On this episode of the Futurum Tech Webcast – Interview Series, I am joined by Pat Brown, VP of Growth Marketing & Insights at Adobe, for a conversation around Adobe’s recent Digital Economy Index, which was released today at Adobe Summit.
The index provides a comprehensive view of the U.S. retail economy, looking at how the last two years of COVID-19 has reshaped how consumers shop. Our conversation covered the index in detail, along with a wide array of topics including how the index originated to the impact of inflation, to shifting buyer behaviors, and more.
An Inside Look at Adobe’s Digital Economy Index
In our conversation we discussed the following:
- Key findings from this year’s Digital Economy Index
- A deep dive into the notable shifts in online shopping behavior
- The impact inflation has had on the retail economy
- An overview of the overall spend in the marketplace
- An inside look at what to expect from the Adobe Summit
This is a don’t-miss conversation for those interested in economics, e-commerce, digital transformation and more. Want to learn more about the index? Be sure to download the full version here. Also, be sure to hit subscribe down below so you won’t miss the next two episodes in the series.
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Disclaimer: The Futurum Tech Webcast is for information and entertainment purposes only. Over the course of this webcast, we may talk about companies that are publicly traded and we may even reference that fact and their equity share price, but please do not take anything that we say as a recommendation about what you should do with your investment dollars. We are not investment advisors and we do not ask that you treat us as such.
Transcript:
Daniel Newman: Hey, everybody. Welcome back to another addition of the Futurum Tech Webcast. I’m your host today, Daniel Newman, principal analyst, founding partner at Futurum Research. Very excited about today’s show and interview series, Conversation With Adobe, and we’re going to be talking to Patrick Brown, and I’ll let him introduce himself in just a moment, but we’re going to be talking about some recent economic data in a survey that the company does that, by the way, is fascinating, but no spoilers here during the introduction.
Quick disclaimer, this show is for information and entertainment purposes only. While we will be talking to executives from publicly traded companies, please do not take anything I say here on the show as investment advice. All right, rock and roll. We got a big event coming up with Adobe, and it’s taken place. It’s going on, but I’ve got Patrick Brown here. Patrick, welcome to show.
Patrick Brown: Thanks, Daniel. Happy to be here. Thanks for the invite. Really looking forward to our conversation today.
Daniel Newman: Yeah, it’s great to have you here. You guys have a little event going on, and I’m going to hit you up on that later. No spoilers right now. Again, I’m going to do the no spoiler edition on the front end of this show, because I’m going to give you a good chance to promote all this. I’m excited to hear from some of the folks this week. Do us a favor though, this is your first time joining the Futurum Tech Webcast, introduce yourself. Tell everybody about the work you’re doing over at Adobe.
Patrick Brown: Sure, absolutely. Like you said, my name is Patrick Brown and I run a team within Adobe called Growth Marketing and Insights. The way to think about us is we’re part, data scientist, analyst, researcher and part media expert. And that’s kind of how we think about it. One of the things that we do is we issue a report called the Digital Economy Index. We’ve got a capability in house that we call the Adobe Digital Insights Team. The way we think about that is, and I know you mentioned we have some survey data…
Actually this isn’t survey data actually, which is why it makes it super, super cool. What we do is we look across a trillion transactions on actual US retail websites and global websites and we roll those hundred million SKUs and everything that’s been happening up into 18 product categories, just to get a sense for what’s happening in the broader online economy. We were doing this for a while.
We’ve been doing this for about 10 years, and we started by doing it, and it was really kind of a value add as we partnered with our customers, some of these amazing brands, but then we realized there was public interest in some of these really macro level trends. We started to kind of partner with the likes of like your great show. We just keep finding, because we’ve been doing this now for 10 years, just some really, really interesting insights.
We partner with the likes of Austan Goolsbee out of Booth in Chicago and Pete Klenow out of Stanford and they’ve really helped us turn into a bit of an economic think tank. It’s been really pretty amazing.
Daniel Newman: Yeah, I love that you shared that, and I love that you got quickly to the bottom of that. That’s the right call. As an analyst, I probably the synonymously use survey for all things research, but that is one of the really cool things when I was reading through the index is the fact that you guys, because of the type of data that you have access to, are able to utilize this data, of course, anonymize it and protect those that need it, but be able to use real world data. This isn’t just opinion or some anonymous survey. This is actual transaction data, which is super cool.
You kind of gave the background on the report and, of course, some of the high profile personas around the world that have helped you guys refine the report and make it even more valuable. Just out of curiosity, I always love to know with these kinds of things the genesis. Obviously I can discern some of the reasons you would do this. There’s a ton of value to both the market and for the brand and potentially for your customers. What was the genesis? What got you guys doing this particular survey?
Patrick Brown: Well, I think was… Say it again?
Daniel Newman: I said survey again. I said, what got you doing this particular report?
Patrick Brown: Well, there you go. Good catch. Where it started was around the holidays 10 years ago. So much spins up around Black Friday, a lot of interest in what’s happening for Black Friday. At the time it was what is happening on… The question that we were trying to answer is, what is happening online space versus retail? Because we would see these images of people lining up in stores at 2:00 in the morning and we’re like, “Well, what’s happening online?” And it started with a question. We started to look across the data. Can we anonymize this?
Can we help some of our incredible customers better understand the dynamics on sales and what they might expect from a seasonality perspective? And it just kind of kept growing in sophistication. We were very focused on a couple sectors in retail. Then we started growing into new categories within that. You start with electronics, and then you add apparel, and you add furniture. And then you start to look at travel trends. It just started to kind of snowball.
Honestly, like good analysts, we followed where the questions were leading us and we ended up with a couple big reports that we do a year around the holidays. Certainly it’s our kind of flagship where we do this Adobe Holiday, the Digital Holiday Index. And then we started looking at prices and that’s where the Digital Price Index Report, which we releasing next week, really focus on what’s happening in prices outside of the holidays. I guess to answer your question, we followed the questions and they led us to some really interesting places.
Daniel Newman: As an analyst, I could appreciate that very much. We do a few different indexes ourselves, one big one every year on digital transformation. The findings are always very impressive. And of course, the way that survey had to evolve, especially with COVID, was pretty remarkable. I feel like I can relate. The research you guys are doing, the index, has become really a staple. When I watch big media, I’ll see CNBC, and I’ll see different news around the world talking about it, especially like you said around holidays, around Black Friday.
It’s become really a staple in terms of understanding what going on in the economy, especially as related to online. I guess you’d say Adobe’s become a bit synonymous with online shopping and obviously with your creator economy, with your experience platform, with your commerce engines. I can’t say I’m surprised. Congratulations on that.
Patrick Brown: Thank you.
Daniel Newman: One of the things in reviewing all this data though I found was you guys found some really material shifts that are going on. You found shifts in buyer behavior. You found significant growth in online spend. Talk to me about some of the key findings from your perspective that really grabbed your attention.
Patrick Brown: Yeah. I think you’re absolutely right, and you set up some of the changes. Like I mentioned before, we’ve been doing this analysis for 10 years now. When we had some history to compare, particularly the last couple years, around how the pandemic has really shifted, it’s affected all of our lives. First, our hearts go out to everybody affected by this terrible tragedy, but it just has changed us all, including how we think about our relationship with online shopping and online retail and how we use digital surfaces.
We had been tracking this trend just in terms of our share of sales online versus physical, and we saw this trend of like 15 to 20% increases in the year over year growth of the online sales leading up to the pandemic. It was almost consistent, 15, 20%. We were growing as a percent of the overall US retail percentage from like 15% of online US retail. It just kept climbing up. In the pandemic years in ’20 and ’21, we saw that accelerate to 40% year over year growth going into the pandemic, and that makes complete sense.
Lockdowns, stores were closed, and you had to move your shopping online. You didn’t have a choice. I think what’s been interesting is even in ’21, we accelerated on that 41, 42%, another 10% on top of that. We essentially took four years of growth and compressed it into two years. It’s been kind of a tale of two different stories. The first year was really things that we were already used to buying online, electronics and apparel, some of those. We just did more of that. We accelerated that as we built our home office, we built some of those.
What has changed as we’ve gone deeper into the pandemic in particular is the categories have shifted. People are now much more accustomed. The biggest growth engine was grocery. People are buying more grocery online. They’re buying more of these. The basket of goods or the things that you’re buying online now reflects more, what you might see physical. I think that’s been a really fascinating shift in consumer behavior.
Daniel Newman: You kind of almost took the next question and answered it for me, but I’m going to dig in a little bit to that. We saw stimulus get pumped into the economy. We saw people forced to be at home more in order to try to mitigate this pandemic. That obviously drove a lot of spend toward electronics, streaming. We saw years of digital transformation pulled forward for both the enterprise and for the consumer. Sometimes those two things were deeply intertwined, things like PCs, mobile devices, applications, SaaS software.
And of course, your guys are looking at parts and pieces of this, but that notable shift to me almost sounds to me like what we witnessed throughout this last couple of years is a fundamental adoption of digital experiences that probably wouldn’t have happened for a number years had the pandemic not created a comfort. I think immediately we became comfortable with the Grubhubs and DoorDashes of the world. Let’s have our food delivered to us. And then it was, let’s get our groceries delivered, or we’ll do the online shopping.
We’ll just let them come put them in the back of our car because we want to remove. We almost got to this point though, where it sounds to me like the data is saying, “Hey, people have become basically comfortable buying everything. There’s really nothing.” From the very everyday milk, eggs, bread, and cheese to the most exotic purchases of high end electronics and vehicles, people are almost willing to do them all 100% digital. No physical store interaction. We’ve pulled forward a ton of digital commerce. Is that kind of the summation of a lot of what the data say?
Patrick Brown: I think you hit it right on the head. We were forced into the change as a consumer. You had to buy online. And then I think what was interesting was experiences then drove the acceleration. Great retailers and great brands that shifted online experience to be top notch or to deliver as best a digital experience as they possibly could further accelerated that trend. You’re absolutely right. I think one example of that is when you think in terms of your options to pay or your options to manage your own credit online versus in a store were really pretty different.
Meaning like if I were to do a layaway or deferred payment, you could go to a physical store and you had a lot of options to do things like that. If I needed something now, you see buy now, pay later type tools like Afterpay are now rolling out a cross websites. Consumers have much more option just to take those value adds that you might find in a physical store and experience similar things on digital. Some of those barriers to leveraging from digital are just gone.
I think that has helped to support the durable trend that we see in some of those shifts to where at 1.6% of grocery sales were online, now it’s 10, 11, 12% of grocery sales. We think that those are durable trends as those experiences are starting to match physical.
Daniel Newman: With a significant runway for further growth, because 10% is still you would say in the early wave of the… In the law of diffusion of innovation, you’re still in the early adoption, even if you have doubled. I do like that you point out some of the shifts in payment modalities. That’s really interesting, whether that’s buy now, pay later, which became a very popular thing on the internet. You mentioned Afterpay. Whether that’s fully digital transactions, crypto transactions. That stuff obviously gained a lot of momentum.
We saw the president recently put an executive order forward creating a little bit of a framework and policy around cryptocurrency. Again, early days, but the acknowledgement shows that we’ve come a long way. Again, I believe it’s accelerated not necessarily a focal point of the report or the index, but something that I think is going to be more important in your future indexes to pay attention, to how are people buying stuff? What are they using? What’s the modality to pay?
We know all the major tech companies are all coming out with their own vehicles for secure peer to peer payments. Of course, we’re seeing the decentralized web playing a growing part. Now that we’re talking about payments and macroeconomics, let’s do a little shift through here to inflation. Because one of the things in prior reports when I’ve looked at your indexes is it has been a bit of an indicator of what lies ahead. Inflationary data, I think to some extent, the Fed data is interesting.
I often think it’s probably a bit understated the way it’s formulated. Your indexes tend to actually give a little better glimpse into just how big the impact is because of how much you break things down into different industries. Of course, I think this speculation, Patrick, is that at the ultra-high end of the market, the inflation and the price premiums are extraordinarily high and some of them are really sticking. But then also at the bottom of the market with what’s going on, the global affairs going on, Russia and Ukraine, we’ve seen oil and gas spike.
I don’t know if that’ll be in this one because of the timeline from the time the index got out, but starting to see that influence. We’ve all seen groceries go through the roof. Anyone that was doing a construction project in the last year has seen prices soar. Talk about inflation and some of the takeaways that you were able to grab from the data.
Patrick Brown: Yeah, and that has been a central piece of this report that we have. I think the macro trend that we’ve seen, and this goes back to… Again, if we look at pre-pandemic and then kind of current pandemic. Pre-pandemic, what you would see from an online inflation perspective is the online sales were a sync overall inflation, because stuff was cheap or online typically. A huge percentage of the online marked basket of goods that were purchased 23, 24% were electronics. Those are traditionally cheaper online versus physical.
It served as this sync for overall inflation, and it kind of pulled it down and held it back a little bit. What we’ve seen with the acceleration as online grows from 17% of overall US retail to up to 25% more recently after the pandemic, you see that starting to creep up and have a larger impact. As that sync has eroded because prices have increased online, it’s affecting the overall CPI numbers as well. For the first time last year, we actually entered the holiday season with elevated prices. Just going into the holiday season, usually we’re 9% below year over year going into the holiday season.
This year, we entered at about 110% of the previous year. I mean, it was a huge shift going into even the holiday season. From a dynamics perspective, we just don’t see that sync overall. What’s now been happening after the pandemic is those categories that you could go to online and consistently find a cheaper good, they’re now increasing in price, not quite as fast as overall physical retail, but certainly increasing at a much quicker clip.
You mentioned grocery, for example. Online grocery now makes up a larger percentage of online purchases as a basket, but it increased 8% year over year in prices for grocery. That’ll be interesting to watch as retailers even are managing their revenue and profitability and increasing price online as it’s a larger percentage of their overall sales.
Daniel Newman: Say that again, grocery increased by how much?
Patrick Brown: 8%.
Daniel Newman: Okay.
Patrick Brown: Year over year.
Daniel Newman: I mean, I don’t admittedly do a lot of the shopping for our family, but I will tell you, I’ve had a number of gripes over the last several months about just how expensive things have gotten. By the way, some very interesting economics too has been product sizing. Now, again, in America we have a lot of health things we need to pay attention to as well. But I noticed the bags of Doritos got smaller while the prices went up. It was actually not only did prices increase, but we actually are getting less of stuff.
Patrick Brown: That’s a great point.
Daniel Newman: Obviously demand has stayed somewhat high, because when you’re watching Netflix, you want the snacks. There is this kind of desire that coincides with these activities to eat. I always laugh. I go, “I don’t know why at 10 o’clock I’m still eating.” But it’s something about when I’m binge watching a show, I have to have something to snack on. By the way, snacking on this data is something I say everybody out there should definitely check out. Do check out the show notes because there’ll be a link to more information on what was in this report.
By the way, so interesting. I think the that’s actually kind of a good segue because I mentioned snacks. You guys have a little event coming up, and there always are snacks at this event, but there’s a whole heck of a lot more. Adobe Summit. We’re in the thick of it now. It’s going on. It’s coming up for the next few days. Talk to me about summit, about the event, what got you excited, what are some of the key moments here for you?
Patrick Brown: Yeah. Thank you again and thanks again for the… This has just been a fun conversation. We’re in a fascinating time right now. Thank you. We have a really exciting event coming up, Adobe Summit. It’s on March 15th through the 17th, so coming on next week. The tagline is “make the digital economy personal,” because I think we all are experiencing it increasingly as we’ve shifted online, more of our purchasing online, and we know what a great digital experience looks like.
The way we think about this is we make great digital marketing solutions and tools for our customers to make amazing experiences for their customers. It’s like, how do you get the best minds in digital marketing and experience creation together and how do we arm them with more tools to deliver? We have fabulous folks like Ryan Reynolds coming to talk. He’ll be amazing. He’ll facilitate a session where we talk about what’s coming and what’s around the corner.
It’s like going to be a who’s who of brands talking about what they’ve learned and sharing insights. We’re really, really excited for it. Be a virtual event. Summitadobe.com if you want to check it out.
Daniel Newman: Every year I attend, always get a lot of value. I do remember some of the live ones. I actually remember and seeing another Ryan, I saw Ryan Gosling speak not too long ago. Always fun that you guys mix sort of the business celebrities, CEOs from companies like Nike, and of course, Adobe’s top leaders will all be there, but then also bringing in some of these sort of persons of interest and making ties to the themes, whether that’s experiences, whether that’s gaming and metaverse and emerging technologies, bringing economists people sometimes have been there to talk, all that stuff.
Very interesting. Like I said, never a dull lineup. I will say, I am longing for us to break out of this virtual. But at the same time one of the things I do love about virtual, we host a big virtual event every year is the quality, the availability, and access that can give people. As a digital experience company, that’s one thing you guys have done very well, not just doing a digital event, but doing a digital event that really does provide a lot of the high levels of engagement, interactivity, flexibility, choice that makes a digital event more than just staring at your video screen all day.
Patrick, I love this conversation. I’d love to continue, have you back. We’ll talk more about this DEI report on a continued basis. There’s such an important lesson that people in every industry, consumers, businesses can learn when you extract the insights that data provide and you guys have some really great insights.
Patrick Brown: Oh, thank you, Daniel. It’s been fabulous to chat. For folks that want to go deeper, we actually launched a portal to make this data available for folks so they can dig into the numbers and ask us questions. We’re just really happy to talk about it and happy to be here. Thank you again.
Daniel Newman: Tell them what the portal is.
Patrick Brown: The Adobe Digital Price Index. Let me actually pull it for you. It’s at business.adobe.com and you’ll find it right on the homepage.
Daniel Newman: That’s awesome. We’ll put the link in the show notes, but I know for some of you that are listening, mobile, you may want it right now, or you may want to punch that in. Definitely punch it in. Like I said, I enjoy all these indexes. Indices, I guess, is the right term, and I enjoy every single one of them. I look forward to continue to see the data you’ll put out because it’s going to definitely be informing a lot of things I’m going to be talking about in the future. For this episode, Patrick Brown, thank you so much for being a guest on the Futurum Tech Webcast.
Patrick Brown: Thanks, Daniel.
Daniel Newman: All right, everybody, you heard it here. Hit those show notes. Check out more. Join in on the summit. Whether you’re listening to this as it’s going on or as it just passed, that doesn’t really matter because you can get stuff on demand. Those links to the events, to the report, those will be in the show notes. But for now, for this episode, time to say goodbye. Thanks for tuning in. Hit that subscribe button. We hope to see you again very soon. Bye, bye now.
Author Information
Daniel is the CEO of The Futurum Group. Living his life at the intersection of people and technology, Daniel works with the world’s largest technology brands exploring Digital Transformation and how it is influencing the enterprise.
From the leading edge of AI to global technology policy, Daniel makes the connections between business, people and tech that are required for companies to benefit most from their technology investments. Daniel is a top 5 globally ranked industry analyst and his ideas are regularly cited or shared in television appearances by CNBC, Bloomberg, Wall Street Journal and hundreds of other sites around the world.
A 7x Best-Selling Author including his most recent book “Human/Machine.” Daniel is also a Forbes and MarketWatch (Dow Jones) contributor.
An MBA and Former Graduate Adjunct Faculty, Daniel is an Austin Texas transplant after 40 years in Chicago. His speaking takes him around the world each year as he shares his vision of the role technology will play in our future.
