Latest / Inflation and Your Money with Fexingo: Protecting Purchasing Power and Beating Inflation / How Inflation Is Quietly Eating Your Subscription Boxes
Transcript
- Lucas: Let's talk about the little monthly treat that keeps getting pricier — subscription boxes. Luna: You mean the ones that show up on your doorstep like clockwork? Because I've definitely noticed my beauty box feels lighter lately. Lucas: Exactly. And it's not just beauty — meal kits, snack boxes, even pet toy subscriptions. They're all getting squeezed by the same inflation forces we've been tracking. The May CPI came in at 334.0, up from 332.41, and core CPI is at 336.1. Those aren't dramatic jumps, but for a business model built on thin margins and predictable costs, every basis point matters. Luna: So is it shrinkflation again? Smaller box, same price? Lucas: Partially. Take a popular snack box — the one that sends you a curated selection of chips and candies each month. They recently went from 12 items to 10, same price point. That's a 15 percent cut. But what's interesting is that some boxes are trying to hold the line on size and instead adding surcharges. One beauty box I looked at added a two-dollar 'inflation adjustment fee' on top of the existing monthly charge. Luna: Two dollars doesn't sound like much, but if you're paying thirty bucks a month, that's a 6.7 percent increase. Lucas: Right. And it compounds. The companies themselves are dealing with higher costs across the board — raw materials, shipping, labor. The PCE price index hit 131.5 in May, and core PCE is at 130.1. Those are the Fed's preferred inflation measures, and they're still creeping up. Meanwhile, the fed funds rate is sitting at 3.63 percent, so borrowing to cover any cash flow gaps is more expensive too. Luna: So the subscription model — which was supposed to be this predictable revenue stream — is now a bit of a trap for companies? They can't easily raise prices without losing subscribers, but they can't absorb costs either. Lucas: That's the bind. And we're seeing it play out in real time. Some meal kit companies have started charging separately for 'premium' recipes — the ones with steak or seafood — whereas before those were included in the weekly plan. Others are quietly reducing the portion sizes. The ten-year breakeven inflation rate is at 2.23 percent, which suggests the market expects inflation to stay moderate, but for these businesses, even two percent annual cost growth can eat into a ten percent margin pretty fast. Luna: I wonder if this is one of those categories where consumers will just cancel and go back to buying things individually. Like, I can get a beauty product at a store without the surprise. Lucas: Some are. Churn rates have ticked up in the subscription box space over the past twelve months. But there's also a loyalty element — people get attached to the ritual. The question is whether that loyalty survives a sustained period of higher prices. If you look at the Dow at 52,900, up two percent in the last five days, and the S&P 500 at 7,483, up 1.8 percent, the broader market seems to be shrugging off inflation concerns. But the consumer on Main Street is still feeling it at the mailbox. Luna: And the mailbox is exactly where subscription boxes arrive. So what's your advice for someone who wants to keep their monthly treat but not overpay? Lucas: First, look at the unit cost. If a box used to have twelve items for thirty dollars, that's two-fifty per item. If it now has ten items for the same price, that's three dollars per item — a twenty percent increase. You might decide it's still worth it, but at least you're making an informed choice. Second, check if they offer a 'lite' version or a longer billing cycle. Some companies have introduced cheaper tiers or quarterly plans that lock in a slightly lower rate. Luna: And I'd add: don't be afraid to cancel and come back. They often send a discount to win you back a month later. Lucas: That's a great point. The retention offers can be surprisingly good. And if you're the kind of person who listens to shows like this and thinks about your money decisions, you might appreciate knowing that the conversations we have here are supported entirely by listeners — no ads, no sponsors. A couple of dollars a month is genuinely what keeps these going — buy me a coffee dot com slash fexingo, if you've gotten something out of them. Luna: Yeah, it's a small way to keep the content independent and focused on what matters to you. Lucas: Exactly. So back to subscription boxes — there's one more thing I want to flag. Gold has been on a tear, up 4.1 percent in the last five days to $4,187 an ounce. That's partly an inflation hedge trade. But for the average person, gold isn't a practical everyday inflation hedge. What is practical is being aware of where inflation is hitting your wallet — and subscription boxes are a perfect example of a hidden cost increase that flies under the radar. Luna: Because it's a small amount each month, you don't really notice until you add it up over a year. Lucas: Right. A three-dollar monthly increase is thirty-six dollars a year. If you have three subscriptions, that's over a hundred dollars. That's a nice dinner out — or a contribution to an IRA. The point isn't to say all subscriptions are bad. It's to say: know what you're paying and what you're getting. And if the value isn't there anymore, vote with your wallet. Luna: And maybe the next time you see a smaller box, you'll remember this conversation. Lucas: Hopefully. Because inflation is quiet, but it adds up. And that's true whether you're talking about the macro numbers or the box on your doorstep.