Shopping online is finally getting cheaper after more than two years of steady price increases with the U.S. in the grip of record-high inflation. But the catch is that you have to be shopping for electronics or clothes to see the price cuts.
E-commerce entered deflation in July, meaning that prices trended downward for the first time in 25 months, according to the latest Adobe Digital Price Index. Online prices decreased 1% compared to last year, after a 0.3% year-over-year increase in June and a 2% rise in May.
The decrease in online prices was largely due to prices dipping on electronics, toys and apparel. The largest category in online shopping, electronics — which made up almost one-fifth of online spending in 2021 — saw a 9.3% decrease in prices in July compared to last year. That followed a 7.3% year-over-year decrease in June. Prices for apparel also went down in July, with a 1% decrease compared to last year.
Electronics are becoming less expensive online for a variety of reasons, said Patrick Brown, vice president of growth marketing and insights at Adobe, in the report.
“Wavering consumer confidence and a pullback in spending, coupled with oversupply for some retailers, is driving prices down in major online categories like electronics and apparel,” Brown said. He said the falling prices would provide some relief to consumers while the cost of food continues to rise both online and in stores.
Online food prices increased 13.4% from last year in July and were up 1.4% from June.
Get Breaking Stock Alerts
The cost of living increased 8.5% in July compared to a year ago. That was slightly lower than the 9.1% yearly increase in June, the biggest year-to-year increase in more than 40 years. Grocery prices rose 13.1% compared to last year, according to the U.S. Bureau of Labor Statistics (BLS).
Shoppers could see further price decreases on apparel in the near future. Big retailers recently reported an overflow of inventory and said they would consider discounts on items such as clothing to address the issue. The overflow was largely due to a backlog of orders on popular items in the early days of the pandemic.
The recent downward trend in electronics prices is consistent with the long-term pattern before the pandemic, wrote Kayla Bruun, economic analyst at decision intelligence company Morning Consult in an email to MarketWatch.
Historically, prices of electronic devices have decreased over time as technology has advanced and manufacturing has become more efficient, Bruun said. But the supply chain disruptions and chip shortage in late 2021 reversed that trend. Now, with high inflation in food and gas, Bruun said consumers are concentrating their spending on those categories and shifting their attention to purchases that were not possible in the early days of the pandemic.
“Our data has shown that purchasing intentions over the next year for a broad range of goods, including electronics, have declined compared with July 2021, while the share of adults planning to book trips and vacations is higher than a year ago,” Bruun wrote.
Learn how to shake up your financial routine at the Best New Ideas in Money Festival on Sept. 21 and Sept. 22 in New York. Join Carrie Schwab, president of the Charles Schwab Foundation.