Online shopping data to track inflation

30 Mar '16
3 min read

Digital market research company Adobe Digital Index (ADI), has designed a Digital Price Index (DPI) that seeks to provide big data insights about the overall economy by exploring trends in online pricing and determining how these trends and prices relate to more traditional measures of inflation.

The effort, the first of its kind for Adobe involved two renowned economists, makes it clear that such data can be leveraged well beyond marketing.

Every three years, the Bureau of Labour Statistics (BLS) releases its Consumer Price Index (CPI), which measures changes in the price level of consumer goods and services purchased in stores by households. The BLS reaches out to Americans and asks them to recall what they buy, how often, and how much they spend.

“E-commerce, as well as quicker transactions and the ability to get products to market faster, has ballooned the number of new products,” said Tamara Gaffney, principal analyst at Adobe Digital Index (ADI). The BLS techniques, however, are not able to capture the digital marketplace, so they are not keeping up with the pace of change, she explained.

For example, when it comes to electronics, which is increasingly a more important area of consumer spending, about 40 per cent of all spend in a given month goes to products that have been on the shelves for less than three months. If this period is extended to a year, 80 per cent of all spend goes to products that have been on the shelves for less than a year.

“Consumers are constantly shifting what they're buying,” said Luiz Maykot, an analyst at ADI. “However, the CPI can only pick up that effect in a particular category every four years, when the BLS survey consumers and ask them what they buy.”

The DPI could complement the work of BLS, better capture the dynamism of new product introduction, and harness the data from billions of online transactions. Greater precision around quantity sold and other data allows it to use what is considered the gold standard for pricing analysis, the Fisher Ideal Price Index.

In its first iteration, the DPI also estimates inflation in a small but growing area of online spend: groceries. For groceries, specifically Food at Home, over the past year, ADI saw an inflation rate of 0.602 per cent. That is different than what the BLS has seen for the same period: a deflation of negative 0.4 per cent.

Gaffney sees the DPI, and Adobe's broader Digital Economy Project, as an example of how marketing data can go “way beyond marketing to provide insight that marketers and the entire business can use to anticipate where the market is going." (SH)

Fibre2Fashion News Desk – India

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