E-commerce has entered deflation for the first time in more than two years, according to Adobe’s latest Digital Price Index (DPI).
Adobe says e-commerce has experienced deflation for the first time
Adobe recently released the latest online DPI inflation data powered by Adobe Analytics, which showed that online prices had declined in July by 1% year-on-year. July’s decline follows two months of increases, with a 0.3% year-over-year increase in June and a 2% year-over-year increase in May.
Prices drop across most e-commerce categories
Adobe says July was the first month in which e-commerce entered deflation after 25 consecutive months of steady online inflation. The DPI tracked a number of e-commerce categories, with 14 out of 18 tracked experiencing month-over-month price declines in July.
The largest e-commerce category is electronics, which had a share of spending of 18.6% in 2021, but saw a sharp decline of 9.3% year-on-year. Clothing prices fell 1% year-on-year after enjoying 14 consecutive months of increases. Toy prices also saw a sharp decline, declining 8.2% year-on-year, an all-time low for the category over the past 31 months.
One of the categories that has held strong has been food, with an increase in grocery prices in July by 13.4% year-on-year, which was a record and the largest increase of all categories.
E-commerce deflation is a ‘relief for consumers’
Adobe’s vice president of marketing and growth insights, Patrick Brown, offered his take on the e-commerce deflation, saying, “Faltering consumer confidence and reduced spending, coupled with oversupply at some retailers is driving down prices in major online categories such as electronics and apparel, providing some relief to consumers as the cost of food continues to rise both online and in stores “.
Adobe also explained how its DPI works, saying on Adobe’s website that: “The DPI is based on the Consumer Price Index (CPI), published by the US Bureau of Labor Statistics, and uses the ‘Fisher Price Index to Track Prices Online The Fisher Price Index uses quantities of matching products purchased in the current period (month) and in a previous period (previous month) to calculate price changes by category Adobe’s analysis is weighted by the actual quantities of 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 products into the categories defined by the CPI manual. The methodology was first developed together with renowned economists Austan Goolsbee and Pete Klenow.”
The statement also said: “[The DPI] analyzes one billion retail site visits and over 100 million SKUs across 18 product categories: Electronics, Apparel, Appliances, Books, Toys, Computers, Grocery, Furniture/Bedding, Tools/Home Improvement household, home/garden, pet products, jewelry, medical equipment/supplies, sporting goods, personal care products, flowers/related gifts, non-prescription drugs and office supplies.”
Consumers spend less online in July
The DPI also revealed that consumers spent $73.7 billion online in July, which is $400 million less than the previous month when $74.1 billion was spent. However, Adobe says the year-over-year comparison is still favorable, as e-commerce spending in July grew 20.9% compared to July 2021.
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