report: adobe digital economy project june 2016

© 2016 Adobe Systems Incorporated. All Rights Reserved.

ADOBE DIGITAL ECONOMY PROJECTJUNE 2016 UPDATE

© 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved.

Adobe Digital Insights background

Based on analysis of aggregated and anonymous data from Adobe Marketing Cloud:• Adobe Analytics and Adobe Mobile Services

Thousands of brands worldwide including two thirds of Fortune 50 companies rely on Adobe Marketing Cloud:• $7.50 of every $10 spent online with top 500 U.S. retailers go through Adobe Marketing Cloud **• Adobe Marketing Cloud powers:

• 20 of the top 30 U.S. employers• 9 of 10 largest hotel groups• 7 of 10 largest airlines

** Latest IR Top 500 Report 2015

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AdobeAnalytics

AdobeMobile Services

© 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. 3

Digital Price Index(DPI)

Job Seeking Index(JSI)

Digital Housing Index(DHI)


Main takeaways: June

Our Digital Price Index (DPI) continues to see general deflation in the goods and services we currently cover. Only two categories have shown YoY inflation, hotels (domestic) and nonprescription drugs. And even for these categories, the inflation rates are small (0.8% and 0.3%, respectively)

Essential goods (such as groceries, nonprescription drugs and medical supplies) have seen significantly less deflation than non-essential goods (such as electronics, sporting goods etc.)

Prices for nonprescription drugs increased 0.5% in June relative to May, while prices for medical equipment and supplies decreased -0.2% during the same period.

Relative to June 2015, prices for the medical equipment and supplies category have decreased 0.6%, while prices for diabetics equipment specifically (testing strips, measurement equipment etc.) have increased by 2.4%.

After decreasing for four consecutive months, prices for groceries are down year-over-year.

In the travel space, prices for Hotels (domestic) decreased significantly by 1% in June, bringing the year-over-year inflation rate down to 0.8% in June from 1.7% in May

Our Job Seeking Index shows that online job seeking is down in June, indicating that the labor market situation in May might have been temporary.

Our Digital Housing Index shows that online housing seeking is down for the second consecutive month.

For both the JSI and the DHI, Washington, D.C. has one of the highest rates of increase in online job and house seeking activity, likely due to the election year.

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Economist Advisors

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Austan Goolsbee, University of Chicago Robert P. Gwinn Professor of Economics at The University of Chicago's Booth School of Business

Formerly served as President Obama’s Chairman of the Council of Economic Advisers

The youngest member of the cabinet of President Obama

Pete Klenow, Stanford University Professor, Department of Economics, Stanford University

Currently Visiting Scholar, Federal Reserve Bank of San Francisco

Member of editorial boards for Econometrica, American Economic Review, Quarterly Journal of Economics and others


Methodology

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Based on analysis of aggregated and anonymous data• Fisher Ideal Price Index• Adobe measures 80% of all online transactions from top 100 U.S. retailers ** • $7.50 of every $10 spent online with top 500 U.S. retailers go through Adobe Marketing Cloud **• Based on analysis of 15 billion website visits and 2.2 million products sold online

BLS: Consumer Price Index Adobe: Digital Price IndexQuantities Sold No YesProducts/quantities updated Every 4 years Daily

Number of Products 83 thousand (all categories) 2.2 million (currently covered categories)

Data Collection Frequency Bi-Monthly DailyData Availability Monthly DailyOffline Prices Yes NoLong history Yes NoAll categories of spending Yes No

** Latest IR Top 500 Report 2015


Big data in DPI decreases uncertainty

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DPI CPIAppliances 0.15% 0.46%Airfare 0.08% 0.51%Computers 0.28% 0.49%Furniture and bedding 0.07% 0.31%Grocery 0.10% 0.12%Hotels: domestic 0.04% 2.30%Medical equipment and supplies 0.20% 0.39%Nonprescription Drugs 0.18% 0.47%Sporting Goods 0.12% 0.31%Televisions 0.24% 0.60%Toys 0.25% 0.59%


Inflation rates by price ranges

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• Televisions have seen higher-ticket items deflate faster than lower-ticket items

• In computers, models priced above $1,200 showing the least deflation in the category

• Price bins are determined based on the price the product had when originally launched (first price).


The Importance of detail: Black Friday

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• DPI captures the effect of major discount holidays like Black Friday and Cyber Monday because it measures quantities and does so in real-time

• Lowest prices for TVs in 2015 were Thanksgiving and Black Friday

• Data demonstrates retailers trying to start sales earlier – the Sunday and Monday before Thanksgiving saw low prices


Measuring rapidly shifting consumer preferences

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• Electronics see an average of 80% of online spend on new* products**

• 16% of monthly online spend for groceries on new products

* Products that have been available for 1 year or less** A product is defined as an item for purchase which has an unique identifier (such as a SKU)


Special topics: Brexit and the Rio Olympics

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• Prices for hotels in London decreased 3% MoM and 13.6% YoY

• Prices for flights to London (LHR) are down 8.5% MoM and 12.1% YoY

• Prices for hotels in Rio de Janeiro increased 4.1% MoM but are still down 3.3% YoY

• After being down significant down YoY in the early months of 2016, prices for flights to Rio de Janeiro (GIG) increased 17% MoM and are up 34% YoY


May 2016 Recap

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MoM: May vs April MoM: May vs April Difference (percentage) Same Sign? YoY: Cumulative May 2015-2016 YoY: Cumulative May 2015-2016 Difference (percentage) Same Sign?

DPI CPI DPI vs. CPIDPI vs.

CPI DPI CPI DPI vs. CPIDPI vs.

CPIAppliances -1.0% 0.0% -1.0% No -4.5% -2.9% -1.6% YesComputers -0.4% -0.9% 0.5% Yes -12.7% -7.8% -4.9% YesFlights 4.1% 4.6% -0.5% Yes -5.0% -3.2% -1.8% YesFurniture and bedding -0.8% -0.5% -0.3% Yes -3.4% -2.4% -1.0% YesGrocery -0.2% -0.5% 0.3% Yes 0.4% -0.7% 1.1% NoDomestic Hotels 0.7% 3.5% -2.8% Yes 2.6% 2.8% -0.1% YesMedical equipment and supplies -1.3% 0.7% -2.0% No -1.5% -1.4% -0.1% YesNonprescription Drugs -0.8% 0.3% -1.1% No -0.2% -1.2% 1.0% YesSporting Goods -0.4% -0.2% -0.2% Yes -5.2% 0.3% -5.5% NoTelevisions -2.0% -1.6% -0.4% Yes -18.5% -17.4% -1.1% YesToys 0.4% -0.6% 1.0% No -6.5% -8.0% 1.6% Yes


June 2016 Summary

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• Main deflation in June:• Tablets, Int’l Hotels, Televisions, Appliances

• Main inflation in June:• Int’l airfare, Nonprescription drugs, Airfare, Toys

YoY MoMAppliances -6.5% -1.8%Computers -12.3% -1.6%Electronics -10.5% -1.8%Flights -4.2% 0.4%Flights: domestic -6.6% -0.2%Flights: international -0.6% 2.5%Furniture and bedding -4.0% -1.3%Grocery -0.1% -0.6%Hotels: domestic 0.8% -1.0%Hotels: international -4.0% -3.2%Medical equipment and supplies -0.6% -0.2%Nonprescription Drugs 0.3% 0.5%Sporting Goods -5.1% -0.6%Tablet -19.9% -3.5%Televisions -17.5% -2.2%Toys -4.9% 0.3%


Appliances

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• Adobe DPI shows cumulative deflation of -6.5% YoY (June 2015 to June 2016)

• Main YoY price decreases for Appliances priced between $600 and $1000

• For June 2016, prices decreased -1.8% vs May 2016 MoM

METHODOLOGY:

• The data used contains transactions for ~110 K products• Products include large appliances such as fridges, ovens, washers, dryers as well as smaller appliances such as vacuums, mixers, blenders etc.


Airfare

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• For June 2016, prices increased 0.4% vs May 2016 MoM

METHODOLOGY:

• The data used contains transactions for ~370 K flight routes• Includes associated fees, where applicable


Airfare: domestic

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• Main YoY price decreases in Washington, Tennessee, Oregon

• Main YoY price increase in Florida


METHODOLOGY:



Airfare: international

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• Main YoY price decreases are for flights destined to Africa and Europe

• Main YoY price increases are for Latin America


METHODOLOGY:



Electronics

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• Main YoY price decreases for Electronics priced between $200 and $500


METHODOLOGY:

• The data used contains transactions for ~1 M products• Products span across dozens of different categories such as televisions, laptops, Blu-ray players, desktops, tablets, wearables, headphones, video games, printers etc..


Electronics: computers

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• Main YoY price decreases for Computers priced between $700 and $1200


METHODOLOGY:



Electronics: televisions

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• Main YoY price decreases for Televisions priced greater than $2000


METHODOLOGY:



Electronics: tablets

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• Main YoY price decreases for Tablets priced between $350 and $550


METHODOLOGY:



Furniture and Bedding

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• Main YoY price decreases for Furniture and bedding priced between $100 and $150


METHODOLOGY:

• The data used contains transactions for ~173 K products• Products include interior and exterior furniture, mattresses and other bedding products


Groceries

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METHODOLOGY:

• Our dataset covers an estimated 30-40% of all online grocery purchases. It contains transactions for ~195k products• The mix of grocery products bought online is not the same as offline – the top category for online shopping is drinks (nonalcoholic), while for offline shopping it is meat


Hotels: domestic

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METHODOLOGY:

• The data used contains transactions for ~250 K hotel properties• Includes associated fees, where applicable

• Adobe DPI shows cumulative inflation of 0.8% YoY (June 2015 to June 2016)

• Main YoY price increases are in Nevada (parking charges), Tennessee, Colorado and California

• Main YoY price decreases are in Illinois, New York , Hawaii and Washington, D.C.



Hotels: international

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• Main price decreases for hotels in Africa and South America

• Main price increases for hotels in North America and Oceania


METHODOLOGY:

• The data used contains transactions for ~250 K hotel properties• Includes associated fees, where applicable


Medical Equipment and Supplies

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• Main YoY price decreases for Medical equipment and supplies for products priced more than $135

• Main YoY price increases for Medical equipment and supplies for products priced between $0 and $10


• For diabetes-specific supplies and equipment, we found YoY inflation rate of 2.4%

METHODOLOGY:

• The data used contains transactions for 6,000 products• ” includes supportive and convalescent equipment, dressings and first aid kits, and medical equipment for general use


Nonprescription drugs

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• Adobe DPI shows cumulative inflation of 0.3% YoY (June 2015 to June 2016)

• Main YoY price decreases for Nonprescription Drugs priced greater than $40

• Main YoY price increases for Nonprescription Drugs priced between $10 and $15


METHODOLOGY:

• The data used contains transactions for 16 K products• Includes all non-prescription medicines taken by swallowing, applying on your skin (such as topicals), inhaling, as suppositories, or enemas.


Sporting Goods

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• Main YoY price decreases for Sporting Goods priced between $40 and $100


METHODOLOGY:

• The data used contains transactions for ~300 K products• Products include small equipment and accessories (balls, gloves, uniforms) as well as large equipment such as treadmills, weightlifting tools etc.


Toys

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• Main YoY price decreases for Toys priced between $70 and $200

• Main YoY price increases for Toys priced greater than $300


METHODOLOGY:

• The data used contains transactions for ~249 K products• Products include toys, games as well as playground equipment


Online Job Seeking declines

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METHODOLOGY:

• Based on analysis of aggregated and anonymous data from more than 1 billion visits to U.S. employment-search websites and top employer career pages from May 2015 through May 2016.

• Adobe Marketing Cloud powers 20 of the top 30 U.S. employers**

• US online job seeking is down 14.1% YoY in June


Online housing search growth slows

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METHODOLOGY:

• Based on analysis of aggregated and anonymous data from more than 2 billion visits to U.S. housing search websites between May 2015 and May 2016.

• Online search for purchases and rentals up 10.4% YoY in June


Appendix

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Presenter

Presentation Notes

Online price deflation timeframe: last 2 years


Digital Price Index: Fisher Ideal Price Index

∑𝑖𝑖=1𝑛𝑛 𝑃𝑃𝑖𝑖𝑖𝑖𝑈𝑈𝑖𝑖𝑖𝑖−1∑𝑖𝑖=1𝑛𝑛 𝑃𝑃𝑖𝑖𝑖𝑖−1𝑈𝑈𝑖𝑖𝑖𝑖−1

∗∑𝑖𝑖=1𝑛𝑛 𝑃𝑃𝑖𝑖𝑖𝑖𝑈𝑈𝑖𝑖𝑖𝑖∑𝑖𝑖=1𝑛𝑛 𝑃𝑃𝑖𝑖𝑖𝑖−1𝑈𝑈𝑖𝑖𝑖𝑖

• The Fisher Ideal Price Index uses quantities purchased on the current period (month) and a previous period (previous month) to determine actual consumer’s preferences. Instead of assuming that consumers preferences for what goods to buy are constant over a certain number of years, it is able to account for the fact that they are constantly changing what they buy.

𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 𝜋𝜋𝑖𝑖 =


Methodology Comparison: Fisher, Laspeyres and Paasche


Annual Cumulative Inflation Rates


Electronics Deflation in Detail

• The average price paid for an iPad mini (all models) has decreased by about 40% since the iPad mini 1 was introduced in November 2012.

• Although the initial price tag of new models remains constant at around $400, the automatic discount of previous models causes the average price to consistently fall: when the iPad mini 3 was introduced at an average price of $450, the price for the iPad Mini 2 was reduced by 25% to $300.

• This data only includes iPad minis sold in retail websites


Inflation Rates by Price Bins, May (MoM)


Inflation Rates by Price Bins, May (MoM) – Cont’d


Job Seeking Online: Traffic Sources

• Direct traffic to employment-listing websites is higher than search traffic

• Search ranks second

report: adobe digital economy project june 2016

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