Holy deflation. The Adobe Digital Price Index shows that online prices have fallen for the eighth straight month, based on an analysis of one trillion visits to retail websites online and more than 100,000,000 SKUs.
The index for April released on February showed an annual decline of 1.8% in online prices and a monthly drop of 0.7%.
Adobe reported that 11 of 18 product categories had a price decrease from one year to the next. The largest decline was in computers, with a drop of 15.4%. Other notable drops were in electronics (11.6%), sports goods (6.4%), toys (5.9%), and home and gardening (5.6%).
Adobe reported that the 7.1% YoY drop in appliance prices is the largest decrease in the category since it began tracking prices online in 2014.
Rob Enderle is the president and principal analyst of the Enderle Group The firm is a consulting services company in Bend, Ore.
“There has been a decrease in demand, and in anticipation of a recession He told the E-Commerce Times that a decrease in marketing of appliances was the result. The result of this is a drop in sales which is offset by price reductions.
Demand Drops
Enderle said that some of the price reductions may be due to cyclical factors.
He continued: “But the demand has dropped due to high interest rates, and most of these categories do not fall under luxury products which are often affected by a general reduction in demand.
He said that “higher interest rates have a negative impact on the demand” because they dampen credit purchases. “These price reductions are meant to mitigate the demand problem.”
“Demand exceeding supply is a primary driver of inflation.” He added that an increase in suppliers’ costs is another factor.
Enderle attributes the dramatic decline in the price of electronic and computer products to the pandemic, high interest rate and the rise in the cost of goods.
He said that the pandemic had saturated the market, which is a market that thrives on turnover. “But, in addition, this product class is often bought on credit and, with credit costs being unusually high, there has been a decline in demand.”
Adobe has also noted that sporting goods have seen a price drop after a long period of impressive price increases.
Adobe stated that prices of sporting goods rose 28 consecutive times, starting in January 2019. The price increases peaked on September 2020 with a 15.8% YoY increase, as many consumers chose to stay at home during Covid-19. invested in products such as fitness equipment.
Bloated Inventory
Prices of economic staples such as oil and commodities also have contributed to the decline in online prices. David Swartz, equity analyst for Investec, said that the price of oil, other commodities and shipping costs peaked in the summer. Morningstar Research Services Chicago
The price of many commodities has dropped. Cotton prices, for example, have dropped dramatically in the past eight to nine months,” said Mr. He.
He explained that shipping costs were high in the first half of 2013. Since then, they’ve dropped dramatically. “Imports affect many categories.”
He added that “shipping costs in 2021-2022 were extremely high, which drove up inflation.”
Swartz pointed out that sales had slowed in several of the categories Adobe tracks.
He said that many companies were stuck with excess inventory and had to offer discounts on their products.
He used the example Under Armour’s very poor gross margins for the March quarter. He explained that the company had to discount heavily because of its large inventory. “That’s deflationary. It brings prices down.”
“We have seen this in a number of other categories,” said the speaker. It wasn’t an especially strong Christmas season. Many companies entered 2023 with surplus inventory.
“The idea we’re experiencing deflation in certain categories is not shocking because we’ve experienced slowing inflation in many costs for retailers in the last half year,” he said.
Price Drop Resistors
Adobe’s report did not cover all product categories. The most notable were the personal care and groceries categories.
While grocery prices have increased 9.3% year-over-year (up 0.4% from the previous months), they’ve slowed over the past seven month since a high of 14.3% in September.
Adobe reports that consumers are increasingly purchasing their groceries online. This category has moved along with the Consumer Price Index.
Enderle stated that high grocery prices are due to a mismatch between supply and demand and costs.
He explained that the bird flu, flooding and regional drought all worked to reduce supply for this category, but demand remained constant. “Since the supply is lower than demand, price increases are largely due environmental concerns.”
Prices in the personal care sector were up by 3% over the last year. This is a drop from the 4.4% YoY increase of the previous month and the 6.1% YoY price change that was experienced in February.
Adobe reported that this category was experiencing persistent inflation for a very long time. Since September 2020, there has only been one month where prices have fallen year over year. This category saw a 0.9% YoY drop in November 2021.
Personal care products have a steady demand regardless of market conditions. Enderle confirmed that the situation appears to remain unchanged.
Swartz continued, “People will purchase personal care products on a regular schedule even if they are more expensive.” “It might vary, but the demand for personal care products is fairly constant. It’s not that different. It’s not true for many other categories.
Abobe Digital price Index
Adobe’s Digital Price Index provides online pricing the same as Bureau of Labor Statistics Consumer Price Index.
Powered by Adobe Analytics and covering 18 product categories including electronics, apparel, appliance, 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 drugs office supplies