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08/27/2021

Adobe: Online inflation keeps going up

Dan Berthiaume
Senior Editor, Technology
Dan Berthiaume profile picture
Online inflation began rising at the start of the pandemic.

Everyday staples are becoming more expensive for online purchase.

According to Adobe Digital Economy Index (DEI) data for July 2021, as e-commerce takes on a greater share of overall retail, online inflation is becoming a bigger concern. Even as supply chain issues resolve, Adobe warns that rising demand may lead to less discounting, as retailers look to preserve margin or offload fulfillment costs.

[Read more: Adobe: U.S. e-commerce will hit $1 trillion in 2022]

For the month of July 2021, Adobe DEI data shows that online prices are up 3.1% year-over-year (YoY) and down 0.7% month-over-month (MoM). Because of greater current volatility in prices online compared to offline, Adobe expects monthly changes are expected to be more dynamic. In June 2021, online prices were up 2.3% YoY and up 0.6% MoM.

In the 18 categories tracked by the Adobe DEI, all but one (office supplies) saw higher prices in July 2021 when compared to a pre-pandemic period (2015-2019 average). Notably, Adobe DEI tracking reveals that everyday staples are becoming more expensive for consumers.

For example, groceries saw prices rise 1.28% in July — compared to a smaller 0.47% rise in June and 0.51% rise before the pandemic. Other everyday staples such as personal care products, which typically saw prices fall 1.23% on average before the pandemic, rose by the same amount (1.23%) in July.

In pet products, a category seeing tremendous growth as people stayed home and took renewed interest in their pets, prices rose 1.37% in July, compared to a pre-pandemic period where prices typically fell 1.12%. Additionally, prices for non-prescription drugs were up 5.66% in July, a significant jump from prior to COVID-19, where prices increased only 0.01% on average.

Electronics and computers, legacy e-commerce categories where consumers generally expect better and cheaper products every year, also saw continued inflation online. Adobe DEI data indicates computer prices were typically down by 9.24% before the pandemic. In July, however, prices were down by only 6.97%. Electronics saw an even more dramatic shift. Typically down 9.06% pre-pandemic, the category was down only 2.04% in July.

Online inflation in categories including furniture/bedding, home/garden, tools/home improvement, and appliances have sustained. Adobe predicts these categories will continue being a driver for online inflation if demand remains high.

“With online shopping becoming more ubiquitous, and consumers getting more accustomed to ordering everyday staples through e-commerce, we expect online inflation will continue to rise and be in closer sync with offline prices,” said Vivek Pandya, lead analyst, Adobe Digital Insights. “As the digital economy expands, online pricing trends will have greater impact on how we measure and understand inflation overall. Consider that in just the first seven months of 2021, consumers have already spent over $481 billion dollars online, a staggering 61% increase over the same period in 2019.”

The Adobe Digital Economy Index (DEI) uses the Fisher Price Index to track e-commerce prices. The Fisher Ideal 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. Based on Adobe Analytics, the Adobe DEI analyzes 1 trillion visits to retail sites and over 100 million SKUs in 18 product categories.