This August, Adobe’s Digital Price Index (DPI), our analysis of real-time consumer spending, tracked yet another month of deflation—a trend that re-emerged this spring after a brief period of inflation.
With long-term deflation on the books, the DPI team decided to make a first-time comparison of how far consumers’ dollars stretch online versus shopping at large. Looking at prices between July 2015 and July 2017, we found that the purchasing power of a dollar has increased to $1.06 online, and only $1.03 elsewhere; if consumers shifted all their spending online for the same products they purchased offline in 2016, they’ll save about $2.2 billion vs spending offline. And, according to the numbers, that number will only increase.“We wanted to find out if people who shop mostly online experience deflation differently than folks who go to the store—and it turns out that the online shoppers are seeing their dollars go further, especially in some key consumer categories,” said Sid Kulkarni, data science analyst for the DPI.
Apparel, furniture and bedding, sporting goods, televisions, and jewelry are among the categories where online deflation is significantly outpacing deflation at large, as measured by the Bureau of Labor Statistics Consumer Price Index (CPI). Prices for the CPI are mostly collected at brick-and-mortar retailers, while around 8% are collected from online
A Peek Inside Online and Other Carts Shows a Big Difference
To show the impact of the deflation gap, the DPI team looked at two sets of prices—one of just digital prices, and another with prices from the economy at large, — and applied those prices toproducts from categories that show more deflation online. Total prices declined in both cases from deflation, but during a year’s worth of shopping, a savvy online consumer could have saved $273.67 compared with prices in 2016, while the in-store shopper saved only $148.36 on the same mixture of goods.
“A three-cent gap in the power of your online dollar compared to a dollar spent mostly offline might not seem like a huge difference,” Sid explains, “But when we look at the carts, you can see how those cents add up quickly, with a real impact on people’s wallets.”
The Online-Offline Gap is Widening
As prices are declining faster in the online price index, the relative buying power of a dollar increases relative to a dollar spent elsewhere. “We’re watching as this disparity gets bigger over time,” says Sid.
The Method Behind the Numbers
The data behind the Adobe DPI is sourced through Adobe Experience Cloud. It represents 80 percent of all online transactions from the top 100 U.S. retailers, including aggregated, anonymous data from 15 billion website visits and 2.2 million products sold online. Unlike the Consumer Price Index (CPI), the DPI can track real-time prices and quantities of items sold. The data also enable unprecedented views of the U.S. economy, including state-by-state analysis and this month’s comparison of online and total deflation.