It’s not exactly a shocker that most consumer commodity prices are lower online than at brick-and -mortar stores. But when you see the price disparity in real numbers, it is a shock that more people don’t buy their household goods online.
Take the Adobe Digital Price Index, which tracks e-commerce prices across 18 product categories, like electronics and apparel, on a monthly basis.
The June 2022 ADPI is out, and it shows online prices ticking up just 0.3% from a year earlier. June’s index numbers were a full 1% below May 2022 online prices, making June the third straight month in which digital-goods prices have slowed.
Compare those numbers with the U.S. consumer-price Index, which rose 1.3% on a monthly seasonally adjusted basis, and rose 9.1% over the past 12 months.
The Adobe online index saw prices decrease in several key categories, driving down overall online retail inflation. (Food and other select consumer commerce categories rose on a monthly basis.) Here’s a snapshot for June.
-- Electronics prices dropped 7.28% from a year earlier and 1.34% month over month.
-- Apparel eased 0.1% year over year and was down 4.06% month over month. That's a significant change compared with the 9.03% year-over-year increase in May.
--- Grocery, tools and home improvement, and pet products were categories where prices continued to tick up. Grocery prices hit records, increasing 12.44% from a year earlier and ticking up 0.71% month over month. Tools and home improvement increased 10.44% year-over-year and 0.6% month over month. Pet products increased 11.3% from a year earlier and 2% from May.
Why Are Prices Lower Online?
It does cost companies less to sell goods online.
“E-commerce has much lower infrastructure costs than regular retail,” said Josh Answers, host of the YouTube Channel’s Trading Fraternity telecast. “Online vendors don’t have to pay store rent, utilities, local property taxes, salaries of salesclerks, stockers or do local advertising to draw customers.”
But that’s not the only reason e-commerce consumers can get a price break. The competitive playing field is leveled online.
“A consumer only has to look a little further down the search-engine results to be able to compare prices, shipping, and any additional benefits that might be offered,” Answers said. “Comparison shopping at a physical retail location is much more cumbersome and time-consuming; therefore retailers have more price flexibility.”
The Amazon (AMZN) Prime date on the calendar and lower advertising costs have also spurred online shopping growth, along with lower prices.
“Our June online pricing data is even more stark, with consumer prices down 5.97% in June versus May,” said Jacob Loveless, chief executive of Edgemesh, an e-commerce acceleration platform services company.
“This is likely driven by a number of factors, but historically the Q4 selling season results in lower prices as retailers compete for holiday shopping dollars.”
With Amazon moving Prime Day to June 12 this year versus June 21 in 2021 and Oct. 13 in 2020, a greater consumer shopping impact is happening earlier in 2022.
“In addition, brands are facing higher net advertising costs,” Loveless said. “In essence, with digital-targeting efficiency decreasing and customer-acquisition costs on the rise, online retailers are encouraging purchases for previous customers who can be reached using lower cost email and texting ad campaigns to offer shopper discounts.”
Even Brighter Days Ahead for Digital Shoppers?
Reality has shown that consumers can’t buy certain items online, like gasoline. Yet that scenario is changing, too – and in favor of online shoppers.
“Eventually, consumers will be able to buy everything online,” said Tenpao Lee, professor emeritus of economics at Niagara University.
“For example, consumers may buy gas certificates and then go to the gas stations to fill up their tanks, further lowering prices.”
There will be learning curves for consumers to get used to the e-commerce spending style, Lee noted.
“Overall, e-commerce will change our lifestyle gradually and definitely in the future,” he said.
