Online Prices Rise in August as American Consumers Prepare for Holiday Shopping Season

Rising grocery and apparel prices have caused inflation for products sold online to return in August, according to new data from Adobe released on Tuesday.

In August 2022, online prices increased 0.4% year-over-year and 2.1% on a monthly basis, according to the latest Adobe Digital Price Index (DPI). What’s more, most of the categories tracked by Adobe – 12 out of 18 – saw month-over-month price increases in August.

This new data is a reversal of July’s 1% drop of online prices, which ended 25 consecutive months of persistent inflation.

Online inflation in August was driven by groceries, where prices rose 14.1% over last year, another record yearly high for the category. Apparel prices have also contributed, rising 4.9% as seasonal promotions fade. Prices for apparel had fallen 1% in July, driven in part by back-to-school discounts and oversupply for certain retailers.

Patrick Brown, VP of growth marketing and insights at Adobe, said in a statement that rising food costs “show no signs of abating,” just as seasonal discounts are phased out through the end of summer. “Consumer demand for e-commerce also remains steady and will keep prices elevated, especially for growing categories such as groceries, pet products and other consumer staples,” Brown added.

In the same report, Adobe noted that consumers spent $64.6 billion online in August, up 6.5% over last year. In July, $73.7 billion was spent online, on account of Prime Day discounts that drove record sales for the retail industry overall. For 2022 thus far, consumers have spent $590 billion online, growing 8.9% for the year, Adobe said.

This data comes on the same day that Mastercard SpendingPulse released its annual holiday forecast. This holiday season, U.S. retail sales are expected to increase 7.1% year over year, according to Mastercard’s new data.

As inflation impacts consumer wallets, bargain hunting is expected to be in full force this holiday season, Mastercard said. E-commerce is anticipated to increase despite significant growth last year, up 4.2% over last year, as the channel remains a convenient way for consumers to check prices in real time.

Mastercard also expects in-store retail sales to rise this holiday. The credit company said the segment should rise 7.9% over last year. What’s more, apparel spending is also set to rise 4.6% over last year and luxury up 4.4%, as both categories are expected to be hot holiday gift sectors following nearly two years of loungewear and athleisure dominating wardrobes.

“This holiday season, consumers may find themselves looking for ways to navigate the inflationary environment – from searching for deals to making trade-offs that allow for extra room in their gift-giving budgets,” said Michelle Meyer, U.S. chief economist at Mastercard Economics Institute. “New job creation, rising wages and lingering savings should have many consumers ready and able to spend.”

Steve Sadove, senior advisor for Mastercard and former CEO and chairman of Saks Incorporated, added that this holiday retail season is bound to be far more promotional than the last. “Easing supply chain issues coupled with the rapid shift in consumer spending trends and over-ordering inventory have left retailers in an interesting position ahead of the holidays,” said Sadove. “Retailers that were able to clear past merchandise and accurately forecast inventory needs will be the best positioned for growth.”

Last week, financial advising firm BankRate published a similar survey stating that half of winter holiday shoppers plan on starting their holiday shopping by October 31.

According to BankRate’s survey, some 11% said they started holiday shopping before the end of August, with 14% planning to begin in September, 25% in October and 38% in November. A mere 12% say they will wait until December to start shopping for the holidays.

As the cost of goods and services escalates, delaying holiday shopping may have become less attractive for some. Of those planning to do holiday shopping, 40% said inflation will impact their shopping decisions, the financial firm reported.

In fact, 95% of holiday shoppers who said inflation will change how they shop are actively looking for ways they can save money, BankRate found. Nearly 3 in 5 (59%) plan to buy fewer items, and 52% are pursuing more coupons, discounts, and sales.

“Holiday shopping will look different this year with inflation around 40-year highs,” Ted Rossman, senior industry analyst for Bankrate.com, said in a statement. “Consumers are still spending, but they’re being especially thoughtful about where each dollar goes.”

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