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Foreign e-commerce giants threaten Nordic high streets

Surveys show up to 40% of high-street stores in Sweden and Finland could face closure by 2030 as retailers seek to combat e-commerce threat

Retail organisations across the Nordic region fear that the rapid advance of online e-shopping could decimate business and jobs on high streets, leading to store closures. Industry federations in Sweden and Finland estimate that up to 40% of high-street stores could be shut by 2030.

The threat to the Nordics is emanating from global e-commerce giants such as Amazon and Alibaba, who are using next-generation digital and artificial intelligence (AI) technologies to gain a strong foothold in the region, capturing business from traditional Nordic retailing outlets. 

A risk analysis conducted by the Finnish Commerce Federation (Kaupan Liitto/FCF), Finland’s leading lobbying organisation for the trade and retailing sectors, predicts that 20-40% of the country’s high-street stores could close by 2030.

The growing presence of foreign e-retailers is forcing Nordic retailers to transform. Retailing accounts for 10-12% of the GDP in Sweden, Finland, Norway and Denmark, and any decline in high-street trading caused by the advance of online shopping will reduce employment in the region. Not only is the retail sector a critical pillar of economic growth for Nordic economies, but traditionally it is also the largest employer of young people.

The analysis suggests that the business operations of speciality goods retailers will be particularly affected, said Jaana Kurjenoja, chief economist at the FCF.

“The situation facing the speciality goods trade is viewed as even gloomier in Sweden than it is in Finland,” she said. “In both Finland and Sweden, one of the biggest threats to speciality goods trade is the growth of foreign digital trade. Unsurprisingly, Swedish retailers fear the expansion of online giants like Amazon and the arrival of Chinese online stores in the Nordic countries. Amazon has quickly taken over the consumer market wherever it has established itself in Western countries.”

The disruptive impact of online e-retailers has already resulted in leading Nordic consumer goods retailers including ICA, Stockmann, Kesko, Reitan and Coop developing stronger digital strategies and a more robust online presence. All are investing more heavily in AI and robotics to drive their online offerings and compete better with the international e-retailing giants that are operating and growing in this space across the Nordic region.

The virtual online e-store is steadily gaining traction to compete more aggressively with traditional bricks-and-mortar stores in the Nordics, and there will be significant upheaval for established Nordic retail players over the next decade, said Mari Kiviniemi, CEO at he FCF.  

“The structural changes and digital revolution of commerce have been talked about for a long time, but they are also becoming increasingly visible in results and forecasts,” said Kiviniemi. “This must be taken into account in the decision-making on both a national and EU [European Union] level.”

The governments in Sweden, Finland, Norway and Denmark have all commissioned reports to gauge the long-term impact of foreign e-retailing to their national economies. Their reports will be the basis for partnerships between the state and private sector that are expected to focus on joint initiatives to bolster the high-street’s appeal and competitiveness.

Read more about Nordic retailing and online threat

They will also evaluate the long-term strategic development of the industry incorporating advances in AI and robotics technologies, and will examine how online shopping is likely to shape traditional retailing in each Nordic country and across the region.

A new report by the Swedish Trade Federation (Svensk Handel/STF), the country’s leading organisation representing the retail sector, offers the gloomy forecast that up to 11,000 high-street stores could be shut in Sweden by 2030 if the industry cannot compete with the “online shopping revolution”. 

The STF’s E-commerce in a digital world report foresees a survival-of-the-fittest situation that will be predominantly challenging for retailers in the durable goods and speciality merchandise segments. The report has better news for consumer food retailers and department stores, which it says have the resilience and financial muscle to withstand foreign competition and retain their customer base.  

“There has been a huge change within electronics goods, in particular,” said Mats Hedenström, industry policy director at the STF. “More consumers are choosing to purchase online rather than in a bricks-and-mortar store. The competition from foreign e-retailers is huge and is getting bigger all the time. The best-case scenario is that traditional retailers will adopt and embrace change, rather than fear it.”

Digitisation has forced many speciality retailers to rethink their business models, with an increasing number migratinge their businesses online, said Hedenström.

The arrival of international e-retailing giants such as Amazon and Alibaba has also ignited a national debate about how best to best protect Sweden’s high streets and prevent urban areas from becoming virtual ghost towns as online shopping increases. 

“The value of real estate is mainly created by how space is used and whether it is rented or not,” said Hedenström. “If a retailer leaves, the property owner will need to find a new business to rent that space. This becomes a real problem if new tenants cannot be found for high- street units.”

Claiming casualties

Competition from the online giants is already claiming Nordic retailing casualties. For example, Norwegian sports retailer Gresvig has closed its G-Sport and G-Max high-street stores across the country after losing the battle with e-sports stores.

Lars Kristian Lindberg, CEO of Gresvig, said: “Unlike online competitors, G-Sport and G-Max operated from expensive premises. They faced competition from lower-cost online providers selling brands at a price difficult to compete with. This proved unsustainable for us in the long run.”

But despite the growing presence of foreign e-retailers, the Nordic consumer’s loyalty to high-street shopping is not likely to disappear overnight. A survey conducted by Trustpilot, the Copenhagen-based consumer review website, found that 63% of consumers in Sweden do not feel comfortable using, and have low confidence in, AI assistants or chatbots.

About 33% of consumers surveyed by Trustpilot perceived AI assistants as a real threat to the long-term delivery of a “human customer service”. Just 12% said they were satisfied with their interactions with AI assistants, and 75% believed chatbots will never replace human customer-service operatives.

A separate pan-Nordic survey carried out by market research group Kantar Sifo for Sweden’s Resurs Bank revealed that consumer loyalty to the local high street is likely to remain strong in the coming decades.

The survey, which focused mainly on the electronics, clothing, footwear, DIY and gardening segments, found that Nordic customers, despite the growth in e-retailing transactions, are generally happier with in-store rather than online purchases.

Anette Konar Riple, chief marketing officer at Resurs Bank, said: “The survey reveals that although online retailers often have more to choose from and more product information, too much information and too many choices create uncertainty for consumers. The survey showed that just 25% of consumers believe they receive good guidance in digital channels, compared with more than half of customers in physical retail store channels.”

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