COVID-19 boosted commercial growth – employment fell

The first year of the COVID-19 pandemic treated commerce in two different ways. Based on preliminary information, the retail trade turnover grew by almost four per cent, but some sectors, such as the grocery trade, were provided an extra boost by the COVID-19 pandemic. According to the initial data, the grocery trade turnover grew by almost seven per cent and the amount of turnover grew by about five per cent last year.

For the speciality goods trade, the first year of the COVID-19 pandemic was very inconsistent. Especially the hardware trade, household appliance trade and sport and interior design trade all benefitted from the phenomena, such as the restrictions of movement and the increasing popularity of remote work and school which the COVID-19 situation caused. At the same time, the fashion trade, among others, lost almost a fourth of its turnover last year.

The growth of the current year is also affected by the persistence of the pandemic. The longer the lack of movement and travel and use of other services continues, the longer the fast growth of certain retail trade sectors will continue and, at the same time, the distress of other sectors will worsen.

The Finnish Commerce Federation estimates that the amount of the retail trade turnover will grow by 2.5 per cent this year if the pandemic begins to grow weaker and movement, travel and the use of services pick up during the summer. Next year, the extra boost in growth that the COVID-19 situation provided will be gone and the retail trade will return to the previous growth figures.

“Retail trade will not completely return to its old self after the COVID-19 situation. Some of the changes, in both consumer behaviour and trade operations, are more permanent,” says Jaana Kurjenoja, Chief Economist at the Finnish Commerce Federation, on the future.

Digitalisation requires investing capability and competence

The COVID-19 pandemic hastened many development trends that had already been influential in the background. One of them is digitalisation. Online shopping became more common very quickly and, last year, its annual growth reached its record for the 2010s.

“In the 2010s, the approximate annual growth of online shopping has been about 10 per cent, but in 2020, the growth jumped to 18 per cent,” says Kurjenoja of the development.

Even though the wildest online shopping growth figures will not become commonplace, COVID-19 has also affected the online retail of the near future.

“Therefore, it is extremely important that the speciality and household goods trades could invest strongly in such digitalisation and service and product development that would be successful even in the international market”, Kurjenoja emphasises.

Benefitting from the global online store market and the advantages provided by digitalisation requires investments in competences on different degrees of education.

“The continuous development of competence is very important so that domestic commerce stays competitive in the increasingly tougher international competition”, Mari Kiviniemi, Managing Director of the Finnish Commerce Federation says.

In Kiviniemi’s opinion, it is crucial that the consumers’ purchasing power is ensured when the economic policy moves on from stimulus packages to adjusting.

“Both income taxation and value added tax have great significance for the purchasing power and domestic trade,” Kiviniemi reiterates.

Commerce sector entrepreneurship must be enhanced

The growth in turnover is not reflected in the number of people employed. In two years, the retail trade employment has shrunk by 25,000 employees and the forecast shows no considerable growth for the next few years.

The decreased level of employment is affected by the reforming encouraged by international and domestic competition, which is reflected in phenomena such as digitalisation, automation and chaining.

“On their own, efficiency and, through that, the improvement of international competitive strength are not bad things,” Kurjenoja states.

However, in the background there is the trend, which has continued for a long time, wherein the number of companies has decreased due to, for example, international franchises taking over markets and wherein fewer new companies have been established than before. New companies bring forth new ideas, innovation and competition, which is important for both the development of the industry and the technology and service companies operating around the trade.

“The more we have the headquarters or research or development operations of the commerce sector, the more the commerce sector will create growth around itself,” Kurjenoja says.

Enhancing entrepreneurship requires taking care of the viability of city centres as well. Bricks-and-mortar stores play a significant role in that.

“When we get to the ‘new normal’, it is more important than before that, in order to make entrepreneurship possible, we work hard for the functionality, accessibility and pleasantness of city centres. The commerce sector was already changing in Finland even before COVID-19 and, therefore, the pandemic has not changed the situation,” Kiviniemi says.

Appendix:

For further information, please contact:

Mari Kiviniemi, Managing Director, Finnish Commerce Federation, 050 511 3189, mari.kiviniemi(at)kauppa.fi

Jaana Kurjenoja, Chief Economist, Finnish Commerce Federation, 040 820 5378, jaana.kurjenoja(at)kauppa.fi

* Turnover adjusted for price fluctuations.