The turnover of commerce continues to grow. Automation and digitalisation are making it possible to enhance the efficiency of operations and develop new service concepts to cope with the competition. However, the growth in turnover no longer leads to an automatic increase in jobs.

Commerce changed permanently in the 2008 financial crisis and the subsequent international and domestic recession. The record growth of the wholesale trade in early 2008 took a sudden and sharp downturn at the end of the year, which put companies in a new situation. This led to intense cost competition in the international and domestic markets, with customers streamlining their supply chains and implementing cost control measures to remain competitive in a climate characterised by slower economic growth and an international investment recession.

Employment in the wholesale trade began a downward trend that is still going on. However, new job roles have also been created during this time. Increased automation and digitalisation means wholesale trade requires new kinds of competencies, while the need for many traditional tasks, such as warehouse operations, is declining.

“Traditional wholesale staff, technical sales staff and purchasing officers are still needed, but expertise and new skills are being increasingly emphasised in their jobs as well. This presents challenges related to recruitment,” says Jaana Kurjenoja, Chief Economist of the Finnish Commerce Federation, describing the transformation of work.

Friction in the labour market in the retail trade

The operating environment of the retail sector has also changed dramatically over the past 10 years. The specialty goods trade has been shaken up by the growth of digital shopping and e-commerce as well as competition from large international chains in physical retail.

Economic uncertainty made European consumers very price-driven, which motivated the daily consumer goods trade, among others, to compete on price and cost. The same trend also began to be evident in Finland, with competition in daily consumer goods trade intensified by the slow development of purchasing power and the growth of unemployment.

The trend of long-term decline in employment is also noticeable in the retail trade. At the same time, job requirements and the entire structure are changing in the retail sector just as they are in the wholesale trade.

“The current development of the retail sector labour market is somewhat conflicting: employment is declining but the search for labour is actually more intense than before. In addition to incentive traps, the labour market in the retail trade is clearly characterised by regional and competence-related friction,” Kurjenoja explains.

One of the most significant factors altering the course of development in the job market in the commercial sector is urbanisation: growth centres have customers and jobs, whereas in sparsely populated areas these are disappearing.

Turnover will continue to see slow growth, employment will decline

The same factors that are slowing down economic growth will also slow down the growth of commerce in the coming years. The availability of skilled labour limits the development of domestic commerce, while the ageing of the population and public sector indebtedness will keep taxes high, which has a negative impact on the operating environment of companies.

According to the forecast of the Finnish Commerce Federation, the turnover volumes* in retail are expected to grow by two per cent this year, after which the growth will slow down to 1.5 per cent next year. The forecast further indicates that employment in the retail sector will decline by one per cent in 2018–2019. The turnover of the wholesale trade is expected to grow by approximately two per cent this year and next. Employment in the wholesale trade will decline by two per cent this year and one per cent next year.

Traditional business subsidies slow down the transformation into a modern service society

Policymakers need to do more if they are to create favourable conditions for a viable service sector driving growth. Everything begins with training.

The Finnish Commerce Federation finds that higher-education institutions should focus more resources on international programmes and modules on consumer science, marketing, product and service design and other similar subjects.

In addition, public funding projects and subsidies should be directed towards the development of service sector ecosystems, where different service providers and customer companies could work together. At the same time, collaboration with trade would help improve the skills and competences among service providers and would also prepare them for international competition.

According to Kurjenoja, traditional business subsidies are not the way forward when building an efficient and internationally competitive services sector. Instead, they maintain the existing structures and functions, also in the public sector. Light corporate taxation would be fair towards all industries and businesses, and it would also create an advantage in international competition.

* Turnover volume is the value of turnover adjusted for price fluctuations.

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