Adobe Digital Price Index - March 2019

© 2016 Adobe Systems Incorporated. All Rights Reserved.
ADOBE DIGITAL PRICE INDEX
(UNITED STATES)
MARCH 2019 DATA

© 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. 2
Digital Price Index Findings
(DPI)

© 2016 Adobe Systems Incorporated. All Rights Reserved.© 2019 Adobe Inc. All Rights Reserved.
Main takeaways
3
 Online Grocery prices have been following a similar pattern as the offline ones, with online prices
rising slightly faster over the last 5 years cumulatively.
 Steel and Aluminum tariffs affected Appliances both online and offline. While the CPI rose after
the March 2018 tariff implementation, the DPI showed a tampering in the deflation.
 Computers shows a slightly steeper decline in prices online vs offline.
 For some categories the online and offline worlds are starting to blur into one. The CPI and DPI
for TVs is remarkably similar.
 The online prices for Toys have started to exhibit a slower deflation in the last few years,
diverging from the CPI.
 Sporting Goods show a much quicker deflation online, possibly caused by a quicker product
turnover online.

Economist Advisors
4
Austan Goolsbee, University of Chicago
 Robert P. Gwinn Professor of Economics at The University of Chicago's Booth School of Business
 Formerly served as President Obama’s Chairman of the Council of Economic Advisers
 The youngest member of the cabinet of President Obama
Pete Klenow, Stanford University
 Professor, Department of Economics, Stanford University
 Currently Visiting Scholar, Federal Reserve Bank of San Francisco
 Member of editorial boards for Econometrica, American Economic Review, Quarterly Journal of Economics
and others

Digital Price Index: Fisher Ideal Price Index
𝑖=1
𝑛
𝑃𝑖𝑡 𝑈𝑖𝑡−1
𝑖=1
𝑛
𝑃𝑖𝑡−1 𝑈𝑖𝑡−1
∗ 𝑖=1
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• The Fisher Ideal Price Index uses quantities purchased on the current period (month) and a previous
period (previous month) to determine actual consumer’s preferences. Instead of assuming that
consumers preferences for what goods to buy are constant over a certain number of years, it is able
to account for the fact that they are constantly changing what they buy.
𝐹𝑖𝑠ℎ𝑒𝑟 𝜋 𝑡 =

March Digital Price Inflation In the United States
6
• The Adobe Digital Price Index was split
evenly between categories that inflated vs
those that deflated in price.
• YoY Groceries have increased in price by
0.9% online.
YoY MoM
Appliances 1.4% 1.3%
Computers -9.4% -1.7%
Electronics -8.8% -1.6%
Furniture and bedding -0.7% 0.4%
Grocery 0.9% -0.4%
Medical equipment and supplies -0.6% -0.1%
Nonprescription Drugs 1.0% -0.6%
Televisions -17.9% -2.3%
Tools & Home Improvement 1.3% 0.1%
Toys -6.1% -0.3%

DPI vs CPI for February
7
• February saw directional alignment in online
vs offline price changes in all categories
except for the noisy Medicinal product
categories.
• The DPI is a good predictor of the CPI for
these categories.
DPI CPI Same Sign?
Appliances -1.8% -0.5% ✓
Computers -1.2% -1.0.% ✓
Furniture and bedding 1.2% 0.8% ✓
Grocery 0.36% 0.30% ✓
Medical equipment and supplies 0.1% -0.6%
Nonprescription Drugs 0.04% -0.7%
Televisions -2.2% -1.9% ✓
Tools & Home Improvement 0.2% 1.1% ✓
Toys -0.1% -0.1% ✓

Offline and Online Grocery Prices Follow The Same Trend In The
US
8
• The basket mix of groceries that consumers purchase online differs from the online counterpart. Meat has a much
bigger impact on the offline (CPI) index
• Offline and Online prices show an intimately correlated trend, with the individual monthly indices exhibiting a 0.58
Pearson correlation coefficient
• Over the last 5 years, cumulatively online prices have risen faster than offline (3.1% vs 2.5% in February)
• Groceries are the biggest contributor of the overall Consumer Price Index out of all the categories the DPI tracks

Appliances Show Price Inflation Online For the First Time This
Year
9
• Appliances have historically shown a very similar trend in prices online and offline with a steady decrease in prices
over time.
• With the introduction of the tariffs on steel and aluminum, offline prices saw steep inflation, while online prices have
leveled out for the first time in the history of the Adobe Digital Price Index.
• The DPI has the advantage of being able to track quantities within a category. It’s possible that consumers have
shifted their purchasing behavior to account for the price changes.
TARIFF INTRODUCTION

Computers Deflate Online Slightly Faster than Offline
10
• Electronics have penetrated online shopping faster than almost any other product category. Offline and online are
starting to blur when it comes to electronics shopping, especially with the recent introduction of ‘Buy Online, Pick
Up in Store’.
• Over the long run it seems like the price drops on computer models are still faster and stronger online.

Televisions Show Almost Identical Price Trends Online Vs
Offline
11
• As with the computers category, TVs show almost an identical behavior in prices online and offline. Over the course
of 5 years the prices have diverged slightly, -59.2% for the CPI vs -63.5% for the DPI in February.
• Notably, the DPI shows a much heavier price drop in the month of November, caused by the Black Friday sales.

The Toy Market Is Starting to Diverge Online
12
• From 2014 to the end of 2015 the Toy category followed the same trend online and offline.
• Starting roughly in 2016 Toys online have started dropping in price more slowly than offline.
• The basket mix of Toys purchased online is contributing to a more level trend in online Toy prices.

Retailers Are Competing For the Void Left by the Exit of Other Big Players of the
Category
13
• Last November, the Toy Price Index saw the sharpest decline in the history of the Adobe DPI.
• The decline was likely due to the large retailers competing to fill the void and grab the largest market share.

Furniture And Bedding
15
• Furniture and Bedding have shown a 0.4% increase in prices MoM in March.
• They’ve seen deflation in price by 11.3% since February 2014 or -2.2% per year on average
• YoY they’ve deflated in price by 0.7%

Tools & Home Improvement
16
• Tools & Home Improvement have shown a 0.1% increase in prices MoM in March.
• They’ve seen deflation in price by -3.2% since February 2014 or -0.63% per year on average
• YoY they’ve inflated in price by 1.3%

Nonprescription Drugs
17
• Nonprescription Drugs have shown a -0.6% decrease in prices MoM in March.
• They’ve seen inflation in price by 1.1% since February 2014 or 0.2% per year on average
• YoY they’ve inflated in price by 1.0%

Medical equipment and supplies
18
• Medical equipment and supplies have shown a -0.1% decrease in prices MoM in March.
• They’ve seen deflation in price by -2.9% since February 2014 or -0.57% per year on average
• YoY they’ve deflated in price by -0.6%

Adobe Digital Price Index - March 2019

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