Finland’s e-retail sector driven by international growth

Finland is emerging as a powerhouse for innovation-led smart retailing technologies, with many tech-savvy enterprises with tangible connections to Nokia and the so-called “Nokia dividend”.

The “Nokia dividend” refers to the fall-out from Microsoft’s €5.5bn acquisition of Nokia’s phone production business in September 2013. The takeover set in motion a major restructuring of Nokia’s organisation in Finland, leading to more than 3,000 redundancies in the company’s software engineering, programming and software development divisions by December 2017.

Although the vast majority of the technical and managerial staff impacted by the post takeover consolidation process were snapped up relatively quickly by enterprises in the ICT sector, the event triggered an explosion of new entrepreneurial activity in Finland.

It resulted in many former Nokia executives and engineers investing their financial severance packages in to consumer-technology focused areas and startup projects. These focal tech areas included mobile telephony, online entertainment, smart apps and advanced retailing innovations.     

The striking Nokia dividend released an impressive array of technical skills and talent in to Finland’s ICT-sector. It served to re-energise a largely stagnating technology sector that was still reeling from the negative affects of a 2008 financial crisis that sent the Finnish economy into a downward and prolonged economic spiral.

In this recession-hit environment, ICT firms found it increasingly difficult to borrow from local Finnish banks in the wake of the 2008 crisis. Banks, faced with a potential mountain of bad loans, effectively turned off the credit tap by making it prohibitively expensive for enterprises to borrow to stimulate growth in their businesses.

The business landscape changed completely after 2014, as the Finnish economy began a slow and sustainable recovery. This made the Nokia dividend all the more timely, given that banks were once again open for business and offering credit-line to small to medium-sized enterprises (SMEs) and promising startup tech business ventures.    

Finland’s expanding “smart” retailing sector emerged from the ashes of the mass redundancies caused by the Nokia reorganisation. This period saw a surge of innovation-led activity that produced a conveyor-belt of “new tech kids on the block”. Many of these tech kids are now international players. This list of characters includes Supercell, Smartcart, ePassi, Frosmo, Spot-a-Shop and Angry Birds’ parent group Rovio.

This same era also resulted in some, including more established Finnish e-retailing firms, spreading their wings. Hobby Hall is a member of this select group. The company merged with Estonia’s Hansapost in August to create a business with €80m in sales.

Smartcart is another player ranked among the new-generation of firms making international waves by developing advanced high-value retailing technologies and consumer-focused shopping solutions. Smartcart has set about re-inventing the traditional supermarket trolley as a digital information centre and self-service checkout station equipped with a touch-screen tablet.

The Smartcart innovation is able to locate in-store products, map special offers, calculate costs and savings, and populate special offers. Additionally, Smartcart provides consumers with a range of information on food product ingredients and generates recipes.

“Our business concept is simple. We see the shopping trolley as something more than the mere transportation tool that it has been since it was first introduced to retailing in 1937. Digital technologies will improve customer experience in bricks-and-mortar stores. Technology will make the shopping experience faster and more pleasant,” said Petteri Heiman, CEO of Smartcart.

The general profile of the companies operating in Finland’s smart retailing cluster lean heavily towards the delivery of advanced technology products that aim to revolutionise the shopping experience.

Smartcart’s offering incorporates a command module integrated into the shopping trolley. This station can be loaded with price and product information, daily offers and an information bank containing more than 6,000 recipes. The module allows for the transfer of products to trolley based on a specific recipe to propagate a shopping list. It provides the shopper with a map for the fastest route to the location of all in-store products.

The development of a new wave of smart self-service checkout system technology is underway at Smartcart. A range of systems are undergoing advanced final testing at stores run by the Superseis grocery chain in Paraguay. The self-service checkout innovations are intended to enable the shopping trolley tablet to be used as a barcode scanner. This will allow consumers to scan products as they shop and use the same tablet to pay for purchases at the end of the retail session.

Haiman sees smart retailing as an unstoppable force. “The shopping trolley will cease to become a steel frame on wheels in just a few years from now. It will integrate the checkout, bonus points, information services and advertising. This is a marketplace that is transforming,” he said.

This revolution has spawned consumer-focused innovations designed to help e-commerce platform operators gain enhanced transaction and improved cost-efficiency in the operation of their online stores.

“The digitisation of retail is happening very quickly. As competition grows, more companies will go online. These online businesses will need to not only stand out from the crowd, but to better serve their customers by improving the online user experience,” said Mikael Gummerus, CEO of Fromo, a Helsinki-based digital retail solutions company.

Fromo’s systems are tailored to service the needs of e-commerce companies that need to reach new customers and increase loyalty among existing customer groups. The systems cover new and more cost-effective omnichannel, cross-channel marketing innovations targeted at clients operating across the media, travel, financial services and merchandise retailing spectrum.   

Customer online routing innovations are rapidly becoming another fertile area for growth in smart retailing. For the tech startup Spot-a-Shop, the company’s primary revenue stream is generated from the traffic flow linked to diverting consumers to the websites of clients with an online presence.

This client-list includes Zalando, Boozt and Ellos. The Spot-a-Shop offering permits online shoppers to compare products and prices across a broad range of fashion stores and refine searches for specific brands, sizes and colours.

“We like to think we are Momondo of fashion,” said Spot-a-Shop’s co-founder Matias Hilario, referring to the similarities between the company’s operating business model and that of the global travel fare aggregator and fare metasearch engine operator. “If a shopper is looking for a specific brand but doesn’t know where to look, our routing system will direct them to the most affordable option.”

Finland’s community of smart retailing upstarts includes mobile payment services’ innovators. Among the most high profile of this tranche of operators is ePassi, which has elevated its business to international heights under a strategic agreement with Alipay, China’s largest mobile and online payment platform.

The agreement will allow Chinese citizens and tourists, with Alipay accounts, to use the ePassi platform to pay for goods and services in shops, restaurants and hotels across the Nordic countries and European Union states.

“This is a hugely important partnership for us. China is playing in a league of its own. The fact that Alipay is the most popular mobile payment method in China makes our agreement covering Europe doubly significant. It will continue to drive the total spend by the Chinese users of AliPay in Europe,” said ePassi chief Risto Virkkala.