bridge” to the future of fully-electric cars. But what if you want the future to come today? Here are a few examples of people who might be well-suited to EV ownership.

You never want to buy gas again

Because EVs cost more than regular cars, most people who buy an EV are probably not worrying each month about whether they can afford gasoline. But it’s the principle of the thing: if you just hate burning gas, hate spending money on gas, and never want to do that again…buying an EV can liberate you from even noticing the price at the pump.

You want to fight climate change

One of the best money moves you can make to fight climate change is to buy an electric vehicle. Driving an EV reduces your carbon emissions by 78% compared to a gas-powered car. Over the lifetime of your car ownership, especially as electric grids get greener with more electricity coming from renewable sources like wind and solar, the carbon footprint of your EV will be substantially lower than that of a gas-powered car.

You want EV tax credits

One of the best ways to get a discount on the purchase of an EV is to qualify for EV tax credits. If you choose the right vehicle and have qualifying income, you can get new EV tax credits of up to $7,500, and used EV tax credits of up to $4,000.

There is one type of hybrid vehicle that can get EV tax credits: plug-in hybrid electric vehicles, or PHEVs. A few examples of PHEVs are the Toyota Prius Prime (which I own and love) and the Chrysler Pacifica Plug-in Hybrid minivan. Check out FuelEconomy.gov for more details on which cars qualify for EV tax credits.

Bottom line

If you want to burn zero gasoline and make the biggest impact to fight climate change, buying an EV instead of a hybrid is the better choice. But if you want to save some money on the purchase price of your car (and possibly on car insurance) while avoiding the limitations of EV batteries, a hybrid car could be better for your budget.

Want a more detailed, personalized look at the cost of ownership of EVs vs. hybrids and gas-powered cars, based on your local gas prices, electricity costs, and how much you drive? Check out this great free tool from the U.S. Department of Energy to compare multiple makes and models of cars — Alternative Fuels Data Center: Vehicle Cost Calculator.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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