Nordea On Your Mind
Retail apocalypse: The growth of e-commerce

Online retail is taking off, shifting from price to convenience

The growth of e-commerce

Nordea On Your Mind.
Nordea Corporate & Investment Banking,
27th november 2017

Online retail is taking off, shifting from price to convenience
E-commerce has grown since its beginnings in the 1990s, with growth accelerating in the past few years, making online account for 10% of Nordic retail sales in 2016 – almost on par with the US. A competitive price was critical in the early years as a differentiator versus physical stores, but now convenience has taken over as the key driver for consumers to go online. Innovation and investments in technology and logistics are making click-based browsing, buying, paying and quick delivery easier and more accessible. We have yet to come across a retail industry participant who does not believe in strong continued growth in e-commerce.

Help, I run physical stores! What should I do?
Many retail industry players believe omni-channel will be the successful future concept: following all the channels that customers go through. The customer can browse the market online, check or try products in physical stores or showrooms, then choose to buy from the shelf or take home delivery. We believe online, offline and omni concepts can all succeed, but it is high time for incumbent retailers to decide on a future model they believe is viable. As much as brick-and-mortar retailers may hesitate investing in digital platforms at the expense of today’s more profitable offline business (still typically 95% of their business), they have to ensure that they remain relevant in a future likely to be much more biased towards consumption via mobile devices.

How to make sure shopping centres are not emptied in the digital age
Retail property owners also need to consider how to prepare for digital disruption. Their job is to attract visitors to the centres where their retailer tenants have stores, which is tougher if customers are increasingly able to shop more easily with their phones. Shopping centres need to offer a richer experience than just shopping, with more entertainment and services and a strategic location to drive visitor traffic. We believe non-weather protected shopping centres reachable only by car and offering little other than shopping will be most at risk of being half-full.

Views from the experts: Interviews with retailers, shopping centre owners and Nordea analysts
Mia Brunell Livfors, CEO of Axel Johnson Group, and Johan Ryding, CEO of Sportamore, share their views on how continued growth in e-commerce will affect retailers. Lars-Åke Tollemark, Managing Director Nordics at Unibail-Rodamco, and Citycon’s CEO Marcel Kokkeel and CFO Eero Sihvonen describe their respective strategies for continuing to lure customers to their shopping centres as the e-commerce share of retail sales grows. Retail analysts Stefan Stjernholm and Stellan Hellström from Nordea Equity Research argue that equity investors have some legitimate concerns over the modest inroads into e-commerce that most Nordic incumbent retailers have made so far.

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Johan Trocmé | Head of Corporate Research | +46 101 56 34 22 | Analyst info
Ellen Benktander | Analyst, Corporate Research | | Analyst info

Nordea Bank | Markets | Equities

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