Online retail sales in the U.S. rose about 7% from January to April this year, an Adobe Analytics report showed on Thursday, driven by strong demand for groceries and cheaper discretionary items.

WHY IT'S IMPORTANT

Consumer discretionary spending has been in focus over the past several months, as sticky inflation has forced shoppers in various categories to trade down to more affordable products.

According to Adobe's data, the share of the cheapest units sold in categories like grocery and personal care has increased during the first four months of the year, while the share of the most expensive products has come down, indicating consumers are looking for cheaper alternatives. For instance, the share of least expensive groceries has gone up to 48% in April 2024 from 36% seen in January 2019.

CONTEXT

Big retailers, including Walmart and Target have laid out conservative forecasts for the year, as shoppers navigate an uncertain macroeconomic environment.

Walmart and Target have also launched affordable private label food brands priced below $5 and $10 respectively.

KEY QUOTE

"We are seeing consumers down-shift and spend more on the cheapest goods within a degree, that is helping categories stay resilient and see continued spending, but it also showcases that consumers are having to manage the inflation they're experiencing in housing, gas and food," said Vivek Pandya, Lead Insights Analyst for Adobe.

BY THE NUMBERS

Total online spending in the period from January to April 2024 grew to $331.6 billion, compared to $309.8 billion in the same period last year. Grocery spending saw highest growth of 15.7%, according to the report.

Adobe expects the first half of 2024 to rake in over $500 billion in online spending, representing a 6.8% year-over-year growth.

The report relies on direct-to-consumer transactions based on over 1 trillion visits to U.S. retail websites.

(Reporting by Anuja Bharat Mistry in Bengaluru; Editing by Tasim Zahid)