Dive Brief:
- Online prices in November rose 3.5% year over year, marking the 18th straight month of year-over-year inflation, according to Adobe's Digital Price Index.
- November's increase also represents a record year-over-year spike, the highest since Adobe began tracking in 2014. Apparel prices rose especially sharply, with prices up 17.3% year over year.
- On a month-to-month basis, prices were down 2% because of holiday discounts, according to Adobe.
Dive Insight:
The global supply chain snarls rippling through the industry are pushing prices up both out of necessity and, in some cases, opportunity.
Across the board, industry leaders have said the supply chain environment would have an impact on the holidays. Nearly two-thirds (59%) of retail executives said they planned to raise prices to mitigate supply chain costs, according to a survey from First Insight and the Wharton School's Baker Retailing Center. Only 36% said their company would take a margin hit so they could maintain their price levels.
Many — but not all — retailers are reporting lower inventory levels this year because of shipping and manufacturing delays. That includes apparel, an industry that by and large has been trying (and often failing) to lower inventory for years for strategic reasons, as a path to selling more clothes at full price.
The supply chain backups have created an environment where many are forced to keep less inventory. But not every player has been affected in the same way or in equal measure. For example, Gap Inc., whose Old Navy banner has been hit especially hard by COVID-19-related factory closures in Vietnam, posted a net loss for the third quarter. The apparel retailer is also projecting a sales loss worth potentially more than half a billion dollars because of inventory shortages.
Others, though, have seen their margins and profits improve in an environment where there are simply fewer clothes to sell, and everybody has an incentive to abstain from discounting. Kohl's, for example, reported inventory turn at a 10-year high, with inventory lower than past years both by design and also circumstance. Operating income and margins at the retailer are up with its inventory down. Footwear retailer DSW is another example of a retailer with lower inventory access but more robust profits.
Adobe's data shows that price increases extend to the online world, where price transparency and the shadow of Amazon have historically acted as constant pressure on retailers to keep prices low.
"Ongoing supply chain constraints and durable consumer demand have underpinned the record high inflation in e-commerce, with apparel seeing high volumes of out-of-stock messages online compared to other categories," Patrick Brown, vice president of growth marketing and insights at Adobe, said in a press release. "With offline prices surging in the Consumer Price Index, however, it is still cheaper to shop online for categories such as toys, computers and sporting goods."
Not every category is increasing, however. Online prices for electronics are down 0.4% year over year, and toy prices are down 2.9%. Adobe said that toys are "one of few categories where pricing trends follow a historical pattern of persistent, stronger deflation."
