By Sjoukje Goldman, Sara Lone, and Anne Gommers.
The Scandinavian e-commerce market is growing exponentially. Denmark, Norway, and Sweden were all ranked in the top 10 of cross-border countries. This is an annual ranking of the best 16 European countries in cross-border online shopping by CBCommerce. These countries are thus of high interest for e-retailers to expand to. Furthermore, these countries are frontrunners leading the way for the rest of Europe in technology and sustainability. But what is important to know about these countries?
Entering the Scandinavian e-commerce market can be challenging with several obstacles during the process. Not trusting foreign websites and customer service not offered in the native language are examples of reasons for Scandinavian consumers not to shop at foreign webshops (Statista, 2021).1 Fortunately, there are options to overcome these obstacles and be a successful cross-border e-retailer in the Nordics e-commerce market. Research has been conducted to determine key takeaways for e-retailers looking to expand across national borders to one or more countries in the Scandinavian region. Approximately 250 e-retailer websites in the countries Finland, Denmark, Sweden, Iceland, and Norway were analyzed to understand key website features per country. The outcome of the analysis has been evaluated and compared with expert interviews and existing literature. The most notable outcomes have been synthesized into six key takeaways.
1. Website localization
The first key takeaway is a well-known concept for those active in cross-border e-commerce: localization of the website. For all cross-border e-commerce activities, translating a website into the native language of the country directly contributes to local success. This mainly has to do with consumer trust in a website. If it is in their own language, the look and feel are familiar, and the consumer will be more inclined to trust the e-retailer and thus place an order. This also applies to webshops that go cross-border to Scandinavian countries. In practice though, localization can still be a difficult experience for e-retailers. Thorough knowledge of the local language and customs is needed to perform localization optimally. Alongside translation and local customer service, currencies, and practices, local payment, and delivery options must be considered (PostNord, 2016).
2. Uniquely local payment methods
E-retailers the world over provide different payment methods for online transactions. In Scandinavian countries, the most common payment methods e-retailers provide are credit card and debit card of local bank transactions via the webshop. Online banking is also a popular payment method, especially in Sweden (almost 70% of most visited webshop provide this option). The tool After Pay is provided by more than 50% of e-retailers in Norway and Sweden. This is in stark contrast with Iceland, Finland, and Denmark where After Pay is quite limited in use. Not offering the preferred payment methods of a consumer base is known to be a reason not to shop at foreign webshops (Statista, 2021), and is thus very important in an e-retailer’s localization strategy per country.
3. Logistics and fulfillment particularities
Providing complete information about logistics is another important key takeaway. Consumers want updates on logistics and the opportunity to have choices. The ability to choose the method and place of a return, such as a pickup point or collecting from home, can positively impact consumers’ purchase intentions(PostNord, 2019). Indeed, studies have proven time after time that providing a simple option to return products or services, and the possibility to choose from several alternatives, can have a positive influence on the number of website visitors and conversion rates.
The most provided delivery option is home delivery followed by delivery at a pickup point. Furthermore, evening delivery is proven to be a popular delivery option in Denmark and Finland and is offered by approximately 15% of Finnish retailers. Machine pickup points, automated parcel lockers where customers can collect and send packages are an up-and-coming delivery option in the Scandinavian countries. Although this option is not provided by e-retailers in Iceland, Norway, and Sweden, 20-25% of e-retailers in Denmark and Finland offer machine pickup points. Around 60-80% of Scandinavian e-retailers offer returns via postal service, which is the most common return option. Returning a parcel at the physical store is also provided by 21% of Finnish e-retailers, however, not every e-retailer has a physical store or warehouse. Returning via a local return point is almost never used by Scandinavian e-retailers.
4. The importance of policies
As of 1 July 2021, a new VAT rule for international e-commerce is applied throughout the EU Single Market. This rule states that all imported goods from non-EU countries are taxed with VAT. Although Norway and Iceland are not members of the European Union, these two countries are part of the European Free Trade Association and members of the European Economic Area. Iceland and Norway must therefore comply with the same terms as the other European Union members and are equal partners in the internal market. This bar chart presents the provided policies by e-retailers of each country. The data is gathered via analyzing 186 e-retailers from Sweden, Norway, Iceland, Denmark, and Finland in 2021.
To maintain the trust of the consumer and their data, a security trust mark can be implemented on the website, preferably shown on the homepage of the website.
In Scandinavian countries, sustainability has become one of the most important social issues for consumers and companies. Whether through media or government regulation, Scandinavian consumers are now keener to make conscientious choices when shopping online.
Transparency of the product supply chain and manufacturing, as well as transportation, has become increasingly important for consumers. In fact, one in three Scandinavian consumers paid extra in 2019 for carbon offsetting with delivery (PostNord, 2019).8 However, further analysis of e-retailer websites revealed less than 5% offer sustainable options, such as green delivery or sustainable products. Online stores that offered sustainable options typically indicated this with a certificate on the website.
Examples of these certificates include CEWE-sustainability, CO2 neutral, Ecolabel/Eco swan, and Sustainable packaging (translated from Danish). These results strongly indicate that it is important to show the sustainability of products, packaging, and/or delivery.
6. Internet access
The household internet penetration rate in Scandinavian countries is above 94%, and of the households in Norway, 98,4% have access to the internet. Almost every household in Scandinavia has access to the internet, making their use of digital tools quite advanced, and heightening digital skills across the region. To be sure, these digital skills are utilized in a wide range of online activities, such as consumption of online content or shopping online. In
2019, over 50% of consumers in Scandinavian countries purchased goods online. Of note, in Sweden, 70% of the consumers purchased goods online. Additionally, shopping via a mobile phone has become easier over the years. In 2019, almost 50% of consumers used mobile phones to shop online. Technology has evolved very quickly, and innovations like social media platforms have created an entirely new infrastructure to support shopping online via a mobile phone. Using a mobile device to shop online has increasingly become more of a normal habit in the
life of Scandinavian consumers. To conclude, results from this study show that localization is one of the most important factors to be successful in cross-border e-commerce. Despite Scandinavian countries often being lumped together under one umbrella, localization is crucial if one wants to be truly successful in these e-commerce markets. These differences may seem slight, but they are important to take into consideration in a cross-border e-commerce strategy.