adobe digital price index reports signs of deflation in u.s. economy

ADOBE DIGITAL INDEX | Adobe Digital Economy Project 1

ADOBE DIGITAL ECONOMY PROJECTAPRIL 2016

OVERVIEWAdobe Digital Index backgroundBased on analysis of aggregated and anonymous data from Adobe Marketing Cloud:• Adobe Analytics and Adobe Mobile ServicesThousands of brands worldwide including two thirds of Fortune 50 companies rely on Adobe Marketing Cloud:• $7.50 of every $10 spent online with top 500 U.S. retailers go through Adobe

Marketing Cloud **• Adobe Marketing Cloud powers:

• 20 of the top 30 U.S. employers• 9 of 10 largest hotel groups• 7 of 10 largest airlines

** Latest IR Top 500 Report 2015Adobe Analytics

AdobeMobile Services


Digital Price Index(DPI)

Job Seeking Index(JSI)

Digital Housing Index(DHI)


Main takeaways: April• Our Digital Price Index (DPI) shows strong signs of deflation in the goods and services we currently

cover that are bought online

• Categories showing the most month-over-month deflation in April were computers and tablets, with hotels and international flights as the only categories showing month-over-month inflation

• In categories such as sporting goods, the DPI shows 3x more deflation than the CPI for the last year

• In groceries, prices have decreased for two consecutive months after two months of price increases

• For computers, steep price declines in March and April are almost as big as the ones observed during the 2015 holiday shopping season

• Overall flight prices decreased significantly YoY, a strong sign that savings from lower jet fuel prices are being passed on to consumers -- especially in domestic routes, which saw the highest deflation

• Domestic hotel prices have increased YoY, a sign that consumers may be taking their savings from flight bookings and spending on hotel accommodations


Digital Price Index(DPI)


DIGITAL PRICE INDEX

Economist Advisors

Austan Goolsbee, University of Chicago Robert P. Gwinn Professor of Economics at The University of Chicago's Booth School of Business Formerly served as President Obama’s Chairman of the Council of Economic Advisers The youngest member of the cabinet of President Obama

Pete Klenow, Stanford University Professor, Department of Economics, Stanford University Currently Visiting Scholar, Federal Reserve Bank of San Francisco Member of editorial boards for Econometrica, American Economic Review, Quarterly Review of

Economics and others


DIGITAL PRICE INDEX

MethodologyBased on analysis of aggregated and anonymous data

• Fisher Ideal Price Index• Adobe measures 80% of all online transactions from top 100 U.S. retailers ** • $7.50 of every $10 spent online with top 500 U.S. retailers go through Adobe Marketing

Cloud **• Based on analysis of 15 billion website visits and 2.2 million online products sold between

April 2014 and April 2016BLS: Consumer Price Index Adobe: Digital Price Index

Quantities Sold No YesProducts/quantities updated Every 4 years DailyNumber of Products 83 thousand (all categories) 2.2 million

(currently covered categories)Data Collection Frequency Bi-Monthly DailyData Availability Monthly DailyOffline Prices Yes NoLong history Yes NoAll categories of spending Yes No

** Latest IR Top 500 Report 2015


DIGITAL PRICE INDEX

• Electronics see an average of 80% of online spend on new* products**

• 16% of monthly online spend for groceries on new products

* Products that have been available for 1 year or less** A product is defined as an item for purchase which has an unique identifier (such as a SKU)

Measuring rapidly shifting consumer preferences


DIGITAL PRICE INDEX

• DPI captures the effect of major discount holidays like Black Friday and Cyber Monday because it measures quantities and does so in real-time

• Lowest prices for TVs in 2015 were Thanksgiving and Black Friday

• Data demonstrates retailers trying to start sales earlier – the Sunday and Monday before Thanksgiving saw low prices

The Importance of detail: Black Friday


• The data used contains transactions for ~300 K products between April 2014 and April 2016

• Products include small equipment and accessories (balls, gloves, uniforms) as well as large equipment such as treadmills, weightlifting tools etc.

Sporting Goodsmethodology


DIGITAL PRICE INDEXSporting goods see much higher deflation than CPI

* CPI category “Sporting Goods” used for comparison

• Between April 2015 and April 2016, DPI shows cumulative deflation of 5.5% YoY

• For April, prices decreased 0.7% vs March MoM

• Between March 2015 and March 2016, DPI shows cumulative deflation of 4.7% YoY

• For the same period, CPI* reported cumulative deflation of 1.3% YoY


• The data used contains transactions for ~370 K flight routes between March 2015 and April 2016

• Includes associated fees, where applicable

Flightsmethodology


DIGITAL PRICE INDEX

Flight prices down 4.6% YoY





* CPI category “Airline fare” used for comparison


DIGITAL PRICE INDEX

Domestic flight prices down 6.5% YoY



• Main deflation cities in April were Phoenix, Dallas, Miami & Los Angeles

• Main inflation cities in April were Seattle, New York, San Jose & Boston

* No CPI category exists for comparison


DIGITAL PRICE INDEX

International flight prices down 1.7% YoY


• For April, prices increased 0.5% vs March MoM

• Main inflation cities in April are for London, Cancun and Shanghai

• Main deflation cities in April were Manila, Vancouver and Guanajuato (Mexico)



• The data used contains transactions for ~250 K hotel properties between March 2015 and April 2016

• Includes associated fees, where applicable

Hotelsmethodology


DIGITAL PRICE INDEX

Domestic hotel prices increase by 2.8% YoY

* CPI category “Other lodging away from home including hotels and motels” used for comparison

• Between April 2015 and April 2016, DPI shows cumulative inflation of 2.8% YoY


• Main inflation cities in April are New York, Chicago, Boston, Seattle & San Francisco

• Main deflation cities in April were Orlando, Miami, Ft. Lauderdale and Tampa

• Between March 2015 and March 2016, DPI shows cumulative inflation of 2.9% YoY

• For the same period, CPI* reported cumulative inflation of 1.1% YoY


DIGITAL PRICE INDEX

International hotel prices increase 2.2% YoY



• Main inflation cities in April are Toronto, London, Vancouver, Montreal & Paris

• Main deflation cities in April were Cancun, San Juan, Dubai and Tokyo



• Our dataset covers an estimated 30-40% of all online grocery purchases. It contains transactions for ~195k products (2015-2016) and is heavily comprised of groceries bought online and picked-up in store

• The percent of shoppers buying groceries online is small, but growing by 35% YoY as of February

• The mix of grocery products bought online is not the same as offline – the top category for online shopping is drinks (nonalcoholic), while for offline shopping it is meat

• Still, a significant portion of online grocery shopping is dedicated to meats, dairy, fruits and vegetables – more than 50%

• When it comes to products where there’s little substitution possible and consumer choice is minimal (like milk and eggs), the DPI tracks almost perfectly with the CPI. This is a good indication that prices online match offline prices well

Groceriesmethodology

Ryan Dietzen

Can we update the 35% stat to something newer than as of February


DIGITAL PRICE INDEX

Online Groceries prices down again



• Main deflation in April for meats, juices & nonalcoholic drinks

• Between March 2015 and March 2016, DPI shows cumulative inflation of 0.5% YoY


* CPI category “Food at Home” used for comparison



• Products include interior and exterior furniture, mattresses and other bedding products

Furniture and beddingmethodology


DIGITAL PRICE INDEX

Furniture and bedding prices decrease

* CPI category “Furniture and bedding” used for comparison



• Main deflation items in April are dining sets





• Products include large appliances such as fridges, ovens, washers, dryers as well as smaller appliances such as vacuums, mixers, blenders etc.

Appliancesmethodology


DIGITAL PRICE INDEXAppliances prices not decreasing as fast as electronics

* CPI category “Appliances” used for comparison



• Main deflation items in April are refrigerators and washers





• Products include toys, games as well as playground equipment

Toysmethodology


DIGITAL PRICE INDEX

Toys see most deflation since holidays

* CPI category “Toys” used for comparison






• The data used contains transactions for ~1 M products between April 2014 and April 2016• Products span across dozens of different categories such as televisions, laptops, Blu-ray

players, desktops, tablets, wearables, headphones, video games, printers etc.

Electronicsmethodology


DIGITAL PRICE INDEX

Deflation of Electronics continues

• Prices for electronics decreased 9.5% between April 2015 and April 2016 YoY

• For April, prices decreased 1% vs March MoM

• Main deflation in April happening in computers, televisions and tablets



DIGITAL PRICE INDEX

Continued deflation of Televisions

* CPI category “Television” used for comparison






DIGITAL PRICE INDEX

Strong deflation in Computers





* CPI category “Personal computers and peripheral equipment” used for comparison


DIGITAL PRICE INDEX

Tablet prices declining again



• This is an important category not specifically broken out in the CPI


Job Seeking Index(JSI)


JOB SEEKING INDEX

MethodologyBased on analysis of aggregated and anonymous data from more than 1 billion visits to U.S. employment-search websites and top employer career pages from April 2015 through April 2016. Adobe Marketing Cloud powers 20 of the top 30 U.S. employers**


JOB SEEKING INDEX

Online Job Seeking declines

• US online job seeking is down 11.8% YoY in April

• Government reported March Unemployment Rate higher at 5.1% (down 8.9% YoY)

• Government reported February Unemployment Rate 4.9% (down 10.3% YoY)


Digital Housing Index(DHI)


DIGITAL HOUSING INDEX

MethodologyBased on analysis of aggregated and anonymous data from more than 2 billion visits to U.S. housing search websites between April 2015 and April 2016.


DIGITAL HOUSING INDEX

Online housing search growth slows

• Online search for purchases and rentals up 19.1% YoY in April

• NAR reports existing home sales increased 1.7% YoY in March


DIGITAL PRICE INDEX


Appendix

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DIGITAL PRICE INDEX

Digital Price Index: Fisher Ideal Price Index

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• The Fisher Ideal Price Index uses quantities purchased on the current period (month) and a previous period (previous month) to determine actual consumer’s preferences. Instead of assuming that consumers preferences for what goods to buy are constant over a certain number of years, it is able to account for the fact that they are constantly changing what they buy.

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DIGITAL PRICE INDEXMethodology Comparison: Fisher, Laspeyres and Paasche


DIGITAL PRICE INDEX

Annual Cumulative Inflation Rates


DIGITAL PRICE INDEX

Electronics Deflation in Detail

• The average price paid for an iPad mini (all models) has decreased by about 40% since the iPad mini 1 was introduced in November 2012.

• Although the initial price tag of new models remains constant at around $400, the automatic discount of previous models causes the average price to consistently fall: when the iPad mini 3 was introduced at an average price of $450, the price for the iPad Mini 2 was reduced by 25% to $300.

• This data only includes iPad minis sold in retail websites


DIGITAL PRICE INDEX

Job Seeking Online: Traffic Sources

• Direct traffic to employment-listing websites is higher than search traffic

• Search ranks second