After two years, online purchases made by Finns started to increase – Driven by foreign online sales 

According to an e-commerce survey by the Finnish Commerce Federation, Finns spent almost EUR 5.4 million on products purchased from online stores last year. After a two-year slump, the volume of online purchases increased by four per cent. However, domestic e-commerce only grew by two per cent, while the volume of purchases from abroad increased by nine per cent. The share of foreign e-commerce of digital purchases made by Finns is approximately 37 per cent, and it has been growing for three years.

”The share of domestic e-commerce increased almost annually in the 2010s, as Finnish stores and brands began to digitise and strengthen their online channels. The share of foreign e-commerce was at its lowest in the middle of the pandemic in 2021, when it was approximately 33 per cent,” says Jaana Kurjenoja, Chief Economist of the Finnish Commerce Federation, of the development.

Channel transition and foreign e-commerce contribute to the growth

Retail sector sales decreased in Finland last year. At the same time, the volume of purchases made by consumers from online channels and abroad increased. This is reflected in, for example, online purchases of fashion, which increased at the same time as the sales of specialty goods trade in fashion operating in Finland declined.

”This is not just about Chinese low-price commerce, as the global supply of more affordable brands and product groups has also otherwise increased in many product groups. A good example of this is the purchase of Finnish health products and cosmetics,” says Kurjenoja.

The cosmetics and health industries are currently growing around the world. Their growth is driven by factors such as the increased demand for various food supplements and anti-aging products, the increased popularity of Japanese and Korean skincare routines, and, particularly, the supply of cheap foreign cosmetics and more affordable brands. The online purchases of cosmetics and health products made by Finns increased by as much as 22 per cent last year when compared to the previous year.

The increase in the online purchases of cosmetics made by Finns is also explained by two other global trends: the increasing use of cosmetics by men and Generation Alpha born in the 2010s, which is a new target group for the international cosmetics industry.

”If you don’t have the products or price groups that Generation Alpha likes, you may miss out on this wave. And if cosmetics are marketed in a very gendered way, male customers may look for products elsewhere,” says Kurjenoja, describing the phenomenon.

Low-price commerce outside the EU is reflected in many things

The value of online purchases from outside the EU has not increased at the same rate as the volumes of products ordered. Although the volume of products purchased from China increased by hundreds of percentage points, the value of individual so-called low-value products almost halved from the previous year. At the same time, purchases exceeding the threshold of EUR 150 set for duty-free consignments were also made more than before from the United Kingdom and the United States, for example, but also from China.

The increase in cheap Chinese imports is not only reflected in a cross-border wave of parcels. It is also overtaking domestic sales that create employment in Finland, especially in lower price segments, both in physical stores and online sales.

However, the impact is not limited to cheaper products, as there are more and more premium and luxury brand copies and online stores specialising in them.

E-commerce in the EU suffers in many ways from an unfair competitive position in relation to operators outside the EU, such as Chinese online stores.

“The Finnish Commerce Federation calls for urgent action to ensure equal competitive conditions so that the online stores outside the EU would follow the same rules as European companies,” says Kari Luoto, Managing Director of the Finnish Commerce Federation.

Domestic e-commerce has growth potential

While the share of foreign e-commerce of digital purchases made by Finns is over 37 per cent, the volume of the domestic online store exports is only approximately seven per cent of the turnover. This is evident in the company survey conducted by Digital Commerce Finland, the Federation of Finnish Special Commodity Trade ETU and the Finnish Commerce Federation, which received responses from 180 online stores at the end of February.

According to the survey, domestic online stores are keen to become international. People believe in the products and their quality, but it is difficult to get started with internationalisation. Many online stores state that a lack of skills and capital is one of the largest obstacles to growth. Resources would be needed for the development of technical solutions and the strengthening of marketing expertise.

“Finding good service providers and IT partners is also difficult for online retailers,” says Kurjenoja, summarising the results of the survey.

The online retailers’ observations on the development needs of their own operations are also supported by the Finnish Commerce Federation’s e-commerce survey. According to the survey, the conversion rates of online stores are lower in Finland than in Sweden or the United States,  and the percentages of rejected shopping baskets are higher than in Germany or the United Kingdom, for example.

“The development and internationalisation of consumer services and brands has been forgotten in the government’s RDI policy,” says Luoto.

Luoto reminds that the long-established industrial policy focused on supporting industry has not succeeded in creating new growth in Finland. Now, the need of service companies to improve productivity and increase investments in intangible capital, such as software and utilising data, should also be identified.

For further information, please contact:

Jaana Kurjenoja, Chief Economist, Finnish Commerce Federation, tel. +358 (0)40 820 5378, jaana.kurjenoja(at)kauppa.fi

Kari Luoto, Managing Director, Finnish Commerce Federation, tel. +358 (0) 400 688 708, kari.luoto(at)kauppa.fi

Lisätiedot:

Jaana Kurjenoja, pääekonomisti, Kaupan liitto, p.040 820 5378, jaana.kurjenoja(at)kauppa.fi

Kari Luoto, toimitusjohtaja, Kaupan liitto, p. 0400 688 708, kari.luoto(at)kauppa.fi