Human connectivity has soared over the past decade, offering new online solutions for our private and work lives. In the latest issue of Nordea On Your Mind, we explore the COVID-19 pandemic's disruption of business models and turbocharging effect on e-commerce.
COVID-19, a turbocharger for online shopping
Social distancing to contain the pandemic has convinced (or even forced) many new customer to shop online. The surge in e-commerce growth is evident in the strong stock market outperformance by e-tailers, who now account for 70% of the market cap of the global retail sector.
Amazon, a single company, represents 61% of the market cap of the US sector. Brick-and-mortar retailers need to follow consumers online.Fortunately, they can get help from the recently evolved ecosystem of e-commerce enablers, and avoid developing all digital and fulfilment capabilities in-house.
Finally, good data to measure and confirm big leap for Nordic online retail in 2020
Good data for online retail sales is hard to come by, as it is typically based on consumer surveys. We have used aggregated and anonymised Nordea card transaction data to gauge growth in Nordic e-commerce, seeing an online share of total retail sales soaring from ~15% to ~25% in just the past year. For non-food, the online share is now ~45%.
The UK analogy again: Online share of Nordic retail sales could reach 30% already in 2024
We have revisited our analysis from 2019 where we use the UK as a template to simulate growth in online penetration for Nordic retail sales. Applying the pre-pandemic penetration growth rate to last year’s numbers, the COVID-19 boost to e-commerce in 2020 alone corresponds to a full four years’ rising penetration. The new trajectory suggests the online share of sales should reach 30% in 2024, instead of 2028 under our pre-COVID assumptions – by 2028, the new trend could see the online share top 40%.
Take-off for food on the web
Food is the biggest retail category, accounting for ~43% of the total market. It still has among the lowest online shares, owing to factors such as high incumbent retailer market concentration and low population density in the Nordics. The MERS pandemic in Korea in 2014-15 saw a surge in online food retail which has persisted. COVID-19 seems to be having a similar impact in the Nordic region, driving online food sales up to 50-100% and doubling the online shares from ~2% to ~4% over the past year.
Voices from e-com players
We have interviewed Kinnevik CEO Georgi Ganev about the company’s investment philosophy based on technological and behavioral megatrends, as well as two CEOs from its portfolio companies – Johan Lagercrantz from MatHem and Fredrik Hamilton from Budbee. We have also talked to Daniel Ovin from Nordea Equity Research about the surge in online food retail.
Stay tuned for the coming articles featuring Georgi Ganev, Kinnevik, Johan Lagercrantz, MatHem and Fredrik Hamilton, Budbee. Until then, take part of our latest e-commerce related articles, here.
If you are a corporate client and want to access the full Nordea On Your Mind report, please contact Viktor Sonebäck at Nordea Thematics.
Although the pandemic continues to hold the world economy in an iron grip, there is hope ahead. Find Nordea’s updated forecasts for the global and Nordic economies in the latest Nordea Economic Outlook.
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