Nordic e-commerce grew by 11 % in the first six months of 2018
Nordic e-commerce grew by 11% in the first six months of 2018 compared with the same period last year.
Consumers indicate that they made online purchases totaling SEK 104.3 billion during the first half of 2018. Sweden is the largest e-commerce market with SEK 42.6 billion, followed by Denmark with 25.8, Norway with 23.2 and Finland with 12.6 billion.
Just over 80 percent of Nordic e-commerce sales go to domestic consumers and barely 20 percent are purchased from abroad. Domestic Nordic commerce is expected to reach SEK 86.3 billion while Nordic commerce from abroad amounts to SEK 18.1 billion. Nordic foreign commerce primarily takes place from the major e-commerce markets: the UK, China, Germany or the US. The scope of foreign commerce also tends to vary between the countries. Finnish consumers especially state that they shop a great deal from abroad, while Swedes do not do so to the same extent.
Mature e-commerce nations in continued movement
The Nordic region is one of the most mature e-commerce markets in Europe and e-commerce in the Nordic region continues to expand. Six out of ten Nordic residents shop online on a monthly basis, which corresponds on average with nearly 12 million people. The fact that more and more consumers are choosing to buy their goods online has made e-commerce increasingly important for Nordic retail companies and e-commerce is currently a significant growth force. The conditions for selling and purchasing online are favorable in the Nordic region, given the population’s high level of e-commerce maturity, high internet penetration, well-built infrastructure and motivated e-commerce players. Other factors that influence the good conditions are that Nordic consumers have an easy time adopting new behaviors and they are tech-savvy. E-commerce maturity differs among the Nordic countries. In terms of the percentage of consumers who shop online, e-commerce is most prevalent in Sweden. Two of three people in Sweden shopped online during the first six months of 2018. Danish and Norwegian consumers are just behind them. Finnish consumers shop less online than their fellow Nordic residents. There are several explanations for this fact. For example, the country has a different language and less purchasing power in general than the other Nordic countries. In addition, Finnish consumers still have a more cautious attitude toward digital behaviors than their neighbors. However, this permits for greater growth potential moving forward through the possibility of a “catch-up” effect.
Younger consumers shop more
Consumer attitudes toward e-commerce is primarily a generational matter. All of the Nordic countries demonstrate the same declining age curve between younger and older consumers when it comes to the inclination to shop online. Younger consumers have grown up with digital technology and since childhood, they have adopted digital behaviors while older consumers have had to adapt as digital technology takes up more and more space in commerce.
However, it is not the youngest age group (18-29) that shops online the most. In Sweden, Denmark and Norway, the highest percentage of online shoppers are in the age range of 30-49. This is probably due to a combination of being accustomed to shopping online, high purchasing power and demand. Many families with children are included in this range, which increases consumption. The country that deviates from this trend is Finland, where only the youngest age category is consistent with the rest of the Nordic region.
The age difference in the inclination to shop online is going to drive e-commerce growth for many years moving forward. As the age groups that are accustomed to shopping online gradually age and new consumers increase the total number of e-commerce consumers, the age difference will gradually flatten out and become more even.
Fashion industry grows sharply online
Clothes and shoes dominate when Nordic residents shop online. This is thanks largely to a big selection, free returns and pressure to keep prices down through increased competition from abroad. The percentage of Nordic residents to buy clothes online continues to increase in all Nordic countries, which has had a negative effect on many physical fashion stores. In a comparison between domestic fashion retailing and foreign fashion retailing, it can be seen that Nordic residents prefer to shop online from their own country. The exception is Finland, where consumers must look to other countries in order to be satisfied with the selection and price due to the fact that there are fewer domestic players.
Next after clothes and shoes, people shop for home electronics, books and beauty and wellness products. Goods in these industries are well-suited for e retail because they are relatively easy to ship and they are often homogenous, which facilitates price comparisons.
One important industry that continues to grow sharply online is groceries. The reason for this is that the national chains, for example ICA and COOP in Sweden, have an increasingly strong presence online and have started to launch their e-commerce strategies in earnest.
Higher purchase amounts — a key for growth
There are significant differences between how much consumers in different countries spend online – and how much they spend on different types of goods. Norwegians spend the most per month in general, closely followed by Danes. In third place are Swedish consumers, followed by the Finns. This distribution is logical in that it reflects general variations in purchasing power, salaries and prosperity in each country. Consumers who buy home electronics are often prepared to spend a huge sum of money when they are in the mood to shop and home electronics present the very highest purchasing sums with respect to product category.
The category of groceries is less mature in terms of e commerce, and notably, Danes shop online for more than 40% more than the average in other Nordic countries. This is probably partly due to the fact that the shorter distances and higher population density provide conditions for handling logistics in such a way that satisfies customers.
As e-commerce matures, in terms of growth it becomes more and more important for companies to identify how to attract existing customers to buy more. Strengthening customer loyalty and encouraging additional purchases, for example through cross-selling, a high level of service and individually adapted offers may therefore become increasingly central competitive advantages.
Cell phones transform the purchasing landscape
Mobile devices have become an important part of e-commerce and have helped make consumers’ purchasing processes simpler and more flexible. Thanks to the cell phone, consumers can shop online from anywhere. In addition, companies’ conditions for inspiring consumers with tailored offers have improved. New payment solutions, one-click purchases, mobile price comparisons and the ability to check stock in real time are other applications that are helping to transform the retail landscape.
Despite the rapid growth of e-commerce, physical retail is preferable in many situations and in general, digital retail is not suitable for everyone. Swedes and Norwegians have the highest percentage to state that their most recent purchase was in a physical store (and not online). However, a difference can be seen: Swedes shop in city centers to a greater extent, while Norwegians prefer shopping centers.
More and more Nordic residents are using their cell phones to shop. With regard to how the last purchase was carried out, the distribution of mobile purchases was even among the Nordic countries. Instead, what differentiates Nordic residents in this regard is the use of tablets and computers. Denmark is clearly home to the highest percentage of people who prefer to shop online via tablet. Finnish consumers can be considered slightly more conservative in their online purchases, as they distinguish themselves by shopping online via computer the most.
The Nordic countries are at the leading edge in relation to the average in Europe when it comes to the mobile development, but some European countries – especially the United Kingdom – have come even further. E-commerce with mobile devices will probably continue to gain ground throughout Europe, and the cell phone’s advances as a tool for shopping are accelerating digital development on all levels.
Global competition
Foreign webshops attract Nordic consumers to shop online by offering unique goods, a large product selection and in many cases, also lower prices. In the first six months of 2018, on average, one in three Nordic e-commerce consumers stated that they had shopped from abroad. Finland and Norway are the Nordic countries whose residents shop outside national borders to the greatest extent. Two in five Finnish online consumers made at least one foreign purchase during the time period. Finnish online consumers also stand out for primarily buying fashion products abroad, which can probably be explained by a weak domestic fashion selection online.
Swedes’ foreign shopping online sharply declined in the first half of 2018 compared with the same period last year. One important explanation for this decline is the handling fee for parcels imported from non-EU countries, which PostNord introduced on March 1, 2018. The fee has primarily subdued purchases from China, which diminished during the first half of the year. PostNord is in the process of negotiating with Chinese e-commerce platforms for a more automated payment solution. A return to previous trade activities between the countries is therefore likely in the future.
Nordic residents’ shopping from abroad
In Europe, it is Nordic residents who shop online from abroad to the greatest extent. This can be explained by factors such as the fact that the countries have a high level of digital maturity in general and high domestic price points, and that they have small populations, resulting in a limited domestic product offering. People in the Nordic region primarily shop from China, the UK and Germany. Even though, globally, the US is the hottest market for e-commerce, Nordic interest is relatively weak.
Denmark is unique in that the UK is its favorite country from which to shop online and Danes’ e-commerce consumption from the UK continues to increase. So far in 2018, Swedes’ favorite has been Germany and on average 28 percent of Swedish online consumers have shopped from there. Swedes’ favorite store in Germany is the European internet giant Zalando. Norwegians stand out for shopping from the US. One important explanation is the American e-commerce platform eBay, which is very popular among Norwegian online consumers. 27 percent of Norwegians have used eBay in the past year.
Of the Nordic countries, Sweden is obviously the most popular e-commerce destination in the eyes of Nordic residents. Finnish consumers are particularly keen to shop online from Sweden.
Foreign online shopping of groceries takes root
Clothing and shoes continue to dominate as the most popular items purchased online in the Nordic region. The previously strong increase has slowed slightly, except in Finland, where the share to buy fashion items from abroad has increased by 4 percentage points compared with the same period last year. Interesting to note is that the share of Nordic residents who shop for clothes online from their home country is larger than the share that shops for the same product category from abroad. The exception is Finland, where the percentage that shops from abroad is greater.
The product category with the strongest increase is groceries, however from low levels. In terms of percentage, Norwegians consume the most in this category. This may be because Norwegian grocery prices are high, which makes foreign online purchases attractive.
Home electronics are the second most common product category for Nordic residents who shop online from abroad. One in five Nordic residents shop online for home electronics from foreign webshops. Media is the third most popular foreign category among Nordic residents, and Amazon Books is a strong player. Relative to other countries in the Nordic region, Sweden’s foreign media purchases are slightly lower. A possible explanation is that Sweden has strong domestic webshops in the media category. Other popular product categories with stability on the market are accessories for cars, boats and motorcycles, as well as items for children.
E-commerce in the Nordics six-month report 2018