Adobe: 21 straight months of inflation driving e-commerce growth

Diving brief:

  • Following e-commerce sales growth projections, Adobe’s Digital Economy Index found consumers spent $1.7 trillion online in the last two years of the COVID-19 pandemic , ending February 2022. Shoppers spent $138 billion online in the first two months of 2022 and are expected to break a record this year by spending more than $1 trillion online.
  • Electronics, apparel and groceries combined accounted for just under half (41.8%) of all e-commerce spending in 2021. Electronics accounted for 18.6% of overall e-commerce sales, followed by clothing (14.3%) and groceries (8.9%). according to Adobe’s analysis.
  • Between March 2020 and February 2022, shoppers saw 60 billion out-of-stock messages, and features like curbside and buy now, pay later picked up steam. Buy now, pay later Orders jumped more than 500% in fall 2020, but year-over-year growth in the past two months has slowed to 53%.

Overview of the dive:

Adobe research partly attributes the rise in e-commerce sales to inflation, which began in June 2020 and has continued for 21 consecutive months. Last year, inflation drove $22 billion in e-commerce sales growth, and across the two years as measured by Adobe, $32 billion of the growth was the result of higher prices rather than additional purchases.

In January and February 2022, rising prices drove online sales growth of $3.8 billion, but consumer demand has yet to falter. The report predicts inflation could cause consumers to spend up to $27 billion more in 2022 on the same amount of purchases.

Adobe expects sales of the three largest e-commerce categories — grocery, electronics, and apparel — to grow in 2022 as well. Signaling a similar trend so far this year, US Census data saw a 24% year-over-year increase in apparel and accessories sales in January 2022.

“E-commerce is being reshaped by grocery, a category with minimal discounts compared to legacy categories like electronics and apparel,” said Patrick Brown, vice president of growth and insights marketing at Adobe, in a press release. “This highlights a shift in the digital economy, where speed and convenience are becoming just as important as cost savings.”

As online sales continue to grow, research suggests that using brick-and-mortar stores to fulfill online orders may need to continue to meet omnichannel demand over the long term. Adobe’s report noted that in 2022 so far, curbside pickup accounts for one-fifth of all online orders among retailers that offer it. A Edge 2021 Report by Ascential predicted that stores could dedicate up to a third of their space to fulfilling online orders in the future, a conclusion they reached based on the prediction that 34.8% of retail chains in global retail will be online by 2023.

Despite recent increases in online sales, Forrester research predicts significantly more sales from physical storefronts for at least the next few years. That of the firm July 2021 report said nearly three-quarters of retail will still occur in physical stores in 2024. Another report released by the company in October 2021 reaffirmed that the conclusion.

The demand for buy now, pay later seems to calm down after the holiday season, but the space continues to grow. Adobe found BNPL orders increased by 528% between October and November 2020 over the previous year, but demand in early 2022 was much lower. Another one Bank of America report found that app downloads for Affirm, Afterpay, Klarna and Zip grew to 3.47 million in December 2021, a 20% increase from the previous year. However, regulators are keeping tabs on the space, with the Consumer Financial Protection Bureau reviewing the risks of BNPL firms consumers who take on more debt than they can afford.

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