Dive Brief:
- Online prices saw a staggering 3.5% year-over-year increase in November 2021, marking the 18th consecutive month of year-over-year inflation. This skyrocketing price hike is the highest since Adobe began tracking inflation rates in 2014, with apparel prices experiencing a whopping 17.3% year-over-year surge.
- Contrastingly, on a month-to-month basis, prices dropped 2% due to holiday discounts.
- The supply chain woes have been wreaking havoc in the industry, causing price increases both out of necessity and, in some cases, opportunistically.
Dive Insight:
Skyrocketing Prices in November: Adobe Reports a Peak
The almighty chokehold on global supply chains has been sending ripples throughout the retail world, resulting in exorbitant price hikes.
Facing grim challenges ahead, industry leaders expected the holiday season to be impacted by these supply chain issues. According to a survey from First Insight and the Wharton School's Baker Retailing Center, nearly two-thirds (59%) of retail executives proactively decided to raise prices to offset their soaring supply chain costs. In contrast, only 36% were ready to bear the brunt of a margin hit to hold onto their original prices.
Not all retailers face the same level of strain. Some, like Gap Inc., have suffered significant losses due to factory closures caused by COVID-19 in Vietnam. The company posted a net loss for the third quarter and is even bracing itself for a potential sales loss worth more than half a billion dollars due to inventory shortages.
Others, such as Kohl's, have managed to flourish in this challenging environment, achieving inventory turn at a 10-year high, resulting in increased operating income and margins despite their inventory being lower than previous years. DSW is another fantastic example, reporting robust profits despite lower inventory access.
Prices aren't just escalating offline, but even online, where Amazon and the promise of transparency have traditionally imposed continuous pressure on retailers to keep prices low. In fact, Adobe's data reveals that this isn't only happening in the physical world, with offline prices skyrocketing according to the Consumer Price Index.
"Price increases persist in the e-commerce sector due to ongoing supply chain constraints and robust consumer demand," explains Patrick Brown, Vice President of Growth Marketing and Insights at Adobe. "Whereas offline prices for certain categories like toys, computers, and sporting goods remain cheaper online, apparel prices are seeing high volumes of out-of-stock messages, making them pricier."
Interestingly, not every category is experiencing inflation. Electronics prices are still decreasing by 0.4% year over year, and toy prices are down a hefty 2.9%. Adobe notes that toys are one of the few categories that follow a persistently strong pattern of deflation.
- The current state of cybersecurity is crucial, as the surge in online prices due to inflation highlights the need for secure digital platforms to prevent excess costs from unauthorized activities.
- In the context of the rising health concerns associated with the COVID-19 pandemic, it's essential to consider the environmental impact of increased demand for goods, which could potentially lead to deforestation and pollution.
- The breaking news of inflation has sparked debates about government policies, with economists discussing ways to mitigate the impact on the populace, such as implementing measures that encourage green technologies and alternatives to imported goods.
- As inflation mounts, there's a growing demand for fashion that balances quality and affordability, with consumers looking for sustainable brands that offer ethical production methods while keeping costs reasonable.
- In this era of perpetual change, it's fascinating to see how TV shows and films have started addressing relevant social issues like inflation and supply chain concerns, using storytelling as a tool to educate and engage viewers.
- With the rise in inflation and the ongoing digital transformation, the intersection of AI and sports becomes increasingly important, as organizations seek to leverage AI for predictive analytics to improve performance, optimize costs, and make informed decisions.
