Adobe Digital Economy Index
Adobe Analytics | August 2020

©2020 Adobe. All Rights Reserved. Adobe Confidential.

Methodology
Most comprehensive report of its kind
• The DEI is powered by Adobe Analytics, which analyzes 1 trillion visits to retail sites and over 100 million SKUs.
• Adobe Analytics measures transactions at 80 of the top 100** retailers on the web in the U.S.
• Adobe Analytics measures transactions from 7 out of the top 10 US airlines.
• Companion research based on a survey of 1,018 U.S. consumers (18 years or older) fielded between August 31st andSeptember 2nd, 2020.

** Source: Adobe Analysis of Internet Retailer 2018©2020 Adobe. All Rights Reserved. Adobe Confidential.

2Summary•

Adobe’s Digital Economy Index (DEI) is a global economic measure for the 21st century that more quickly,
comprehensively, and internationally measures the increasing buying power of digital consumers—with greater detailthan any other data source available.

•Sales growth for Labor Day was up, but far weaker than the days leading up to the U.S. federal holiday. Elevated online
shopping levels appear to be decreasing the potency of specific shopping holidays and events.

•August online sales growth trends down further as staggered re-openings continue and consumer demand for purchasingcertain goods falls, while holding steady across other online categories.

•Consumers basket values return to normal levels, after dropping significantly in April.

•Digital Purchase Power (DPP) remains flat as electronics deflation offsets grocery inflation.

•Labor Day weekend travel bookings spiked up, in the preceding days, as travelers made last-minute decisions to travel.
However, overall travel bookings were down significantly, as expected, for the holiday weekend.

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Labor Day weekend drives muted sales impact• Labor Day online sales came in softer than
expected this year, at just $2.6B and +12%YoY.
• The day even came in at below the expected
forecast for a world without COVID andlockdowns.
• The week leading up to Labor Day showed
muted growth as well at 33% YoY.
• The relatively low online turnout for Labor
Day is a major reversal of the pattern we'vebeen seeing for the past few years. In thepast, holidays have almost always grown
faster than the average trend.

©2020 Adobe. All Rights Reserved. Adobe Confidential.

4Online spend growth slips further in August...
•As physical stores become more available,and "Back to School" saw expected challenges,
August showed further decline in ecommerce
growth, down to "just" +42% YoY.

•US consumers spent a total of $63B in August.

•US consumers have spent 14 billion hours, or 1.6
million years, shopping online so far this year•

2019 had only two $2B days outside ofthe holiday season. As of August we've alreadyhad 130 days that pass that milestone.

•Every single day from May to the end of June wasover $2B.

•None of the days outside of the holiday season
surpassed the $3B mark last year. This year we've
already had three of them: May 4th, May 18th,and May 25th.
©2020 Adobe. All Rights Reserved. Adobe Confidential.

5Consumers became nimbler in their ecommerce shopping early in the pandemic•Consumers made smaller purchases inApril as stores closed, and they turned online
for essentials that they'd normally go to thestore for.

•That behavior change resulted in a $10
drop in basket value from $154 in February to$144 in April.

•Consumers have since slowly shifted backto the normal levels. August consumer
baskets were at $153, while the individual
average product price shot back up to $54.

©2020 Adobe. All Rights Reserved. Adobe Confidential.

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Mobile reigns supreme for ecommerce, 60% of August visits through smartphones•Smartphones are significantly past the halfpoint of visits to retailer websites.

•However, they still account for only 40% of allsales.

•$190B has been spent through smartphonedevices so far this year.

•Smartphones are on track to contribute morethan 50% of online spend by September 2022.

©2020 Adobe. All Rights Reserved. Adobe Confidential.

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Apparel YoY growth falls at a faster rate than overall ecommerce•August YoY growth for the apparel drew down to 21%
and contributed significantly to the topline decrease,observed for overall ecommerce.

•52% of consumers agreed that, in August, they spentless on apparel, online, than they had before.**Insights based on consumer survey©2020 Adobe. All Rights Reserved. Adobe Confidential.

8Last minute Labor Day plans cause flight booking spike•In the two weeks leading up to Labor Day weekend there
were 60% more flight bookings than the previous 14 days.
In 2019, the comparable time only saw 45% growth,
indicating travelers deliberated until the last minute thisyear about purchasing a flight. This has potentially positive
implications for holiday travel in November and December.

•Labor Day domestic flight bookings were down 58% YoY,
while hotel bookings were only down 20% YoY, indicating
travelers feel more comfortable staying in hotels thantraveling by airplane. Our survey indicates that of those thatplan to travel over the next 6 months, 45% plan on staying
in a hotel, and 34% plan on traveling by airplane.*•Travelers within the Midwest were most willing to travel forLabor Day, with flight bookings originating there only down
–36% YoY. The Northeast is the most reluctant to travel, at–61% YoY.

•*Insights based on consumer survey©2020 Adobe. All Rights Reserved. Adobe Confidential.

9Travel looks different for nearly half of consumers making travel plans
49% of consumers say they plan on doing some levelof traveling in the next 6 months:•••

21% within their state
32% within the US
6% internationally

What is your reason for traveling in thenext 6 months?*

52%

Visit friends/family

45%

Recreation

20%

Work

11%

Moving7%

Remote Work

*Insights based on consumer survey

73%

34%

7%

8%
5%

We asked consumers“How do you plan on traveling over the next 6 months?"*©2020 Adobe. All Rights Reserved. Adobe Confidential.

10BOPIS surges given consumer uncertainty and retailer optimization•Buy online pickup in store (BOPIS) usage
surged in August, with 59% growth over July
(259% YoY), as consumers continue to be more
comfortable venturing out to stores, andretailers continue improving the BOPISexperience.

•According to our survey, 30% of online
consumers prefer using BOPIS or curbside overdelivery.**Insights based on consumer survey©2020 Adobe. All Rights Reserved. Adobe Confidential.

11August daily sales stay consistent in grocery, apparel, and electronics
Much of consumer sentiment reflected ongoing (but not increasing) uncertainty, with August trends
mirroring closely the trends seen in July.

•U.S. online grocery saw a 3 percent increase in average daily sales inAugust.

•Consumer electronics daily sales increased by 3 percent as consumers
bought electronics to suit their mobile learning needs.

•Daily online apparel sales shifted down by 3 percent in August.

*Growth compared to baseline period of July 15 to July 31 to measurement period of August 15 to August 31©2020 Adobe. All Rights Reserved. Adobe Confidential.

12Digital purchase power stays flat in AugustU.S. Digital Purchase Power (DPP) was down slightly at -0.4% in July 2020 YoY:
•On average, August DPP typically grows at +4.2% YoY, however, this year DPP was down at –0.4%. This further highlights the inflationary environment
COVID has wrought upon the online economy.

•Deflation in certain major categories like electronics (–4.8% YoY) was offset by continued inflation in others, like grocery (+4.8 YoY).

•Amid demand decreases, apparel prices were down –1% YoY, but were up 2.3% MoM.

•Consumers are now purchasing an online basket of goods for $1.00 that was worth $1.00 in August 2019, and in a unique break from the trend their digitalmoney has not gained any purchasing power.

©2020 Adobe. All Rights Reserved. Adobe Confidential.

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YoY grocery inflation hits new high•While online grocery prices remained relatively flat MoM, they surged to a new high of +4.8% YoY, in August.

•In the wake of more stable demand and in-store purchasing, online grocery price growth MoM has plateaued. However,the prices are significantly elevated considering the time of the year, and can be expected to see seasonal increases, as weedge closer to Q4.

©2020 Adobe. All Rights Reserved. Adobe Confidential.

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Flowers and related gifts see unseasonal price surges•Flowers and related gifts traditionally see price surges during Valentine's Day and Mother's Day. However, with COVID keeping
people apart, and ecommerce being leveraged for gift delivery, flowers and related gifts prices have been hitting new YoY
growth highs over the past 6 months. These types of products saw a +8.4% YoY increase in prices in August.

©2020 Adobe. All Rights Reserved. Adobe Confidential.

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Scope and outlook

March announcement

April monthly refreshes begin

Holiday Season trends

Stay tuned for updates and data refreshes here:

https://www.adobe.com/experience-cloud/digital-insights/digital-economy-index.html©2020 Adobe. All Rights Reserved. Adobe Confidential.

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Appendix
The appendix contains a closer look at U.S. DEI categories, formula, and methodology, along withthe benefits to consumers, companies, and policy makers.

©2020 Adobe. All Rights Reserved. Adobe Confidential.

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Why we’re introducing DEI in an evolving landscape
Before the COVID-19 pandemic:

In today’s reality:•The digital economy has been growing faster than the economy as awhole.

•

Economic policy makers need fast turnaround insights to manage a global
health and economic crisis.

•Inflation has been historically low—influenced by falling prices
online.

••Online shopping has been converging with offline as click-and-collect,
one-day shipping, and other services let people transact online for awider variety of goods and services.

Online shopping has become the primary means of commerce
populations around the world as purchases previously made in person areshifted online.

•Shoppers' baskets have shifted toward items related to health, working
from home, and social distancing.

•Companies are adjusting to daily changes in demand, supply, and labor
availability.

•With the global economy rapidly evolving, we need a metric andsupporting insights that can help consumers, citizens, companies, andpolicy makers assess their economic world and make intelligent, informed
choices about how to help themselves and others.

•Mobile shopping has allowed people to shop and buy from anywhereat any time.

•Online shoppers have become accustomed to being able to compare
and buy products around the world and have them shipped to theirdoor.

•Similarly, ecommerce companies have come to expect competition
from around the world.

•In this growing global digital economy we need a metric that cantrack online prices across nations and enables consumers, companies,
and policy makers to understand the trends, similarities, anddifferences across industries and countries.

©2020 Adobe. All Rights Reserved. Adobe Confidential.

Measuring the 21st-century economy
A snapshot of the DEI

Why we’re uniquely qualified to build the DEI•

It’s a measure of increasing consumer buying in the digital world, startingwith the U.S. and growing to cover the world’s major economies.

•Only we have the data from trillions of visits, tens of millions of products, andthousands of retailers needed to assess the global digital economy.

•It uses this metric to explore our global digital lives, from when to buy a
new TV to which countries pay most for organic produce.

•Our Adobe Sensei AI capability can take all this data and process it in near-real time togive high-speed insights.

•Through it we're able to establish the digital purchasing power (DPP) that
informs consumers' buying power online for various goods.

•We’re trusted by multiple companies to create this index.

•Only Adobe is trusted by the economists and academics that can use this data to makea real difference in the world.

Why the DEI is important•

The world economy is interconnected, especially the digital economy, andit needs metrics that reflect that relationship.

•Consumers, companies, and policy makers need a high-speed, detailed,reliable, global source of insight to inform their choices.

What sets the DEI apart•

Its insights are fast and accurate.

•Its insights are based on what consumers actually purchase, rather thansurveying respondents about products they've purchased without
controlling for quantity (how BLS calculates CPI).

•Its data spans the globe.

How DEI can help•

Consumers get a better understanding of their digital world—when to buy, what tobuy, and how digital commerce is changing their lives.

•Companies get a better understanding of local and global trends, allowing them toanticipate and manage across international businesses.

•policy makers get a much-needed rapid read on the digital economy and key data thatcan be used to anticipate broader economic trends.

©2020 Adobe. All Rights Reserved. Adobe Confidential.

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What the Digital Economy Index Measures•The DEI calculates digital purchasing power (DPP) by country.

•DPP measures how much more people can buy with a dollar,euro, real, pound, yen, etc. online now versus a year ago.

•For example, if DEI for the U.S. is up by 2 percent, then $1.00
spent online now will buy you what $1.02 would have bought
you a year ago.

•The DEI is always weighted by what people actually spend
online:•As computers become less expensive, total online purchasing power
will go up quickly because a good portion of what people buy online iscomputers.

•But a rise in the price of pet products wouldn’t affect purchasing powermuch, because people spend relatively little on pet products online.

•Economies with fast-growing DEIs are making more and better
goods available to their online consumers more cheaply.

•Because Adobe’s DEI looks at what people actually buy, it allows
reasonable comparisons between global economies.

©2020 Adobe. All Rights Reserved. Adobe Confidential.

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24Methodology and partnerships
We’ve partnered with economists Austan Goolsbee and Pete Klenow to contextualize andanalyze the output from the DEI.
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

Pete Klenow, Stanford UniversityProfessor at Stanford University’s Department of Economics

Currently visiting scholar, Federal Reserve Bank of San FranciscoMember of editorial boards for Econometrica, American Economic Review, Quarterly Journal of Economics, and more©2020 Adobe. All Rights Reserved. Adobe Confidential.

25Formula for the DEI
The base formulation for the DEI is informed by the Fisher Price Index:• The Fisher Ideal Price Index uses quantities purchased on the current period (month) and a previous period(previous month) to determine actual consumers preferences. Instead of assuming that consumers’ preferences
for what goods to buy are constant over a certain number of years, it's able to account for the fact that they are
constantly changing what they buy.

Fisher πt =∑𝑛𝑛𝑖𝑖=1 𝑃𝑃𝑖𝑖𝑖𝑖 𝑈𝑈𝑖𝑖𝑖𝑖−1∑𝑛𝑛𝑖𝑖=1 𝑃𝑃𝑖𝑖𝑖𝑖 𝑈𝑈𝑖𝑖𝑖𝑖∗𝑛𝑛∑𝑖𝑖=1 𝑃𝑃𝑖𝑖𝑖𝑖−1 𝑈𝑈𝑖𝑖𝑖𝑖−1∑𝑛𝑛𝑖𝑖=1 𝑃𝑃𝑖𝑖𝑖𝑖−1 𝑈𝑈𝑖𝑖𝑖𝑖©2020 Adobe. All Rights Reserved. Adobe Confidential.

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How the DEI benefits consumers•

Consumers can get valuable guidance from the DEI, likethe best times to buy appliances, TVs’ or cameras. Ourholiday report already featured DEI insights during theQ4 shopping season, and it provides guidance on thebest days to buy hot-selling items.

•The DEI initiative will expand the product categories
and geographic scope of our pricing data, which willallow consumers to tap into the best days to buy a wider
assortment of goods, wherever they are in the world.

•Lastly, the DEI will help contextualize the pricing that
consumers are observing on certain goods, as well as
how these price changes may fluctuate and impact
them in the future.

©2020 Adobe. All Rights Reserved. Adobe Confidential.

27How the DEI benefits companies•Companies can gain valuable insights from the DEI, like how digital economies are different in the U.S. versus
the UK, especially when it comes to apparel, grocery items, and a host of other product categories.

•The DEI shows movement in global prices that require context and comprehensive tracking, so thatcompanies can gain visibility into the market forces that are impacting their consumers and clients.

•Companies will be able to see how their pricing strategies will impact and be reflected in global pricing trends,
both inside and outside their own product and goods categories.

•Quantity data that the DEI initiative uncovers will illuminate how product demand is being impacted by priceand how consumers are substituting one type of good for another.

•The speed at which DEI data is populated will allow them to be more reactive to emerging pricing trends. In
some cases the data will be predictive, which will be even more valuable to organizations everywhere.

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DEI Data for leading thinkers and institutions•

We will make our DEI data feeds available to governmental institutions and organizations that develop
policy and provide economic guidance.

•Organizations that are looking for ways to more accurately understand the digital economy will be able
to use real-time data to analyze the rapid-impact events like COVID-19 that are happening both
domestically and globally.

•This data will be a combination of pricing and product-level category data to help economic institutions
better determine which parts of the digital economy can best predict inflation, as well as how consumer
baskets are shifting.

•These data feeds will be provided on a biweekly cadence to most organizations so that they can be more
responsive to shifts happening within different sectors.

©2020 Adobe. All Rights Reserved. Adobe Confidential.

29How the DEI benefits policy makers•

policy makers can get guidance from the DEI, especially in categories where digital data predict changes
in the broader economy.

•The DEI can look at prices mapped across a national census framework. This allows for pricing and productsales insights across urban and rural regions, high- and low-income segments, and diverse and nondiverse populations. Ultimately, this allows policy makers to understand the pricing effects being experienced
by different constituencies.

•policy makers can develop plans based on the DPP metric we’re tracking to determine the buying power
consumers are experiencing over time.

•The DEI will be trended against the CPI to help paint a clear picture of whether consumers are experiencing
better pricing offline or online. As a result, policy makers will be able to make the case to expand broadband
and bring connectivity to regions in need of favorable pricing on goods that were not accessible online before.
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