International e-commerce is growing – China shows the way

The online store market has been reporting strong growth for years and it is not slowing down. It is projected that the largest online store market (China) will grow over 70 per cent in the next 5 years, and the 2nd largest (USA) by nearly 50 per cent. In Finland, digital procurement is expected to grow a substantial 40 per cent by the year 2023, which is approximately the same amount as in other Nordic countries.

“In other Nordic countries, the growth mostly relies on the growth of the yearly shopping basket. Of course, the shopping volume is also increasing in Finland but not as much as in Sweden and Norway, for example. In Finland, the growth of digital procurement, more so than in other Nordic countries, is based on the growth of buyer volume,” this is how the Chief Economist of the Finnish Commerce Federation Jaana Kurjenoja portrays the development of the Finnish e-commerce market.

Last year, digital procurement, from both domestic and foreign online stores, grew approximately six per cent and the net sales to Finnish consumers was almost €3 billion (not including VAT or delivery expenses). This year, the growth is expected to continue at approximately 9 per cent. Online procurement of food and drink (approximately 11 per cent) and the procurement of home utilities (approximately 10 per cent) saw the biggest growth.

The procurement of utilities has moved ever more to digital platforms. For example, 40 per cent of electronic sales are made digitally and, in 2023, this is expected to grow to approximately 60 per cent.

Commerce has become mobile

Mobile procurement has become more common in the past couple of years. Last year, already 39 per cent of procurements were completed using a mobile device; the share was only 27 per cent in 2016. The development of working solutions is essential for Finnish specialised and utility goods, so that international competitors do not steal clients because of poor and non-existing mobile apps.

“One of the most common reasons for consumer agitation when they are mobile shopping is slow websites or apps. Apps, in which the steps of procurement, from social media to payment, work seamlessly and with as few clicks as possible, attract customers to buy and return to the store,” Kurjenoja explains.

Now that mobile wallets are taking over the payment method industry, in Finland and abroad, online stores must be able to offer these solutions as well. Already, the majority of China’s online procurements are paid for using mobile wallets, such as Alipay, but, also in the US, it is projected that electronic wallets will replace card payments as the most used payment method in the coming years. In Finland, the influence of bank transfers and banks’ payment buttons will remain strong, but electronic payments and mobile wallets are also taking over the industry in Finland.

Verkkokauppa.com is the largest and Varusteleka is the best reviewed

In recent years, for net sales, Finland’s largest online store was Verkkokauppa.com, but Zalando had the most customers. One of Finland’s largest online stores and easily the largest online seller of provisions was the state-owned Alko. Large, international markets and online stores – Amazon, AliExpress, eBay and Wish – attract both customers and procurements. Although international giants are attractive shopping platforms, many Finnish online stores beat them in customer reviews.

Varusteleka, SinunApteekki, Dermoshop, Scandinavian Outdoor and Musti ja Mirri received excellent reviews from their customers measured in both value for money and customer support.

“Like last year, Varusteleka was the customers’ favourite in beating Apple, Asos and Wish, among others,” summarises Kurjenoja.

International e-commerce plays by different rules

The digitalisation of the retail sector has accelerated international competition for consumers. However, the industry’s regulation is from the brick-and-mortar store era. Among other things, insufficient consumer safety monitoring and delivery expenses required by the international postal system, often support e-commerce from outside the EU instead of domestic e-commerce.

Research centre Copenhagen Economics’ study on postal service price effects on Finland’s and Sweden’s e-commerce reveals that the difference between Universal Postal Union (UPU) payments and domestic delivery expenses can reduce an online store’s profit margins for a product several times over. On average, a Posti delivery cost for a domestic online store is 46 per cent higher than that of the payment for arriving post from a Chinese online store, for example. In Sweden, the difference is even greater: 57 per cent.

In addition to UPU payments, European commerce expenses are increased by the safety and quality standards which, basically, do not have to be adhered to by Asian e-commerce. According to a study by the Finnish Commerce Federation, for a Finnish retail business, the procurement cost of a product in accordance with EU-standards can be up to 20−70 per cent higher than it is for a Chinese store.

“Legislative regulations, self-monitoring by companies and externally acquired auditing protect the consumer but also raise the prices. When we add the postal and importing expenses paid by Finnish stores, it is easy to notice that the European market is at a significant competitive disadvantage,” the Chief Specialist of the Finnish Commerce Federation Janne Koivisto explains.

For further information, please contact:

Jaana Kurjenoja, Chief Economist, Finnish Commerce Federation, tel. +358 (0)40 820 5378, jaana.kurjenoja@kauppa.fi
Janne Koivisto, Chief Specialist, Finnish Commerce Federation, tel. +358 (0)50 321 3639, janne.koivisto@kauppa.fi

The Copenhagen Economics study for the Finnish Commerce Federation and Svensk Handel can be found here.

Appendix:

The Finnish Commerce Federation represents commerce – the largest sector of economic life. Commerce employs around 300,000 people in Finland. The Federation has around 7,000 member companies and represents both retail and wholesale commerce in industry policy and labour market lobbying. Kauppa.fi