The purchases that Russian consumers make in Finland may halve in comparison to last year. Particularly the number of high-income Russian consumers has fallen. At the same time, Russian consumers have embarked on the digital highway, and are making purchases online. There may be no reasons for returning to Finland following the financial crisis. The outlook is even more gloomy due to Finland’s continuing failure to view consumer services as export products.

According to a recent report* by the Finnish Commerce Federation, Russian tourists’ spending in Finland is slowing down. According to border interviews conducted in January–August, the amount of money that Russians spend on services in Finland plummeted by a third, to €35 per visitor, from last year. Nor was the money saved in this manner used on shopping or purchases, since the average amount of money spent on purchases fell by a fourth, to €122. The total consumption of Russian consumers in Finland this year may even halve from last year’s €925 million if the drop in tourism continues at the rate seen during the first half of 2015.

Diverse services have never been a part of Finland’s appeal in the eyes of Russian travellers. Now the use of services has dwindled and narrowed down even further—a trend visible in, for instance, accommodation. Camping sites and staying with friends and acquaintances have experienced a relative increase in their popularity, whereas hotel accommodation and the rental of cottages have lost some of their former appeal. The most affluent visitors are responsible for the majority of service consumption, but both the number of affluent travellers and their proportion of the total number of visitors has fallen.

“Right now, the drop in the number of Russian travellers is a result of the financial crisis and the rouble’s exchange rate, but there’s no guarantee that things would return to their former state after the crisis is over,” says Jaana Kurjenoja, Chief Economist of the Finnish Commerce Federation.

Past Finland on the digital highway

Last year, 39 per cent of Russians visiting Finland had bought goods or services online at one time or another. This year, that percentage has risen to 66.

“From the global perspective, Russia is seen as one of the most interesting e-commerce markets, and many international fashion brands, for instance, are planning to open online stores there, if they haven’t already done so,” says Kurjenoja.

The most appealing factor in Finland for Russians comfortable with the digital age is the quality of products, but much less so than it is for other Russian visitors. Although Russians who make purchases online enjoy a higher level of income than others, they place considerably more value on the prices they pay for Finnish purchases than others do.

“If international e-commerce offers Russian consumers quality, a wide range of products and services and competitive prices, why would they come to Finland—particularly since holiday travellers can find diverse services all around the globe?” asks Kurjenoja.

One possible outcome of this is that Russians’ travel to Finland will return to where it started from: people cross the border to buy food and consumables either for private use or re-selling purposes, but the middle-class Russian with a relatively high level of income sees no reason to head to Finland.

Consumer services also an export product

The gloomy outlook on Russian travel is merely one manifestation of the bigger picture and the structural problems afflicting the Finnish economy.

“Taxation in Finland is at a very high level due to the country’s sizable and expensive public sector. Taxes increase costs and diminish purchasing power. This is being compensated for by wage hikes. The costs of services increase and competitiveness suffers the consequences,” says  Juhani Pekkala, Managing Director of the Finnish Commerce Federation.

According to Pekkala, moderation in future wage increases alone cannot solve the problems of the Finnish economy, unless the structures of the economy and labour market are reformed at the same time. But that road is long, and will not provide an immediate boost to the domestic market or transform consumer services into an export product. Finland’s specialty goods trade, for example, would be in need of fast and diverse support to be able to compete with foreign brands in Russia’s e-commerce market.

“Coming up with attractive services is the job of businesses, but does the government even offer any incentives for doing so? Making consumer services an export product should really be one of the government’s key projects, particularly since the narrowness of our export sector is a major problem for us,” says Pekkala.

* Tutkimus- ja Analysointikeskus TAK Oy interviewed a total of 6,725 Russians aged at least 15 leaving Finland in January–August.

For further information, please contact:

Jaana Kurjenoja, Chief Economist, Finnish Commerce Federation, tel. +358 (0)9 1728 5134, jaana.kurjenoja(at)kauppa.fi

Juhani Pekkala, Managing Director, Finnish Commerce Federation, tel. +358 (0)9 1728 5111, +358 (0)400 419 560, juhani.pekkala(at)kauppa.fi

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. www.kauppa.fi

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