5 October 2022. Giosg participated in the Suhdanteet 2023 event organized by the Federation of Finnish Special Commodity Trade, or ETU in short. The event gathered about 100 high-level decision-makers in Helsinki’s main trade centre Messukeskus.
Though the event painted a bleak picture of the current economic situation in Finland visitors were in a chatty and relaxed mood. The event emphasised the need for sustainability and personalisation in retail.
The impact of the economic downturn on consumer spending
The first guest speaker on the stage was Meri Obstbaum, Head of Forecasting at the Bank of Finland. She gave an overview of the current economic situation.
The Finnish Special Commodity Trade saw strong growth at the begging of 2022. However, the positive growth has since declined, and the rest of the year looks negative. The rising costs are putting many businesses and consumers in dire straits.
“The confidence in economic development is negative for all operators, but especially consumers' confidence in the economy has collapsed,” Obstbaum says.
Spending on services higher than in 2019
While the overall situation looks grim, the spending on services has increased from 2019 levels. However, spending on retail products is weak.
“Decreasing purchasing power weighs on consumer confidence, which predicts declining private consumption and the GDP,” Obstbaum says.
Spending on fashion and hobbies
With the decreasing purchasing power, there are concerns if consumers will keep on spending on retail items that are considered non-essential, such as fashion and hobby items.
Prices are rising faster than ever. Food prices have seen the highest hikes, and medical products have the lowest hike.
Fashion has seen a drop in sales in the last couple of years, not just this year.
“In 2020, global fashion fell by 20%. Online store sales did not compensate for lost brick-and-mortar sales,” says CEO of Stockmann Oyj Abp Jari Latvanen. “Online shopping accounted for 16% of sales in 2020, 21% in 2021, and 18% in 2022.”
CEO of Bubbleroom Ville Kangasmuukko agrees that it has been tough to be a fashion retailer in recent years.
“There is a lot of competition in the market, and there are also a lot of brands that only sell online and thus have gained a significant market share,” he says.
Pandemic is pushing changes in retail
The global pandemic has had some benefits, according to Latvanen. “It has forced retailers to think differently.”
Personalisation and sustainability are getting more important than ever.
Consumer behaviour in the post-Pandemic world
A study done by the Finnish Commerce Federation shows that Finns are getting more and more environmentally conscious in their consumer behaviour. Finnish consumers want more information on the environmental impact of the products they buy.
Finns value sustainability and durability when they purchase products. However, not so many Finns are willing to pay more for this.
“70% of Finns prefer buying from sustainable companies, but only 40% are willing to pay extra for it,” Jaana Kurjenoja, the Chief Economist at Finnish Commerce Federation, says.
Finns see that the core areas of responsible consumer behaviour are buying durable, locally-made goods and managing finances well.
Delivery speed is not so important
The increasingly environmentally conscious Finnish consumer is not so interested in Quick Commerce.
46% of consumers are willing to wait longer for products if the delivery option has a lower impact on the environment. Only 25% of Finnish consumers select an e-commerce store based on delivery speed, and 30% say that they don't consider delivery times at all.
"The importance of delivery speed is perhaps less than we have been led to believe," Kurjenoja says.
Consumers are more educated and price-conscious
Consumers are more educated on the products than before because the information is easily accessible.
“Today, consumers are not necessarily looking for product information, but for experience information, and social media is very good for that,” Harri Hokkanen, a Postdoctoral researcher from Tampere University, says.
In the current economic situation, prices guide purchasing heavily.
"We are returning to coupon culture," Heikki Karjaluoto, Professor of marketing from the Jyväskylä School of Economics. says.
“Consumers like to save, even with the help of coupons. It makes them feel smarter.”
The role of social media in buying
Modern consumers are computer-savvy and fully online.
“They don’t just go online, they live online,” Hokkanen says.
The new generation of online buyers is doing more of their product research on social media. Especially, young people use social media as a source of information, such as TikTok and Instagram.
"The younger you are, the more influences you get from there. When we are watching the 9:30 news, they're doing something else with their cell phones," Hokkanen says.
The rise of User-generated content and influencers
The rise of social media has also highlighted the value of User Generated Content. Consumers don't just want to see clothes on models, they also want to see real people's reviews of products.
“User-generated content is important. The more reviews by "real" people, the more certain the consumer will buy the product in question,” Kangasmuukko of Bubbleroom says.
Social media has also created the rise of influencer marketing.
“Social influencers wouldn't exist if they weren’t profitable,” says Hokkanen.
This all highlights that businesses need to invest in social media.
"It would be foolish to leave out something that would have a big impact in the future," Hokkanen says. “However, a company does not need to be on every social media channel to remain popular.”
Note: In a later seminar the audience was asked if their companies had done commercial collaborations with influencers, and around 10 or 11 people from the group of 30 indicated that they had done so.
The value of personalization
The customer experience should be at the centre of retail operations. This is why providing personalised service offline and online is getting more and more important.
“Everything should be done in a customer-centric way. Both in brick-and-mortar and the online store,” Aarne Töllinen, Vice President of K-Auto, says.
Töllinen explains what an excellent customer journey looks like:
- The customer finds the store
- The customer gets greeted
- The customer's wishes are granted
- The customer is impressed by the product selection
- The customer finds the product
- The customer accepts the prices
- The customer trusts the store
- The customer adds more products to the cart
- Customer pays
- Customer exits satisfied
- The customer recommends the store to a friend
- The customer is greeted again
- The customer returns
- The customer gets more attention
“This journey should be the same no matter if the customer buys offline or online,” Töllinen says.
Peter Björkqvist, giosg’s Chief Revenue Officer, agrees.
“The current web pages are just extensions of the warehouses. The products are added to the basket and then checked out. Today's consumer wants and expects more,” Björkqvist says.
"We are humans, and when humans serve humans, the customer experience is always better."
Note: Giosg Product Marketing Manager Kimi Tiinus and Content Marketing Intern Melanie Muil contributed to this article