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Ecommerce is delivering some relief from rising prices across the consumer economy, new monthly data shows.
Online inflation continued to cool off in June, according to the Adobe Digital Price Index.
The latest reading from Adobe Analytics states that online prices were up .3% year-over-year for the month. On a month-over-month basis, prices were down 1%.
These numbers come a day ahead of the economy’s overall inflation reading from the US Census Bureau’s Consumer Price Index. Last month, that measure showed a 40-year-high increase of 8.6% year-over-year. This led the Federal Reserve to raise interest rates .75% in an effort to cool demand.
When it comes to ecommerce, the latest Digital Price Index data shows some moderating. Decreases were visible in key categories tracked by Adobe Analytics:
- Apparel prices fell .1% year-over-year, and 4.06% month-over-month. This comes after prices in this category increased year-over-year in May.
- Electronics prices recorded their largest year-over-year decrease since May 2020, falling 7.28%. There was some relief on a month-over-month basis, however, as prices fell 1.34% month-over-month.
- Toys saw a year-over-year decrease of 4.81%, with a slight month-over-month uptick of .16%.
Digital inflation since 2015. (Courtesy of Adobe Analytics)
At a time of rising inflation, the report also featured plenty of spikes. In all, 11 of the 18 categories tracked by Adobe saw prices go up. Some of the most popular ecommerce categories set new inflation records:
- Grocery prices were up 12.44% year-over-year, setting a new record. It’s the fifth straight month of significant price increases in this category, and the 29th straight month overall of rising prices. This mirrors rising costs of food in the wider economy. It was up .7% month-over-month.
- Pet products saw prices rise 11.35% year-over-year, which was the latest in a series of annual record highs in this category. Month-over-month, prices in this category rose 2.01%.
- Tools and home improvement rose 10.44% year-over-year, which also drove this category to a record annual increase. It was the 19th straight month that prices went up on a year-over-year basis. Prices were up .6% year-over-year in this category.
(Chart via Adobe Analytics)
Adobe Analytics also provided key data on spending for the year so far:
- In all, consumers spent $451.7 billion online, with the six-month total growing 7.5% year-over-year.
- For June consumers spent $74.1 billion online, which is roughly 1% year-over-year growth.
- Spending for the month was down when compared to May ($77.8 billion) and April. and May ($78.8 billion).
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On average, customers spend $59 more than the value of their gift card, Fiserv found.
In retail, sales are often measured in goods, whether they are purchased for ourselves or someone else. There are plenty of strategies that brands and retailers use to increase those sales, whether it is marketing, loyalty programs or how that item is presented.
In most cases, these are two different parts of the equation for retailers: The product that is bought and the strategies that lead to the purchase.
That’s what makes the gift card unique.
It is an item you can buy, with a section in the store all its own. Eventually, it leads to the purchase of other goods, so the gift card is leads to a direct sale. Yet it’s also a means to build a retail brand and create incentives that both introduce customers to a store and keep them coming back.
That’s a key takeaway from the 20th Annual U.S. Prepaid Consumer Insights Study from fintech and payments company Fiserv.
At this point, the gift card feels like a staple of the shopping experience. But it is only about 30 years old. In 1994, Blockbuster Video pioneered the sale of cards for gifted purchases directly as a means to combat fraud in paper gift certificates. Since then, they’ve proven to have a multitude of uses that stretch beyond the holidays.
Starbucks and Amazon gift cards are commonly distributed as prizes at team-building events and as pick-me-ups by friends showing they care. In 2022, 60% of consumers said they received a gift card from an employer, according to the Fiserv report. That was a big increase from 32% in 2019. People appreciate the gesture. The survey found that 85% of employees think that gift cards from an employer make for appropriate incentives.
For people looking to show generosity, gift cards can also be a means to stretch dollars. At a time of high inflation, people are looking for deals with their discretionary purchases. Gift card promotions that offer discounts and bonuses are proving particularly popular, the study found. Two-thirds of consumers said promotions can influence them to purchase more, while more than half of consumers took advantage of such an offer in 2022.
Yet the more difficult consumer environment is also having an impact on overall gift card sales. In 2022, the growth of gift card purchases slowed.
“Overall, 56% of U.S. consumers purchased more gift cards in 2022 compared to 2021,” said Tom Niedbalski, VP of gift solutions at Fiserv. “This was a decline from the 73% of consumers who said they bought more gift cards in 2021 than they did in 2020.”
Inflation and less discretionary income were the driving factors for consumers who said they bought fewer gift cards during 2022, as 35% of consumers said inflation was the reason they were purchasing fewer cards.
It's important for brands and retailers to understand why consumers buy gift cards. But it's just as crucial to understand where they can fit in retail strategy. Beyond sales, gift cards can help drive repeat customers, and extend a brand. These tools are particularly valuable at a time when retailers are focused on profitability in a tougher consumer environment.
Fiserv explained four areas in which gift cards are of particular value for brands.The following is directly quoted from Niedbalski:
Improving cash flow and revenue. Gift cards not only drive in-store and online traffic, there is an associated “lift,” or overspend, when a gift card is converted into a sale. On average, customers spend $59 more than the value of their gift card.
Repeat customers. Retailers use gift cards to foster loyalty and customer engagement, ultimately leading to repeat customers. One way we see this play out is through promotions associated with gift card sales. For example: a consumer who buys a $100 gift card for the holidays will receive a $20 bonus card that can be used after January 1 – creating a pre-holiday sale and post-holiday transaction in the New Year.
Branded currency. A gift card places a merchant’s brand directly into the consumer’s wallet, increasing brand awareness and ensuring the merchant’s brand is with the consumer when they are looking to buy.
Year-round marketing. The gift card has grown beyond the traditional holiday season. From birthdays and graduations to anniversaries and babies, gift cards are becoming the most popular way to recognize milestones – giving retailers opportunities to run additional promotions throughout the year.