Can Brick and Mortar Compete with Digital on Price?

Adobe Price Index shows digital advantage

Author: Andria Cheng

September 19, 2017

Brick-and-mortar retailers may be able to wow shoppers with wonderful touch-and-feel experiences and in-person customer service, but they are still at a big disadvantage when it comes to price—a key purchase factor for many consumers.

From apparel and furniture to televisions and sporting goods, prices of goods are declining. But online prices are dropping at a much faster rate than in-store price tags, according to Adobe’s Digital Price Index study, which compares the prices of baskets of comparable goods online against those in the Consumer Price Index (CPI) measured by the US Department of Labor Bureau of Labor Statistics. The study, which looks at a total of 18 product and service categories, suggests that price deflation can be seen in most categories, whether online or in physical stores, but the declines are more distinct online.

(Adobe said it calculates digital price data by measuring 80% of all online transactions from the top 100 US retailers, and aggregating data from 15 billion website visits and 2.2 million products sold online. It also acknowledges that about 8% of the government’s CPI data is collected from online sellers, with the rest coming from physical locations. The online-vs.-offline price gap in Adobe's study would have been even wider had the online portion in the CPI been excluded, the firm said.)

For instance, online apparel prices in June fell 4.1% from a year earlier, compared with a 0.6% decline in-store during the same period. Prices of televisions sold online declined 13.2%, vs. an 11.4% drop at physical stores.

Although the data is a discouraging sign for already troubled brick-and-mortar retailers, Adobe’s online prices don’t include what consumers may have to pay for shipping. Meanwhile, physical retailers aren’t sitting still: They are fighting to keep their prices competitive. Walmart, Best Buy and many other chains are offering price matching and cutting prices in key categories to attract shoppers to stores. 

The importance of price for many consumers can be seen in March 2017 survey data from Yes Lifecycle Marketing. Fully 74% of the respondents cited price as a reason they purchase on Amazon. 

As important as price is, many studies have also showed that consumers still like to shop in stores, to see and touch, and to experience—a common refrain touched on by retailers across the board as a weapon against Amazon and other online sellers.