UK ISP TalkTalks Claims Internet Retail Inflation is Close to Zero

Budget ISP TalkTalk has created its own Digital Retail Price Index (DRPI), which shows the rate of inflation when you buy goods (food and clothing etc.) online instead of on the high street. It claims that inflation on the internet is just 0.3%, which compares with 3.5% for the UK’s Retail Price Index (RPI) and 3% for the Consumer Price Index (CPI) .

Inflation typically represents how a country measures the general increase in prices (what we pay for goods etc.) and any fall in the purchasing value of money. In short, a higher percentage means we’re paying more to live.

TalkTalks Director of Sales and Loyalty, Kristine Olson, explains:

“The internet brings huge economic and social benefits, but only if you’re online in the first place. The difference between RPI and DRPI shows that people who don’t have internet access at home are really missing out financially at a time when household budgets are still being squeezed. There are 8.1 million adults in the UK who have never used the internet, and who are missing out on the money saving deals available online.”

The study itself, which was constructed by the Centre for Economics and Business Research (CEBR), also revealed the following statistics.

DRPI Findings

• 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.

• UK-based internet retailers are the main drivers of lower DRPI inflation in the last two years. This is in contrast with Internationally-based internet retailers and in-store retailers who have both seen retail prices rise faster. For the former, this is in part due to a weaker Sterling. For the latter, increased inflationary pressures on fixed overheads may have contributed to faster retail price growth in-store.

• The latest data shows annual DRPI inflation at 0.3% in Q1 2012, whilst the In-store Price Comparator Index registered annual inflation of 2.5%.

• 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.