Dusseldorf In German retail, prices are rising drastically – but inflation is largely absent in online retail. This is the result of a price analysis by the e-commerce service provider Remazing for the Handelsblatt on the Amazon Marketplace.
“Our analysis showed that the price development on the Amazon Marketplace was well below the general inflation development, there are almost no noticeable effects of inflation,” said Remazing co-founder Emil Beck. “We were a bit surprised ourselves that the prices have remained almost constant.”
Remazing supports more than 100 major branded companies in selling via online platforms, including Under Armour, Schöffel, Leifheit, Henkel and Beiersdorf. Using its own software, Remazing has tracked the price development of these companies’ products and their competitors’ products for over a year. The conclusion: “The effects of inflation, as we see them in the economy as a whole, do not affect Amazon,” says Beck. In some categories, the prices in March were even lower than in the same month last year.
E-Commerce: Which products are getting cheaper online – and which ones are more expensive
The baby goods examined cost an average of 73.05 euros. A year earlier, the value for the same products was EUR 75.68. It was a similar story with beauty products, where the average price fell from EUR 12.34 to EUR 12.06. Body care products were also cheaper – on average from 12.46 euros to 12.33 euros.
In online retail, on the other hand, price increases were most evident in household goods and furniture. There, the average price for the products examined rose from EUR 134.45 to EUR 147.01 over the course of a year.
When evaluating the results, however, it should be noted that foods for which retail prices have risen the most are sold less on online platforms, and fresh foods are practically unavailable here.
The result coincides with a study carried out by the software service provider Adobe for the US market. According to this, prices in online retail fell by 1.7 percent in March compared to the same month last year. The price index for total trade (CPI), on the other hand, rose by five percent over the same period.
According to Adobe’s analysis, it was particularly worthwhile to buy electronic products online. Their prices had fallen by an average of 12.9 percent in the USA. The decline was 6.6 percent for toys and 4.9 percent for household and garden equipment.
Amazon algorithms penalize price increases
From the point of view of Remazing co-founder Beck, there are a number of reasons why price increases in e-commerce are not being received. The most important one has to do directly with Amazon. “Amazon has great price transparency and therefore tough competition, which has the effect of slowing down possible price increases,” he observes. Amazon’s algorithms also reacted very sensitively to price increases and then immediately reduced the visibility of the products.
Adrian Meili, CEO of the brand manufacturer Zino Davidoff, confirms this: “The marketplaces are transparent when communicating prices, which helps the customer to compare different offers.” Davidoff therefore “only selectively increased the prices in online direct sales” last year.
E-Commerce: Advantage through less staff
But it is also up to the providers themselves that they can keep their prices largely constant in the general inflationary environment, explains Remazing co-founder Beck: “E-commerce has leaner structures and therefore lower costs.”
The online retailer needs significantly fewer staff and is therefore feeling less of an impact from rising wages.
(Photo: IMAGO/MiS)
Alexander Graf, co-founder of the digital consultancy Etribes and CEO of the software provider Spryker, confirms this assessment: “Structurally, brick-and-mortar retail has little chance compared to online retail due to its higher costs in this inflationary environment,” he says. That’s why inflation benefits online trade. “The decisive advantage is that it requires fewer staff, because inflation is also linked to the salary spiral,” says Graf. “Whoever has a lot of staff is at a disadvantage.”
However, the failed surge in inflation is also reflected in the sales of online retailers. While brick-and-mortar retailers are registering high sales increases due to price increases in the food sector, many e-commerce companies are falling behind. The online sales of the Otto Group in Germany fell by eight percent in the past financial year.
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“In addition, both Amazon and the brand companies have filled their warehouses very full from the experience of the delivery bottlenecks in the pandemic,” observes expert Beck. Therefore, there is strong sell-off pressure in the market. “The warehouses had to be emptied for new goods,” says Beck. That affects profitability.
Pringles and Fanta: Bundled goods reduce the proportionate logistics costs
Many brand manufacturers have come up with strategies to avoid paying more in online retail despite the price pressure. A popular method is to bundle items virtually. “This increases the value of the shopping cart and reduces the percentage of logistics costs per product,” explains Christoph Sterkel, who is responsible for e-commerce at Kellogg. With just one click, the customer can buy four or eight cans of Kellogg’s Pringles brand of crisps.
In e-commerce, Kellogg also has a close working relationship with Coca-Cola. For example, both manufacturers offer Fanta and Pringles online as a package. “This is very successful and achieves higher receipt totals,” explains Sterkel. In principle, according to its information, Kellogg does not sell below the non-binding retail price on online marketplaces. According to Sterkel, it is important to achieve the profitability targets there as well. You don’t win new customers through price.
E-Commerce: In the long term, online prices could approach the rate of inflation
One consequence of the high price pressure is that companies are thinking more carefully about which goods they keep in stock, observes Remazing founder Beck. This could then offer scope for higher prices again.
“In the long term, we expect that price developments in online retail will also have to approach the inflation rate,” says Beck, “because the providers cannot keep up the low prices in the long term.”
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