Ecommerce has entered deflation for the first time in over two years, according to the latest Adobe Digital Price Index (DPI).
Adobe Says Ecommerce Experienced Deflation for First Time Ever
Adobe recently published the latest online inflation data from the Adobe Analytics-powered DPI which showed that online prices had decreased in July by 1% year-on-year. The July decrease follows two months of increases, with a 0.3% year-on-year increase during June and a 2% year-on-year increase during May.
Prices Decrease in Most Ecommerce Categories
Adobe say July was the first month where ecommerce entered deflation after 25 consecutive months of constant inflation online. The DPI tracked a variety of ecommerce categories, with 14 out of 18 of those tracked experiencing month-on-month price decreases in July.
The largest ecommerce category is electronics, which had a 18.6% share of spend in 2021, but had a sharp fall of 9.3% year-on-year. Clothing prices fell 1% year-on-year after enjoying 14 consecutive months of increases. Toy prices also took a hefty drop, decreasing by 8.2% year-on-year, which is a record low for the category over the last 31 months.
One of the categories that remained strong was food, with grocery prices rising by 13.4% year-on-year in July, which was a record high and the largest increase out of all the categories.
Ecommerce Deflation a ‘Relief for Consumers’
The vice president of growth marketing and insights at Adobe, Patrick Brown, offered his insight into the ecommerce deflation, saying: “Wavering consumer confidence and a pullback in spending, coupled with oversupply for some retailers, is driving prices down in major online categories like electronics and apparel. It provides a bit of relief for consumers, as the cost of food continues to rise both online and in stores.”
Adobe also explained how their DPI works, saying on the Adobe website that: “The DPI is modeled after the Consumer Price Index (CPI), published by the U.S. Bureau of Labor Statistics and uses the Fisher Price Index to track online prices. The Fisher Price Index uses quantities of matched products purchased in the current period (month) and a previous period (previous month) to calculate the price changes by category. Adobe’s analysis is weighted by the real quantities of the products purchased in the two adjacent months.
“Powered by Adobe Analytics, Adobe uses a combination of Adobe Sensei, Adobe’s AI and machine learning framework, and manual effort to segment the products into the categories defined by the CPI manual. The methodology was first developed alongside renowned economists Austan Goolsbee and Pete Klenow.”
The statement also said: “[The DPI] analyzes one trillion visits to retail sites and over 100 million SKUs across 18 product categories: electronics, apparel, appliances, books, toys, computers, groceries, furniture/bedding, tools/home improvement, home/garden, pet products, jewelry, medical equipment/supplies, sporting goods, personal care products, flowers/related gifts, non-prescription drug and office supplies.”
Consumers Spend Less Online in July
The DPI also revealed that consumers spent $73.7 billion online during July, which is $400 million less than the previous month when $74.1 billion was spent. However, Adobe say the year-on-year comparison is still favorable, with the ecommerce spend in July growing by 20.9% compared to July of 2021.
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