Digital Economy’s Growth Outpaces Collective Economy, COVID-19 Drives Recent Surge
Digital purchasing power—the amount consumers can buy with a set amount of money over a period of time—has increased 20 percent since 2014. Data from Adobe’s Digital Economy Index, which analyzes trillions of online transactions across 100 million product SKUs in 18 product categories, shows that the digital economy is growing faster than the economy as a whole. Sales in certain categories, including groceries, cold medications, fitness equipment and computers, have surged as a result of COVID-19, and Buy Online, Pickup In-Store (BOPIS) shopping has increased 62 percent year-over-year between February 24 and March 21, 2020.
Information from the index also shows that digital is driving new shopping behavior. Some product categories have taken a bigger share of the digital shopping basket while others have fallen off. The grocery category has increased its share of the basket from six percent to eight percent in three years, and apparel retailers, who made the pivot to digital early, have seen their share of total online transactions increase from 21 percent to 23 percent over the last five years. Conversely, computers have decreased from 21 percent to eight percent in the wake of the mobile computing boom.
Digital purchasing power continues to rise, as consumers continue to get more for the dollars they spend online. The digital purchasing power of consumers is up three percent year-over-year in addition to the 20 percent increase since 2014, with $1 buying today what it would have taken $1.20 to buy in 2014. Over that same time, $1 spent buying a similar set of goods offline lost value, with $1 in 2020 buying what would have only cost 88 cents in 2014. However, Adobe notes that the expectation is that as more of people’s lives move online, the offline and online economies will continue to converge and so will their prices.
COVID-19 has driven a surge in ecommerce: between January 1, 2020, and March 11, 2020, purchases of several products have seen a significant jump in sales: 807 percent for hand sanitizers, gloves, masks and anti-bacterial sprays; 217 percent for over-the-counter drug purchases—cold, flu and pain relievers; 231 percent for toilet paper, and 87 percent for canned goods and shelf-stable items. Additionally, with many U.S. consumers confined to their homes starting in March, orders for fitness equipment—kettlebells, dumbbells, stationary bikes and treadmills—and computers—desktops and laptops—have seen 55 percent and 40 percent boosts in online sales, respectively. The online grocery shopping category overall has seen a 100-percent increase in daily online sales between March 13 and March 15.
Adobe’s data shows that its innovation that is pushing online prices down. Categories with the most product updates (new SKUs) released in a year—electronics, computers and TVs—have seen online prices decrease, digital purchasing power increase, and have kept U.S. inflation down overall. Online electronics prices, for example, have decreased more than 40 percent over a five-year period. From January 2014 to July 2017, online deflation drove digital purchasing power up by an average of 3.9 percent per year, but as people started buying more goods and services where innovation was less common—like groceries and furniture—online deflation and digital purchasing power slowed to two-percent growth year over year. Adobe suspects that as online shopping begins to represent all that people buy, not just the most innovative goods, the price advantage to shopping online will diminish.