The following guest article was written by Mikheil Shengelia, Research Analyst, Data Strategy at Eagle Alpha, an alternative data aggregation platform that also provides supporting advisory services for data buyers and vendors.
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Pricing data collected from various sources allows asset managers and researchers to perform a granular analysis of a company’s prospects. On a standalone basis, this data has value but may only be telling part of the story. Consequently, investors may need other dataset’s to combine with price data to tell a more complete story of the company.
Introduction to Pricing Data
Pricing datasets contain information on the prices of various products or services. These datasets typically include information such as the vendor, product name, unit price, currency, and date. Pricing data can be sourced from various industries and markets including retail, real estate, autos, consumer packaged goods (CPG), hospitality, and travel. Pricing datasets are often used in market analysis, business decision-making, and academic research.
Aggregated pricing data of goods and services for both businesses and consumers are now more readily available than it has been in the previous decade. This data can provide insights into corporate revenues and industry competition, while alternative measures of inflation have been developed using web-crawled pricing data.
Pricing data is widely used by investors as the data has broad macro and equity applications. Pricing data is a very useful input into the fundamental analysis of companies, particularly in consumer-related markets. Pricing data in segments like CPG, apparel, luxury, and auto sectors can give valuable insight into a company’s performance. Beyond just pricing, web scraped and other datasets, can reveal valuable insight at the SKU level, inventory, and discounting.
On a standalone basis, this data has value but may only be telling part of the story. Investors may need some indication of sales volume to accompany the data. For example, the data could be paired with web traffic or search data to get an understanding of end demand and a broader view of company revenue trends. As such pricing data is usually combined with another dataset.
E-commerce Pricing Data
E-commerce pricing data can be collected through web scraping, API integration, and manual data entry. However, it’s important to note that this data can be complex and dynamic, with prices changing frequently based on factors such as demand, competition, and supply chain costs. As a result, asset managers need to monitor and analyze this data continuously to stay up to date with market trends.
Different data vendors cover different geographical regions, while granularity ranges from individual stock-keeping units (SKUs), or rolled up into categories, brands, or top-line retailer analysis. Markdowns and discounting are also generally available and are important. Likewise, a measure of inventory can be observed through product availability and stockouts.
Another important use of e-commerce pricing data is to compare the prices of similar products across different e-commerce platforms. This can help asset managers identify pricing discrepancies or opportunities for arbitrage, and gain a better understanding of the competitive landscape in a particular market.
Governmental agencies accelerate the adoption of alternative datasets as they become more widespread. The UK Office for National Statistics (ONS) mentioned in its May 2019 release that it had an ambitious plan to implement web scraped and point-of-sale scanner pricing data in the production of aggregate measures of consumer price statistics by 2023.
In November 2021, the ONS published a release on the introduction of alternative data into consumer price statistics, including changes to the methods of aggregation and weighing (see figure 1 below for an example). The latest release from April 2022 details new data sources to be used and systems for production from 2023. It is interesting to note that the Bureau of Labor Statistics is also considering using alternative data in the construction of the US Consumer Price Index.
Figure 1: Illustrative Example of Elementary Aggregation for the “Rice” Consumption Segment in the London Region (Source: ONS)
Understating the Effects of the US Trade Policy
Cavallo et al. (2020) published a research paper analyzing the price impact of the US trade policy on importers, exporters, and consumers. They used data from PriceStats and the Billion Prices Project and found that import tariff passthrough was higher at the border than exchange rate passthrough. Despite the appreciation of the US dollar, Chinese exporters did not reduce their dollar prices by much, while US exporters reduced prices significantly in response to foreign retaliatory tariffs.
The price impact in US stores was limited, suggesting falling retail margins. The researchers concluded that the majority of the tariffs’ burden fell on US firms. Figure 2 below shows price indices using data collected from two large retailer websites. All individual goods were classified into HS categories using either the product descriptions or information from the retailers.
Figure 2: Retail Price Index Response to Chinese Import Tariffs (Source: Cavallo et al., 2020
Pricing data collected from various sources allows asset managers and researchers to perform a more granular microanalysis. On a standalone basis, this data has value but may only be telling part of the story. Investors may need some indication of sales volume to accompany the data. For example, the data could be paired with web traffic or search data to get an understanding of end demand and a broader view of company revenue trends. As such pricing data is usually combined with another dataset.
On June 6th, 2023, Eagle Alpha will return to New York to host their 2023 summer alternative data conference – UNBOUND. The day will be jam-packed with expert presentations, thought-provoking panels, breakout rooms, and sessions to meet and chat with new and unique data providers. Keep an eye out for sessions and speakers being announced soon. You can register your interest to attend here.