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Don’t waste another dime on bloated channel reporting and vanity metrics.
Don’t waste another dime on bloated channel reporting and vanity metrics.
As digital prices fell, inflation in the wider economy showed signs of slowing.
After months of prices rising at historically high rates, there were signs of some easing in the upward march of inflation in July. However, food prices remain on the rise.
Here are the latest numbers for July 2022 for the economy as a whole, and ecommerce:
The heat of the summer brought a cool down for inflation.
The Consumer Price Index registered an 8.5% increase on a yearly basis in July, according to the US Bureau of Labor Statistics.
This was down from a 40-year-high increase of 9.1% in June, offering signs that the rapid rise of inflation over recent months may be starting to slow down.
Prices overall were flat month-over-month. But the cooling owed mostly to falling gas prices, which fell 7.7% month-over-month.
That was enough to offset a 1.1% rise in food prices from June to July. Food offers a reminder that inflation is still rising at rates not seen for 40 years. The food index increased 10.9% over the last year, which was the largest 12-month increase since the period ending May 1979.
Consumer Price Index, 12-month percentage change. (Source: US Bureau of Labor Statistics)
So-called core inflation, which leaves out the more volatile food and energy indeed, increased 5.9% on an annual basis and 0.3% monthly, according to the BLS. The monthly increase was smaller than April, May or June.
Among consumer goods categories that showed movement, household furnishings prices rose 0.6% after increasing 0.4% in June. Personal care was up 0.4%. Meanwhile, apparel prices fell 0.1% after rising the prior two months.
While the CPI provided some signs that price pressures are beginning to ease, the monthly measure is simply a snapshot. It could show inflation's rise slowing this month, only to tick up again next month. That dynamic was evident from March to April, when a one-month slowing in price increases gave way to a new 40-year high of 9.1% in June. However, falling gas prices that have been observed throughout the summer will buoy hopes that inflation has peaked. However, the CPI offers a reminder that gasoline prices remain 44% higher than a year ago.
The Federal Reserve has taken action to get prices under control with back-to-back interest rate increases of 0.75%, which are unusually large hikes for the central bank. After the latest increase in late July, Fed Chairman Jerome Powell said that it may take months before the effects of the interest rate hikes are evident. Powell has said price stability is the body’s top priority as it seeks to prevent inflation from taking hold within consumer mindsets.
The Fed has said it would take decisions about further increases meeting-by-meeting, and base it on the data that becomes available in the meantime. Before it meets in September to consider any additional action, there will be another CPI release, as well as the July personal consumption expenditures index data, which is the central bank's preferred inflation measure.
Even as inflation begins to come down, it's worth remembering that the conditions it created are likely to remain in the months ahead. On earnings calls to recap the second quarter, public companies in the retail and consumer goods space have detailed outlooks that include continuing declines in consumer demand.
"We are keenly aware of what's happening around us. We anticipate that inflation and the continued softness in consumer spending on goods will persist through the remainder of the year," said Shopify CFO Amy Shapero told analysts on the ecommerce company's earnings call.
Adobe Digital Price Index: 2015-present. (Source: Adobe Analytics)
Online inflation data from Adobe Analytics showed that ecommerce prices were falling so precipitously that they are entering a deflationary period.
According to the Adobe Digital Price Index, online prices in July dropped 1% year-over-year. This came after a 0.3% increase in June and 2% increase in May. Prices fell 2% month-over-month.
The index, which analyzes one trillion visits to retail sites and over 100 million SKUs across 18 product categories, had previously shown 25 straight months of rising prices. Put another way: deflation is showing up for the first time in two years.
Ecommerce prices fell amid a complicated environment that mixes sagging consumer sentiment, an influx of inventory, deal events around Prime Day and the start of back-to-school shopping season.
Adobe said consumers spent $73.7 billion online in July, which was $400 million less than the prior month. However, Prime Day drove a 20.9% increase in ecommerce spending on a year-over-year basis.
In all, prices fell in 14 of the 18 categories tracked by the index on a month-over-month basis. But on a year-over-year basis, prices increased in 11 of the 18 categories. Here are a few highlights:
“Wavering consumer confidence and a pullback in spending, coupled with oversupply for some retailers, is driving prices down in major online categories like electronics and apparel,” said Patrick Brown, Adobe’s VP of growth marketing and insights. “It provides a bit of relief for consumers, as the cost of food continues to rise both online and in stores.”
The full chart showing pricing category changes is below
(Source: Adobe Digital Price Index)
With prices continuing to rise, it's worth clicking into specific categories. That's what market research firm Numerator did in a report for July.
For one, it detailed grocery inflation, which is distinct from the CPI's "food at home" and "food away from home" indexes.
Grocery inflation reached a record high in July, as prices rose 15.4% year-over-year, per Numerator. In particular, the snacks and beverages categories outpaced overall grocery inflation. Both have doubled since the beginning of the year, with snacks prices rising 19% and beverages up 18.1%. Online grocery prices rose +25.7%, said Numerator.
Health and beauty inflation rates doubled in four months. The spike to a year-over-year increase of 18.5% for July in this category had doubled April's 9% increase.
Household products rose 21.6% in July on an annual basis. The biggest increases were noted in household cleaners, and paper and plastic products.
Taken together, the data reported this week indicates that inflation's rise could be starting to ease. But food prices continue to rise rapidly, and that's an important point to underline. Given the importance of the food category to daily lives and its impact across grocery, CPG and restaurants, food could replace fuel as the category to watch.
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.