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Online Prices Decline In July, Ending 25-Month Inflation Streak

E-commerce prices declined 1%, on a year-over-year basis, in July, the first sign that more than two years of online inflation may be ending, according to the Adobe
Digital Price Index report released today.

On a monthly basis, prices were down 2% in July compared to the previous month. Electronics showed the biggest year-over-year decline, down 9.3%. Fourteen of the 18 product categories tracked by the Index saw month-over-month price decreases in July.

As online spending dramatically increased during the pandemic, Adobe analysts noticed a stark reversal in the normal pattern of consistent online price decreases every year. Between 2015 and 2019, e-commerce prices fell an average of 3.9% each year, and typically declined by 4 to 5%. In 2019, the last pre-pandemic comparison, online prices declined 5.2% year-over-year, Adobe reported in July, 2021.

As consumers during the pandemic shifted their online spending away from “wants” and more to needs, like groceries, prices reflected increased demand and less promotional activity.

Online grocery prices continue to increase by record amounts. Groceries were up 13.4% year-over-year in July, and 1.4% month-over-month, the biggest increase in any category in July.

Patrick Brown, vice president of growth marketing and insights at Adobe, attributed the July deflation to “wavering consumer confidence and a pullback in spending, coupled with oversupply for some retailers.” The lower prices in categories like electronics and apparel provide “a bit of relief for consumers, as the cost of food continues to rise both online and in stores,” Brown said.

Consumers spent about $400 million less online in July than they did in June, ringing up $73.7 billion in online sales in July compared to $74.1 billion the previous month. On a year-over-year comparison, however, July spending was up 20.9% over July 2021, with Amazon’s Prime Day driving record online sales for the entire retail industry, Adobe reported.

The Adobe Digital Price Index is based on Adobe Analytics data culled from one trillion visits to retail sites and over 100 million SKUS in 18 product categories.

Toys were down 8.2% year-over-year, that category’s largest year-over-year price drop since December 2019. July was the 16th consecutive month of deflation for toys.

Pet products, like groceries, also continue to show record price increases online. Prices were up 12.6% year-over-year, and up 1.7% month-over-month.

Apparel, a large-volume category that previously drove much of the online inflation, was down 1% year-over-year, the first notable year-over-year decline in that category, according to Adobe.

Adobe began issuing its monthly price index report a year ago, after seeing that online prices were becoming more sensitive to overall economic trends, rather than routinely declining every month.