U.S. consumers continue to spend more online this year than last year, but will they keep it up amid inflated gas, grocery and garment prices and increasing stockouts?
According to the Adobe Digital Economy Index, consumers spent $83.1 billion online in March 2022, a 7 percent gain from the $77.7 billion spent in March 2021. That was “a significant increase” year-over-year, Adobe reported Tuesday. In February, consumers spent $67 billion online.
“The growth is impressive considering that a year ago, in March 2021, a round of stimulus payments helped drive a record $77.7 billion in consumer spending online — an unanticipated 48.7 percent growth year-over-year,” Adobe said in its release.
Stockouts online are on the rise. In March, online shoppers saw 3.1 billion out-of-stock messages online, compared to the 2.8 billion noticed in February as supply chain challenges persist, Adobe reported.
Nevertheless, stockouts don’t appear to be much of a deterrent to spending, at least currently. “The durable demand for e-commerce shows that shoppers are increasingly comfortable with product substitution,” Adobe reported.
Retailers have lately been seeing an uptick in sales of special occasion apparel, tailored and work-related clothes. That’s due to a surge in weddings scheduled for this year, Americans returning to offices and beginning to go out and socialize again after two years of being cooped up inside.
Fashion has experienced exceptionally high inflation. In March, prices for apparel increased 16.3 percent, year-over-year, and 0.3 percent, month-over-month, more than any other category, Adobe reported.
In February, apparel prices rose 11 percent in the DPI (the digital price index,) compared to 3.1 percent in the CPI (the consumer price index.)
Grocery prices continued to surge and rose 9 percent, year-over-year, and 1.4 percent, month-over-month, according to Adobe.
Prices for pet products increased 7 percent, year-over-year, and 1.5 percent, month-over-month. Personal care items increased 1.4 percent year-over-year and 0.1 percent month-over-month.
Tools and home improvement prices were up 8.5 percent, year-over-year, and 1.1 percent, month-over-month.
“Consumers are feeling a greater hit to their pocketbooks, with consistently high levels of online inflation in categories such as groceries and pet products,” said Patrick Brown, Adobe’s vice president of growth marketing and insights. “But while e-commerce prices have risen more than years past, durable demand shows that consumers are embracing the conveniences of online shopping, particularly for growing categories like groceries.”
Low- and middle-income consumers are most affected by inflation, but the war in Ukraine is also dragging the stock market down, which would further reduce demand for goods and services, particularly by affluent individuals shopping for luxury products.
“We haven’t seen much change in customer shopping behavior yet,” said Brett Biggs, Walmart Inc.’s chief financial officer, at an investors conference this month. “Typically, when fuel prices go up, for us, you’ll see some consolidation in trips. Traffic might go down a little bit, transaction dollars will go up….When you look at all the metrics, you look at unemployment is low, wage rates are high, customer balance sheets are still pretty good. Savings rates are still pretty good. There’s a lot of things that still feel pretty good from a consumer standpoint.”
However, David Bassuk, global coleader of AlixPartners’ retail practice, recently told WWD: “We’re at a kind of inflection point today where the future looks harder.
“It was a good holiday, it’s been a good start to the year. But we have a lot of disruption ahead,” Bassuk added. “The ripple effect from the global crisis with Ukraine, coupled with inflation…the supply chain crisis is not over. You keep putting all these things together…it all ends with the consumer. It’s going to be more challenging for the consumer.”
Of the $83.1 billion spent by consumers in March, $2.8 billion was driven by higher prices. In other words, consumers paid $2.8 billion more for the same amount of goods. Online inflation has now been observed for 22 consecutive months, Adobe reported.
Last March, online prices overall increased 3.6 percent, year-over-year, and 0.3 percent month-over-month.
In March, 14 of the 18 categories tracked by the DPI saw year-over-year price increases, with apparel rising the most. Price drops were observed in four categories: electronics, jewelry, toys and computers.
On a month-to-month basis, 12 of the 18 categories saw February price increases, with price drops observed in electronics, books, toys, flowers/related gifts, computers and sporting goods.
The Adobe Digital Economy Index covers more than one trillion visits to U.S. retail sites and more than 100 million SKUs (stock-keeping units) in 18 product categories. Online inflation insights, from the Adobe Digital Price Index, is modeled after the Consumer Price Index, published by the U.S. Bureau of Labor Statistics, and uses the Fisher Price Index to track online prices. The Fisher Price Index uses quantities of matched products purchased in the current and previous month to calculate the price changes by category.