The Net-centric age introduces the DIGITAL RPI

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A fascinating piece of work by the Centre for Economic and Business Research Ltd (CEBR) at the behest of  the TalkTalk group  who have just published their first Digital Retail Price Index (DRPI). pdf  Its calculated quarterly – the latest information is to March 2012.

The CEBR conclude that:”

  •  “The Digital Retail Price Index (DRPI) shows online prices growing by around 2.2% between Q1 2007 and Q1 2012, averaging an annual rate of 0.4%.
  •  In contrast the In-store Price Comparator Index shows in-store prices rising by around 6.4% over the same period, averaging 1.2% annually.
  •  Based on this evidence, this suggests that a consumer faces a rate of inflation that is three times higher if they replicated their online spending habits in-store.”

TalkTalk’s Press release is headlined “Online inflation ten times lower than high street”

“TalkTalk launches Digital RPI quarterly index

Annual Retail Price Index (RPI) Inflation is currently running at around 3.5 per cent but if you do most of your shopping online it’s only around a tenth of that broadband firm TalkTalk has calculated.  The annual Digital Rate of Inflation – (DRPI) the equivalent rate if you buy your household goods, food and clothing online rather than in-store – is just 0.3 per cent.”

Basically the Digital RPI is derived from the Office for National Statistics (ONS) Internet Retail Sales volume & value information with a weighting of Food 39% Household goods 34% and clothing 27%. We’re not sure if the ONS statistics used are the new ones introduced with respect to March or not and the weighting apparently differs from those being used by the ONS mentioned earlier this week.

They then compare this with a derivative of the ONS’s RPI basically using the above weighting to give a like for like comparison that’s the rather unfortunately titled “In-store Price Comparator Index” ie ISPCI?

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There’s an online international retailers element included in their index which due to weak sterling in 2008/09 (or one might argue strong US $) caused some horrendous increases in the 25%-30% range which are reflected in the peak in the DRPI at 1.7%

We’ve done a comparison with the ONS’s RPI & CPI just to prove that they all show the same picture which of course they do.

It does give a loud and clear picture that Digital/Online Inflation is way less than the bricks & mortar variety AND they forecast that it could stay that way over the next year or so.

“We expect the DRPI to be lower than the In-store Price Comparator Index over the next twelve months as energy prices still remain elevated – disproportionately affecting high-street businesses with relatively higher overhead costs. Furthermore, Internationally-based internet retailers are expected to benefit from lower air freight costs whilst consumer goods prices in global markets are expected to remain broadly stable.”

Great work – we hope they continue to produce it or even better persuade the ONS to take it on – exactly the sort of useful statistical analysis required in a net-centric age.

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