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Discounts to kick off the heart of the holiday shopping season helped drive online prices to their steepest drop in more than two-and-a-half years, according to the November online inflation reading from Adobe Analytics.
Adobe’s Digital Price Index for November shared the following:
- On an annual basis, online prices fell 1.9% from November 2021. That's the largest drop in 31 months, according to Adobe Analytics.
- For the month, prices fell 3.2% from October.
- On a category level, 15 out of the 18 product types tracked showed a price decrease on a monthly basis.
It’s a move toward complete deceleration, after a mixed bag in October that showed prices falling on an annual basis, but ticking up from a monthly level.
The falling prices were driven by heavy discounting for Cyber Weekend, which ushers in holiday shopping from Thanksgiving-Cyber Monday. With shoppers looking for deals as a result of inflation across the economy, this season is being touted by retail executives as one that is exceptionally promotional. Electronics and computers saw the largest annual drops on record on month when electronics discounts peaked at 25% on Cyber Monday. Meanwhile, toys and sporting goods also saw significant price decreases.
The lower prices helped to keep demand high for cyber week, despite concerns about shoppers cutting back for the season as a whole due to inflation and a darkening economic forecast for 2023. Adobe previously reported that Cyber Monday alone drove a record $11.3 billion in ecommerce spending, while the week as a whole drove $35.3 billion. The discount rate was elevated across categories, with toys peaking at 34% off, and appliances ticking up to 16% off.
It comes as prices across the economy begin to come down. The overall deflation was on view across categories.
“While the November drop in online prices was driven by major discounting on days including Cyber Monday and Black Friday, we also see signs of overall ecommerce inflation cooling,” said Patrick Brown, vice president of growth marketing and insights at Adobe, in a statement. “In categories such as groceries and personal care, which are not promotional in nature, we are seeing price increases come down from their heights in late summer and early fall.”
Here’s a closer look at the category trends on display, according to Adobe:
Electronics: Prices were down 13.4% year-over-year, and 4.5% month-over-month. The annual decrease was the largest drop on record since 2014, and well above the second-largest of drop of 12.8% observed in December 2019. The second largest was in December 2019, when prices fell 12.8% YoY. Electronics is the largest commerce category by share of spend, accounting for 18.6% of online dollars spent in 2021.
Computers: Prices were down 18% year-over-year, and 5.1% month-over-month. This was also the largest year-over-year drop on record since 2014. This also well outpaced the second largest fall of 16.9% year-over-year in 2019. Computer prices online have fallen for 23 straight months, since December 2020.
Groceries: Prices rose 13.7% year-over-year, and 0.3% month-over-month. Mirroring overall food price increases, this category continues to have stubbornly high digital inflation. But it has continued to slow in the last two months. But prices have begun to slow in the past two months. Through September, every month in 2022 marked a year-over-year high in grocery prices. However, a fall began in October, as prices increased 14%.
Pet Products: Prices rose 11% year-over-year, and were down 0.2% month-over-month. This category has also slowed down after reaching a record high of 12.7% in August. after hitting a record YoY high in August 2022 (up 12.7% YoY). Price increases in November also slowed when compared to the prior two months.
The big question
(Photo courtesy of Adobe)
Will this DPI reading and the forthcoming data for December be an outlier due to the holidays, or will this this data be a leading indicator that inflation across the economy is starting to cool?
For the wider economy, the Fed-preferred Personal Consumption Expenditures Index showed that inflation for all goods and services cooled to 6% in October, which was its lowest level since December 2021.
While the Digital Price Index hasn’t always moved in line with the overall economy, today’s report will surely raise hopes that the more widely-measured inflation measure of the Consumer Price Index, and the wholesale reading from the Producer Price Index will show further cooling of broad-based inflation when November data is released next week.
Trending in Economy
Campbell Soup Company CEO Mark Clouse offered thoughts on messaging amid inflationary shifts in consumer behavior.
After months of elevated inflation and interest rate hikes that have the potential to cool demand, consumers are showing more signs of shifting behavior.
It’s showing up in retail sales data, but there’s also evidence in the observations of the brands responsible for grocery store staples.
The latest example came this week from Campbell Soup Company. CEO Mark Clouse told analysts that the consumer continues to be “resilient” despite continued price increases on food, but found that “consumers are beginning to feel that pressure” as time goes on.
This shows up in the categories they are buying. Overall, Clouse said Campbell sees a shift toward shelf-stable items, and away from more expensive prepared foods.
There is also change in when they make purchases. People are buying more at the beginning of the month. That’s because they are stretching paychecks as long as possible.
These shifts change how the company is communicating with consumers.
Clouse said the changes in behavior are an opportunity to “focus on value within our messaging without necessarily having to chase pricing all the way down.”
“No question that it's important that we protect affordability and that we make that relevant in the categories that we're in," Clouse said. "But I also think there's a lot of ways to frame value in different ways, right?”
A meal cooked with condensed soup may be cheaper than picking up a frozen item or ordering out. Consumers just need a reminder. Even within Campbell’s own portfolio, the company can elevate brands that have more value now, even if they may not always get the limelight.
The open question is whether the shift in behavior will begin to show up in the results of the companies that have raised prices. Campbell’s overall net sales grew 5% for the quarter ended April 30, while gross profit margins held steady around 30%. But the category-level results were more uneven. U.S. soup sales declined 11%, though the company said that was owed to comparisons with the quarter when supply chains reopened a year ago and expressed confidence that the category is seeing a longer-term resurgence as more people cook at home following the pandemic. Snacks, which includes Goldfish and Pepperidge Farm, were up 12% And while net sales increased overall, the amount of products people are buying is declining. Volumes were down 7%.
These are trends happening across the grocery store. Campbell is continuing to compete. It is leading with iconic brands, and a host of different ways to consume them. It is following that up with innovation that makes the products stand out. Then, it is driving home messaging that shows consumers how to fit the products into their lives, and even their tightening spending plans.
Campbell Soup is more than 150 years old, and has seen plenty of difficult economic environments. It is also a different business today, and will continue to evolve. At the end of the day, continued execution is what’s required.
“If it's good food, people are going to buy it, especially if it's a great value,” Clouse said.