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When it comes to e-commerce, Nordic countries are not protected from international competition by their marginal languages or northern locations. Around 27% – or €4bn worth – of online shopping in Denmark, Finland, Norway and Sweden goes to foreign sites.
So how can Nordic retailers succeed in the face of such competition?
According to Anni Ronkainen, digital chief at Finnish retail giant Kesko, digital has to be central to everything.
Kesko is a company which primarily sees itself as a bricks-and-mortar operator, but that is now just one half of the story. "It is not enough to have the best digital services in Finland because the competition is so much wider,” said Ronkainen. “If we think about the services our customers use... it is with international players like Facebook and Google.”
The store has become a wider term that includes both the physical store and all the digital services surrounding it, according to Ronkainen. Prior to working at Kesko, she was country manager at Google Finland and now hopes to bring a culture of “act fast and experiment” to the 75-year-old retailer.
If Kesko is an example of a traditional retail group – it operates in the grocery, car, machinery, home improvement and speciality goods trade – trying to react to the fast pace of technological change then Danish furniture retailer Bolia, founded in 2000, represents the opposite end of the spectrum.
“Already back in 2000 we ran our retail concept based on a web platform. Rght from the start we never saw a difference between web sales and physical sales,” said Bolia CEO Lars Lyse Hansen. “For us it has always been one organism, one supplier chain and one platform, whether our customers are ordering furniture online at home or our staff in the stores are ordering the products for the customers.”
While Bolia today has 36 stores in Europe it sees itself primarily as an online player. The company’s physical stores act as showrooms for the furniture with a few showpieces in the actual store and the rest of the collection presented online.
All Bolia furniture and 500,000 design variations are ordered directly from Bolia’s website, whether in-store or at home. Bolia only needs an internet connection to open a store and the company’s entire furniture collection is available.
The only way is omni-channel
Although Kesko and Bolia represent very different approaches, both companies emphasise the importance of omni-channel, which is where all sales channels – both online and offline – are integrated into a seamless customer experience.
“The approach is that we have one customer who has a variety of purchasing channels and contact options available. We have to be able to identify that customer,” said Ronkainen. “In principle we should get the information that a customer has browsed a product in our online store and is now entering the physical store. This isn’t reality yet, not for us and hardly for anyone else either.”
Ronkainen sees having physical stores as an advantage against pure online players because they cannot offer their customers a physical experience and face-to-face service.
Bolia’s web platform-based concept offers a case in point. “Today 43% of our total sales come from online so we are already in a very mature situation. It is a great benefit for our stores as well," said Hansen. “Even though we have never had as high online sales as we have today, at the same time we have never had more visitors in our stores.”
The battle between outsourcing and in-house
Bolia’s IT strategy is heavily reliant on outsourcing. It only has three IT experts in-house and uses Microsoft Dynamics as its enterprise resource planning (ERP) system. Kesko manages its IT strategy, architecture and services internally but has outsourced most of the operational IT services and hybrid cloud platforms to partners.
“The role of IT is big, but again it is just one department in a string of departments which have to work together to execute our omni-channel strategy,” said Hansen at Bolia.
Another Finnish firm, the national betting and lottery company Veikkaus, has taken the opposite approach. The businesss has retaken control of its back-end by buying the rights to its online store’s core customer and service systems from gaming system provider IGT.
“Veikkaus has almost 1.7 million loyal customers and the growing use of online requires continuous and dynamic development of the service. Our aim is to make gaming easier and faster and improve the customer experience,” said the company’s CEO, Juha Koponen.
Veikkaus, which favours open-source systems, believes having system development in-house will make it faster, more agile and enable a greater analytics driven approach.
Similarly, analytics has a central role at Kesko as the retailer develops IT to support its omni-channel focus. “We are building upon our robust analytics capabilities and extending those with new capabilities that combine a 360-degree view of the customer across all our channels to build a customer-centric omni-channel offering based on data,” said Kesko CIO Arto Hiltunen.
“[The main challenges] are changing the whole culture and processes of the company to work in this new omni-channel setting, and attracting all the new IT talent needed for the new architecture and more agile development model,” he added.
For Kesko this means separating what is seen as traditional IT and the development of new digital services. The new digital services unit, which will be headed by Ronkainen, will focus on concept creation and technology pilots, as well as mobile and analytics development.
Integration of physical and online
Although Ronkainen cannot yet reveal details, she said Kesko has additional plans to further integrate shopping online and in the physical store.
“We will definitely see some interesting things around the end of the year and early next year,” she said. “[Related to] how a small physical selection in store can be made into a large selection by having a fixed connection to the online store.”
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Bolia has similar plans. In early 2016 it will venture into wholesale and claims to already have partners waiting in 20 countries. As with Bolia’s own stores, the wholesale partners have a few products available in their physical stores, but it is Bolia’s web platform that gives them access to the whole collection which comprises thousands of variations.
“We will hook up our global partners directly to our website. They will simply place their order on our website as a wholesale trader and that will enable distribution, payments and all the practicalities behind it,” said CEO Hansen. “They can just present our website to their customers and we will deliver the furniture.”
Bolia is also experimenting with a new level of digitisation in its own stores. If a customer is interested in a sofa that isn’t physically present in the store, it will be showed to them in one-to-one scale by projection on a wall. Furthermore, Bolia can place a picture of the customer’s living room behind the sofa to show how it fits in the room.
So, while regional stores don't have all the answers to fighting off global online giants, it appears the greatest asset is in the combination digital knowhow and local presence. It is a battle which is only just beginning.