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Retailers Are Testing Price Increases Online

Early signals could point to less discounts

February 15, 2017

Prices for just about everything sold online have been under pressure for years, especially after factoring in discounts and promotions. But there are some early signs that retailers may be raising prices, or at least not budging as much when it comes to offering discounts.

Change in US Inflation for Prices of Select Products Purchased Digitally, Jan 2017 (% change vs. same period of prior year and % change vs. prior month)

While retail prices typically inch up after the discount-ridden holiday season, month-over-month consumer prices increased more than usual in January, according to Adobe’s Digital Price Index, which tracks $7.50 of every $10 spent online with the top 500 US retailers. For instance, January prices of tablets increased 6.4% since December. Additionally, televisions were up 1.1% month over month, toys gained 3.4% and sporting goods increased 1.2%—all higher compared with the same period a year prior.

In the three-month period through January, year-over-year online consumer prices increased 1.2%—the biggest gain for the same period since 2014, said Luiz Maykot, data science analyst at Adobe Digital Insights, in an interview.

“We saw an unexpected price rebound in January, which could be a signal of retailers testing the water” on raising prices or not discounting as much, Maykot said.

Adobe said its data also indicates inflation may be on the rise following the Federal Reserve’s December 2016 rate hike.

(On a long-term basis, Adobe’s digital price index generally rises and falls in line with the government’s consumer price index, but short-term variances are not unusual. Adobe’s index captures the impact of major discount holidays like Black Friday and measures quantities purchased, as well as tracks pricing in real time.)

Despite retailers’ desire to avoid excessive discounting, prices for many products have fallen substantially in recent years. For example, online prices consumers pay for televisions have declined 47% in the past three years, according to Adobe. Prices dropped 44% for tablets, 27% for computers, 15% for sporting goods and 17% for toys. The data doesn’t indicate how big of a role discounts may play in the decline.

“The economy has experienced deep deflationary trend,” Maykot said. “Ever since the financial crisis, people have become more stingy with their money.”

To get people to be less averse to spending money, retailers will have to work harder to convince them otherwise.

—Andria Cheng

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