Economist Mike Walden: E-Commerce Impacts on Inflation

Although the inflation rate is likely to be somewhat higher this year, inflation has been very tame during the last two decades.  A big question is why.  One potential answer is e-commerce.  How might e-commerce impacted inflation, and is there any evidence it has?

Summary Answer

  1. The “how” is very easy – e-commerce allows people to quickly and easily compare prices of alternative sellers
  2. Sellers know this, so suggests they will be more competitive on price
  3. However, to date, the evidence that e-commerce has been a major factor on keeping inflation relatively low is slim
  4. one reason is that, although expanding, only about 10% of total retail sales are done on-line
  5. also, the trends in inflation rates for traditional retail store sales and e-commerce    sales have been very similar
  6. last, more rigorous analysis using statistical methods has yet to find a link of            inflation trends to e-commerce
  7. but, still may happen