$2.2 Billion. That is the magic number of just how much money American consumers could save overall if they did 100% of their shopping on the internet and not in retail stores. Pretty amazing if you think about it. Unfortunately for many retailers, the lack of a high-tech online presence is leading to the demise of the shopping mall.
According to Adobe's Digital Price Index, an index that tracks real-time consumer spending, consumers could have saved $2.2 billion if they did all their shopping via their computer or smartphone: "Looking at prices between July 2015 and July 2017, we found that the purchasing power of a dollar has increased to $1.06 online, and only $1.03 elsewhere; if consumers shifted all their spending online for the same products they purchased offline in 2016, they’ll save about $2.2 billion vs spending offline."
What does this look like? The chart below shows the purchasing power of the dollar (or any other currency for that matter) and exactly how much it's able to buy. As the rate of inflation increases, purchasing power decreases because a dollar doesn't buy as much as it did before. However, as online prices fall, consumers are experiencing something they haven't seen in quite some time: increasing purchasing power, or deflation.
Where are the consumers saving the most money especially when it comes to online shopping? Not surprisingly, the categories experiencing the highest level of deflation are clothing and electronics -- because people are always buying these. Television sets fly off the shelves every Amazon Prime Day and Black Friday, and if you want a pair of socks, you can get a 6-pack of men's dress socks for $5 on Amazon at the moment. Apparel led the gap between online and offline deflation in 2016 with a 3.5% difference, and televisions had the highest overall deflation with 13.1% in digital and 11.4% in offline.
So what is the takeaway from all this? Well, namely that the death of the retail store is inevitable, the question is just how fast this will happen. While this is a sad day for physical stores, consumers should rejoice in the fact that more take home pay is going right back in their pockets due to all these savings.