As Online Shopping Increases, the Web Is Experiencing Its Own Brand of Inflation | Economy

As more people shop online, the internet is no longer the bargain it once was.

Historically, online prices went down as the holiday shopping season approached, falling 6.6% in the aggregate in October 2019 from a year earlier. But that all changed with the coronavirus, as consumers flocked online in 2020 amid national shutdowns and now rampant shortages of goods.

Last month, online prices rose 1.9% from October 2020, the 17th consecutive increase dating back to June 2020, according to the Adobe Digital Index released Thursday. In some categories, such as electronics, sporting goods and appliances, prices have fallen but nowhere near the amount they did in prior years.

Electronics, for example, saw price declines as of Nov. 6 from a month earlier of 8.7%. But that discount was 13.2% a year earlier. Similarly, prices for sporting goods fell 2.8% compared to a drop of 11.2% a year earlier, while appliances were down 4.6% versus 10.2%

In 18 categories tracked by Adobe, only one did not see higher prices when compared to a historical average for the years 2015 to 2019 – books. Meanwhile, some goods that have moved more to online during the pandemic are seeing increases.

“One of the ones that is a proxy (for overall inflation), groceries, we have been seeing consistent online inflation,” says Vivek Pandya, lead analyst at Adobe Digital Insights.

Online inflation still trails that of overall consumer inflation, which is now running 6.2% annually. But as the percentage of sales online rises to 1 in 4 of every dollar spent from 1 in 5 in previous holiday seasons, the shift will be a rude awakening for many shoppers.

“Consumers are now seeing a double hit to their pocketbooks, with everyday expenses like rent and gas rising, while the big holiday shopping season is going to get more expensive,” Pandya says.

And adding to the experience, out-of-stock notifications are commonplace, Pandya says. “That is up 250% compared to pre-pandemic norms.”

The changes could not have come at a worse time, as data intelligence company Morning Consult finds that 39% of consumers plan to do the majority of their holiday shopping online this year, with 36% saying they will split their purchases between online and in-store shopping. A quarter say they plan to do most of their shopping in stores.

Among millennials, the preference for online is strongest, with 42% favoring it and 21% saying they will mostly shop in stores. Overall, retail analysts are calling for a strong holiday season, with sales revenue up 19% for the week ending Nov. 6 and unit sales up 4% from pre-pandemic levels two years ago, according to retail consultants NPD.