Adobe Digital Economy Project - January 2017

© 2016 Adobe Systems Incorporated. All Rights Reserved.
ADOBE DIGITAL ECONOMY PROJECT
JANUARY 2017 UPDATE

© 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved.
Main takeaways: January
2
 The Adobe DPI adds two new categories this month:
 Personal care products (cosmetics, lotion, hair, nail care and more): 1.1% MoM inflation, -3.0% YoY deflation
 Pet products (pet food & treats, kitty litter, accessories like leashes and pet beds, and more) 1.1% MoM inflation, 0.2% YoY inflation
 Early signals from 2017 suggests that inflation is on the rise. Weighted average inflation across the Adobe DPI categories shows 0.5% MoM inflation
 Many categories show strong MoM inflation after the holiday season, including tablets (6.4% MoM inflation), toys (3.4% MoM), and alcohol (2.6% MoM)
 The Adobe DPI generally shows MoM increases in January after holiday sales end, though 2017 increases were higher on average. While the same number of
categories showed MoM inflation in January for 2016 and 2017, the DPI categories that had price increases showed more inflation MoM on average in January
2017 (1.74%) compared to January 2016 (1.57%)
 Tablets (6.4% MoM inflation in January 2017), televisions (1.1%), auto parts (0.8%), furniture and bedding (0.6%), sporting goods (1.2%), pet products (1.2%), and toys (3.4%) have higher MoM inflation rates this
year than last year
 The DPI shows international travel is more affordable in January: international flight prices are down -5.0% MoM (though up 1.5% YoY), and international hotels
show near-zero inflation (0.1% MoM and down -1.4% YoY)
 Trade from and travel to Mexico shows signs of inflation YoY, but prices for travel are down steeply since November
 Auto parts, a category that is significantly made up of imports from Mexico, shows a 0.8% MoM inflation but -1.4% YoY deflation
 Travel into Mexico’s largest airport, Mexico City International (MEX) shows 4.0% YoY inflation (compared to 1.5% YoY inflation for international flights) but prices are down significantly since November 2016.
Flight prices to MEX show deflation of -19.0% between November 2016 and January 2017.
 In the U.K. prices are rising but still showing deflation YoY: grocery prices are up for the 4th month in a row (0.2% MoM inflation, -0.8% YoY deflation).
Computers are up 1.6% in January (-2.5% deflation YoY), while televisions in the U.K. saw 0.6% MoM inflation (-21.1% YoY deflation)

Adobe Digital Insights Background
Based on analysis ofaggregated 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 ofevery $10spent online with top 500 U.S.retailers go through Adobe Marketing Cloud **
• Adobe Marketing Cloud powers:
• 20 ofthe top 30 U.S.employers
• 9 of10largest hotel groups
• 7of10largest airlines
**LatestIR Top 500 Report 2015
3
Adobe
Analytics
Adobe
Mobile Services

Economist Advisors
4
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

© 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. 5
Digital Price Index
(DPI)
Job Seeking Index
(JSI)
Digital Housing Index
(DHI)

Digital Price Index Methodology
(DPI)

Methodology – U.K.
7
Based on analysis of aggregated and anonymous data
• Fisher Ideal Price Index
• $6 of every $10 spent online with top 100 European retailers go through Adobe Marketing Cloud **
• Based on analysis 1 billion website visits and 100k products sold online
ONS: Consumer Price Index Adobe: Digital Price Index
Quantities Sold No Yes
Products/quantities updated Annually Daily
Number of Products 180,000
100k
(currently covered categories)
Data Collection Frequency Monthly Daily
Data Availability Monthly Daily
Offline Prices Yes No
Long history Yes No
All categories of spending Yes No
** Latest IR U.K. Top 500 Report 2015

Methodology – U.S.
8
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
BEA: Personal Consumption
Expenditures
Adobe: Digital Price Index
Quantities Sold No No Yes
Products/quantities updated Every 2 years Monthly Daily
Number of Products 83 thousand (all categories) 83 thousand (all categories)
2.5 million
(currently covered categories)
Data Collection Frequency Bi-Monthly Monthly Daily
Data Availability Monthly Monthly Daily
Offline Prices Yes Yes No
Long history Yes Yes No
All categories of spending Yes Yes No
Index Type Laspeyeres Fisher Ideal Fisher Ideal
** Latest IR Top 500 Report 2015

Big data in DPI decreases uncertainty
9
DPI CPI
Appliances 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
10
• Televisions have seen higher-ticket items
deflate faster than lower-ticket items in 2015
• For computers, mid-range models priced
between $700 and $1,200 showed the
highest deflation last year
*Price bins are determined based on the price the product had when originally launched
(first price).

The Importance of detail: Black Friday discount comparisons
11
• DPI captures the effect of major discount holidays
like Black Friday and Cyber Monday because it
measures quantities and does so in real-time
• Prices online for Televisions dropped later in
November 2016 than in 2015, with more discounts
during the Black Friday week (Monday 11/21 through
Cyber Monday), which accounted for more than half
of all Televisions units purchased between
November and December
• Television prices then increased more in December
2016 than they did in December 2015, a sign that
retailers were able to capitalize on later shopping

Measuring rapidly shifting consumer preferences
12
• Electronics see an average of 77% of online
spend on new* products**
• 17% 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)

Digital Price Index Findings
(DPI)

Adobe DPI Findings in the United Kingdom
14
• Adobe DPI for the U.K. shows cumulative deflation for groceries of
-0.8% YoY (January 2016 to January 2017), with a fourth-straight
month of inflation (0.2% MoM inflation)
• U.K. computers and television inflation have diverged in recent
months, though both saw MoM inflation in January
• Computers in the U.K. saw a 1.6% inflation in January; the category is
still showing -2.5% deflation YoY
• Televisions in the U.K. saw 0.6% MoM inflation; the category is still
showing -21.1% deflation YoY

December 2016 U.S. Recap
15
MoM:
November to
December
MoM:
November to
December
Difference
(percentage)
Same
Sign?
YoY: Cumulative
December 2015-2016
YoY: Cumulative
December 2015-2016
Difference
(percentage)
Same
Sign?
DPI CPI DPI vs. CPI DPI vs. CPI DPI CPI DPI vs. CPI DPI vs. CPI
Alcohol -2.1% -0.1% -2.0% Yes 0.5% 0.9% -0.4% Yes
Appliances 6.0% -0.4% 6.4% No -4.6% -4.5% -0.1% Yes
Auto Parts -0.1% 0.6% -0.7% No -1.8% -1.0% -0.8% Yes
Computers 1.2% -0.5% 1.7% No -6.5% -5.8% -0.8% Yes
Flights -0.7% -3.4% 2.7% Yes 3.3% -4.9% 8.2% No
Furniture and bedding 1.7% -0.1% 1.8% No -3.8% -2.9% -0.9% Yes
Grocery 0.5% -0.2% 0.7% No -0.7% -2.0% 1.2% Yes
Hotels -1.6% -2.3% 0.7% Yes 4.1% 3.3% 0.8% Yes
Medical equipment and supplies -0.2% 0.1% -0.3% No -1.4% 0.3% -1.7% No
Nonprescription Drugs 0.4% 0.1% 0.3% Yes -0.2% -0.7% 0.5% Yes
Personal Care Products*** 1.1% 0.2% 0.9% Yes -2.3% -0.4% -1.9% Yes
Pet Products*** 2.0% 0.0% 2.1% No 0.0% 0.6% -0.6% Yes
Sporting Goods 2.1% -0.2% 2.3% No -5.7% -1.5% -4.1% Yes
Televisions 7.8% -3.5% 11.3% No -19.8% -24.5% 4.7% Yes
Tools & Home Improvement 0.7% 0.1% 0.6% Yes -2.1% -0.5% -1.6% Yes
Toys 2.7% -1.4% 4.1% No -6.9% -8.9% 1.9% Yes
Weighted Average Inflation* 0.6% -0.4% 1.0% No -1.2% -1.9% 0.7% Yes
Weighted Aggregate Inflation, Less
Grocery** 0.8% -0.7% 1.5% No -1.7% -1.8% 0.2% Yes
* Weighted average inflation is calculated using CPI-U relative component weights (2014-2015) across the shared categories in the DPI and the CPI
** Grocery is a large component of the current CPI weights, so changes in grocery prices drive the majority of weighted average inflation. As we add more categories (like housing, auto etc.), these
aggregate numbers will change.
*** New categories introduced in this month’s Adobe DPI

January 2017 U.S. Summary
16
• Main MoM deflation in January:
• International flights, domestic flights,
Computers
• Main MoM inflation in January:
• Tablets, toys, domestic hotels, alcohol,
YoY MoM
Alcohol -0.1% 2.6%
Appliances -5.1% 1.7%
Auto Parts -1.4% 0.8%
Computers -8.0% -0.5%
Electronics -9.8% 1.0%
Flights 1.1% -3.5%
Domestic Flights -0.7% -2.9%
Intl Flights 1.5% -5.0%
Furniture and bedding -3.5% 0.6%
Grocery -1.2% 0.1%
Domestic Hotels 3.1% 4.3%
Intl Hotels -1.4% 0.1%
Medical Equipment and Supplies -1.5% 0.1%
Nonprescription Drugs 0.0% -0.1%
Personal Care Products -3.0% 1.1%
Pet Products 0.2% 1.1%
Sporting Goods -5.4% 1.2%
Tablet -13.0% 6.4%
Televisions -19.5% 1.1%
Tools & Home Improvement -1.9% 0.6%
Toys -6.7% 3.4%
Weighted Average Inflation* -1.5% 0.5%
Weighted Aggregate Inflation, Less Grocery** -1.9% 0.9%
* Weighted average inflation is calculated using CPI-U relative component weights (2014-2015) across the shared categories in the DPI and the CPI
** Grocery is a large component of the current CPI weights, so changes in grocery prices drive the majority of weighted average inflation. As we add more categories (like housing, auto etc.), these aggregate
numbers will change.
*** New categories introduced in this month’s Adobe DPI

Alcohol
17
• Adobe DPI shows cumulative deflation of -0.1% YoY (January
2016 to January 2017)
• Prices for Beer show cumulative inflation of 2.5% YoY
• Prices for Spirits show cumulative inflation of 1.0% YoY
• Prices for Wine show cumulative deflation of -1.7% YoY
• For January 2017, prices increased 2.6% vs December 2016
MoM
METHODOLOGY:
• The data used reflect transactions for ~120 K products

Appliances
18
• Main YoY price decreases for Appliances priced between $200
and $400
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

Auto Parts
19
• Adobe DPI shows cumulative deflation of -1.4% YoY
(January 2016 to January 2017)
• Main YoY price decreases for Auto Parts priced greater than
$200
MoM
METHODOLOGY:
• The data used reflect transactions for ~300 K products

Airfare
20
• Adobe DPI shows cumulative inflation of 1.1% YoY
• For January 2017, prices decreased -3.5% vs December
2016 MoM
METHODOLOGY:
• The data used contains transactions for ~370 K flight routes
• Includes associated fees, where applicable

Airfare: domestic
21
• Largest price increases in airfare were to Kansas, with YoY
inflation of 9.1%
• Other large price increases for airfare were to Ohio, with YoY
inflation of 6.1%
• Other significant price decreases for airfare are to Colorado, with
YoY deflation of -4.4%
• Largest price decreases are to airfare to Minnesota, with YoY
deflation of -5.2%
• For January 2017, prices decreased -2.9% vs December 2016
MoM
METHODOLOGY:

Airfare: international
22
• Adobe DPI shows cumulative inflation of 1.5% YoY (January
• Largest price increases for airfare were to South America, with
inflation of 17.6% YoY
• Other price inflation for airfare include Oceania, with inflation of
2.2% YoY
MoM
METHODOLOGY:

Electronics
23
• Main YoY price decreases for Electronics priced greater than
$1500
MoM
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,printersetc..

Electronics: computers
24
• Main YoY price decreases for Computers priced between $1200
and $1600
• Main YoY price increases for Computers priced between $0 and
$300
MoM
METHODOLOGY:

Electronics: televisions
25
• Main YoY price decreases for Televisions priced greater than
$2000
MoM
METHODOLOGY:

Electronics: tablets
26
• Main YoY price decreases for Tablets priced between $550 and
$900
MoM
METHODOLOGY:

Furniture and Bedding
27
• Main YoY price decreases for Furniture and bedding priced
between $100 and $150
MoM
METHODOLOGY:
• Products include interior and exterior furniture, mattresses and other bedding products

Groceries
28
• Main YoY deflation for eggs (-21.4%), beverages (-3.2%)
and cheese (-2.6%)
MoM
• Main price increases for bakery products (+2.1%)
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
29
METHODOLOGY:
• The data used contains transactions for ~250 K hotel properties
• Prices for hotels in Nevada show the highest inflation
among states measured at 14.1% YoY
• Prices for hotels in North Dakota show the highest
deflation among states measured at -4.4% YoY
MoM

Hotels: international
30
METHODOLOGY:
• The data used contains transactions for ~250 K hotel properties
• Largest prices increases are for hotels in Oceania, with
7.5% YoY inflation
• Largest price decreases are for hotels in Asia, with YoY
deflation of -1.9%
MoM

Medical Equipment and Supplies
31
• Main YoY price decreases for Medical equipment and supplies
priced between $45 and $135
MoM
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
32
• Main YoY price decreases for Nonprescription Drugs priced
between $0 and $10
• Main YoY price increases for Nonprescription Drugs priced
between $15 and $25
MoM
METHODOLOGY:
• Includes all non-prescription medicines taken by swallowing, applying on your skin (such as topicals), inhaling, as suppositories, or enemas.

Personal care products
33
• Main YoY price decreases for Personal care products priced
between $10 and $30
MoM
METHODOLOGY:
• Includes cosmetics, lotion, hair (shampoo, conditioner) and nail care

Pet products
34
• Main YoY price increases for Pet products priced between $0
and $10
• Main YoY price decreases for Pet products priced between $10
and $20
MoM
METHODOLOGY:
• Includes pet food & treats, kitty litter and accessories (leashes, pet beds)

Sporting Goods
35
• Main YoY price decreases for Sporting Goods priced between
$40 and $100
MoM
METHODOLOGY:
• Products include small equipment and accessories (balls, gloves, uniforms) as well as large equipment such as treadmills, weightlifting tools etc.

Tools & Home Improvement
36
• Main YoY price decreases for Tools & Home Improvement priced
greater than $600
MoM
METHODOLOGY:

Toys
37
• Main YoY price decreases for Toys priced between $200 and
$300
MoM
METHODOLOGY:
• Products include toys, games as well as playground equipment

Job Seeking Index
(JSI)

Online job seeking continues YoY declines
39
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
• Adobe Marketing Cloud powers 20 of the top 30 U.S. employers**
US online job seeking is down 14.5% YoY in January

Digital Housing Index
(DHI)

Online housing search grows YoY
41
METHODOLOGY:
• Based on analysis of aggregated and anonymous data from more than 2 billion visits to U.S. housing search websites
Online search for purchases and rentals is up 9.6% YoY in
January.

Appendix
42

Inflation rates by price ranges, cont’d (tablets)
43
• Tablets have seen higher-ticket items deflate
faster than lower-ticket items
• The greatest price decrease and increase in
November and December were for tablets
priced between $350 and $600
(first price).

Inflation rates by price ranges, cont’d (televisions)
44
• The highest priced televisions have have
seen faster deflation than lower priced items
• The greatest price decrease in November
and increase in December were for TVs
priced between $600 and $1,000
(first price).

Inflation rates by price ranges, cont’d (televisions)
45
• Mid-range computers have seen faster
deflation than lower and higher priced
models
• The greatest price decrease in November
were for mid range computers between
$700 and $1,200 while the greatest price
increase in December were for lower priced
models between $300 and $700
(first price).

Digital Price Index: Fisher Ideal Price Index
∑𝑖𝑖=1
𝑛𝑛
𝑃𝑃𝑖𝑖𝑖𝑖 𝑈𝑈𝑖𝑖𝑖𝑖−1
∑𝑖𝑖=1
𝑛𝑛
𝑃𝑃𝑖𝑖𝑖𝑖−1 𝑈𝑈𝑖𝑖𝑖𝑖−1
∗
∑𝑖𝑖=1
𝑛𝑛
𝑃𝑃𝑖𝑖𝑖𝑖 𝑈𝑈𝑖𝑖𝑖𝑖
∑𝑖𝑖=1
𝑛𝑛
𝑃𝑃𝑖𝑖𝑖𝑖−1 𝑈𝑈𝑖𝑖𝑖𝑖
• 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.
𝐹𝐹𝐹𝐹𝐹𝐹 𝐹𝐹𝐹𝐹𝐹 𝜋𝜋𝑡𝑡 =

Methodology Comparison: Fisher, Laspeyres and Paasche

Adobe Digital Economy Project - January 2017

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Notes de l'éditeur