Under The Hood

Leading Continuous Digital Transformation

Continuous Digital Transformation, Continuous Transformation, Customer Experience, Digital Strategy, Digital Transformation

Case Special Trade – Fear of Amazon

Finland is a Northern European country famous for Nokia and The Moomins.  It has a population of 5 million, whose native languages are Finnish and Swedish.

From a special trade point of view, this market is small even though the land area of Finland approximately equals the area of Germany.

This article discusses what happens when Amazon is estimated to arrive to Finland in the next 1-2 years and what local shop owners can do to survive?

During the last few years, digitalization has swept away old market dominators like Anttila , Tiimari and even top-end brands like Stockmann are in trouble

Development over the last 10-15 years, including the mobile internet, Facebook and online payment, has opened new markets for local shopkeepers.

Still until now many small and mid-size companies located in small cities have served only B2B and B2C customers in that geographical region.

In the same time, large global companies have entered the local field of customers. For example, Amazon, Alibaba and XXL have grown their market share in Finland as smaller local players have lost their earlier competitive edge.

Finland is not an exception from the global perspective.

Large cities keep growing as people move there after jobs, education, entertainment and life-style. For the small-town shopkeepers, the situation holds the possibility of expansion, but it is also a big risk.

Open-minded entrepreneurs have started using new technologies to support, patch up and even grow lost sales.  As people use mobile phones pre, during and after sales it is vital to speciality stores to have an online presence.

The risk of disappearance is very real for traditional shops that rely only on the bricks and mortar business scenario

Combining both the physical and the online location of the store is key to operating in the 21st century, but what else can small-town shop keepers do to compete with the new market dominators?

Let’s have a closer look at two small speciality stores, Intersport and Filmtown, operating in a town called Nummela only 44 km from Helsinki, the capital of Finland.

The town itself has only 12,000 inhabitants, but Greater Helsinki is within one-hour’s travelling distance and has nearly 1.5 million inhabitants.

Case Filmtown – candies and ice cream won’t go online

In July 2017 Intersport shop keepers Nina and Pekka Ekegrén announced in the local newspaper that they will soon close the business.  This announcement came just a month before a Finnish family owned DVD rental concern, Filmtown, closed their business.

Intersport and Filmtown in their business areas are completely different, but both stores are victims of same phenomena: digitalization and globalization.

The family owned company started to operate in 1991 and grew fast. Tero Nurminen, CEO of Filmtown, explains in the local newspaper that customers have changed their habits and movies are rented and bought mostly online.

Netlix, HBO and Apple store have grown fast in Finland and the Filmtown business has shown decline for four years in a row. The rental chain still has 38 stores in Finland, but already 30 stores have closed down.

Even the film rental business is now slowing down, the CEO, Nurminen, believes that the company can be profitable in the future. In addition to Filmtown, the company operates CandyTown candy chain, and the Spice Ice ice-cream chain. These two brands are growing, because candies and ice cream won’t go online, explains CEO Nurminen.

Case Intersport – multinational companies like Norwegian XXL putting pressure on local concerns

Nummela has strong traditions in sports and, for example, the town’s own soccer team began in 1964.

Today Intersport has a close cooperation with the local sporting community and is the only shop specialized to cater to sportspeople and athletes, both for summer and winter activities. The shop is in the central shopping mall with a strong daily customer flow.

Intersport’s shopkeeper Mr. Pekka Ekegrén has also seen a decline in his business. The physical store has 650 square metres of floor space and opens from early morning to late in the evening every day.

He explains that in the last year the business has grown 5% annually, sales of 1.8 million Euros, but the running costs of the physical store are too high.

People expect personal service seven days a week, but at the same time price remains the biggest aspect in the buying decision.

Mr. Ekegrén says that nowadays, people compare prices online and buy products just before they need them.

For example, parents look at a school’s training schedule and if the teacher informs them that there will be cross country skiing on Wednesday, the parents buy skiis for their children on Tuesday.

At the same time, multinational companies like Norwegian XXL have a larger variety of products in store putting pressure on local concerns and, by taking away trade, reducing their profits.

Small shop owners and big companies all around the world not only face these same problems, but also have the same grow possibilities!

Customers’ behavior has totally changed in recent years and the development of technology has given the lead to early adaptors and larger companies.

CEOs and top management boards are forced to think of new ways to compete in the flipped playground that constantly changes shape.

The good news for single shopkeepers and business leaders is that the new rules of the competition are the same for all players.

All in all, the last mile walked with the customer is more and more important. All shop processes need to support and fulfil customers’ expectations.

Especially in big cities Amazon and other multinational companies will provide soon same-day delivery and many customers expect to have products in hours, not in days.

In addition to traditional supply chain management, assortment control, product purchase and marketing, all organizations need to learn new mandatory skills. These new skills include marketing automation, social selling, online store price and sales automation, chatbots and mobile optimization.

This doesn’t mean that every skill must be learned in-house. Large partners and small startups can give flexibility and cost efficiency.

Conclusion: Even though there is huge risk of lagging behind, the best road to success is to start the transformation today

Superb customer experience is a combination of all of the skill listed above and market leaders of the future will reap the benefit of the current disruption hitting the field of trade.

Leaders must define the road map quickly and start taking small steps forward. The time for planning needs to dramatically decrease and organization should during the same time, support a culture of fast failure and constant learning.

#1 Tip for a leader: Identify channels your customers will prefer tomorrow

Identify which channels your customers prefer to use:

Do they all read certain hard-copy magazines? Are they all on Facebook or Twitter? Which other services do they use?

Knowing your customer better will help you focus your development efforts on the channels that have the largest impact on your business.

#2 Tip for a leader: List separate targets for each channel

Are you using mobile technology for getting new customers? Are you using desktop technology to promote your latest collection?

Whatever your targets are, just by listing those targets, you are already one step closer to achieving them.

Good luck!

Sources: Taloussanoma 2017, Vihdin Uutiset 2017 and Yle 2018

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