23-09-2021 14:21

Pandemic overdrive for e-commerce

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.
Delivery man is ringing the bell to deliver two cardboard boxes. He's wearing a face mask and protective gloves.

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%.

Nordea On Your Mind is the flagship publication of Nordea Investment Banking’s Thematics team, which produces research for large corporate and institutional clients. The research does not contain investment advice and typically covers topics of a strategic and long-term nature, which can affect corporate financial performance.

Top decision makers at Nordea’s large clients across the Nordic region receive Nordea On Your Mind around eight times per year. The publication’s themes vary widely, and many are selected from suggestions by clients. Examples of covered topics include artificial intelligence, wage inflation, M&A, e-commerce, income inequality, ESG, cybersecurity and corporate leverage.

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.

Get the report

If you want access to the full Nordea On Your Mind report “E-commerce and Corona“, please contact viktor.soneback [at] nordea.com (Viktor Sonebäck).

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