Nordic e-commerce confident "silver krona" uplift will persevere

According to a report published by postal group PostNord, Sweden saw a 44% surge in online purchases in April 2020, with 78% of Swedish people shopping online, the highest proportion that the report has ever measured.

E-store platform provider Vilkas Group has estimated that e-commerce sales went up 60% in Finland in the last two weeks of March 2020. The numbers were based on the sales figures of more than 2,000 Finnish online shops.

Meanwhile, Norway saw a 32% increase in online shopping, according to fintech company AfterPay Insight.

Private-equity-backed companies prospering from this trend include Swedish supermarket Mathem, which in May opened a new warehouse and has employed an additional 500 staff since early March to deal with the increased demand.

Helsinki-based online refurbished smartphones retailer Swappie, which recently raised $40m in a series-B round, saw a fivefold increase in net revenues in April and May 2020 compared to the same period last year, the company said in a statement.

Next generation
Prior to the pandemic, the shift from offline to online shopping had mainly been attributed to the changing habits of younger people. But the lockdowns have – out of necessity – introduced a new age group to online shopping.

Magnus Wiberg, managing partner at eEquity, says: "The strongest growth in e-commerce has been due to shoppers in the age group of 65-79 year-olds. Older people have been forced to use online shopping and we've achieved during Covid-19 what we wouldn't have seen in five years."

Says Staffan Morndal, partner at Verdane: "After the pandemic, there will be enough old people who'll have learnt how to do online shopping. There will obviously be those who look at shopping as an activity as they are bored at home and therefore want to go out. But there will also be those who are sick or too old and would rather order online. So they will continue to contribute to the changing shopping behaviour."

Nordic e-commerce deals (2019-2020)

Asset	Advanced sector	PE/VC Backer	Country	Year
Swappie	Speciality retailers	Inventure, Reaktor Ventures, Lifeline Ventures, TESI	Finland	2020
Qliro Group	Speciality retailers	Rite Ventures	Sweden	2020
Apohem	Drug retailers	Novax	Sweden	2020
Bookis	Speciality retailers	Schibsted Growth	Norway	2020
Babyshop	Broadline retailers	Verdane Capital Partners	Sweden	2020
ImseVimse	Speciality retailers	Pivot Partners	Sweden	2020
Esska of Sweden	Speciality retailers	Pivot Partners	Sweden	2020
Mathem	Food retailers & wholesalers	Investment AB Kinnevik, Verdane Capital Partners	Sweden	2020
Puuilo	Broadline retailers	LGT Capital Partners	Finland	2020
Bygghemma Group	Home improvement retailers	EQT	Sweden	2019
Matsmart	Food retailers & wholesalers	LeadX Capital Partners	Sweden	2019
Cosmetic Group	Broadline retailers	Jotunfjell Partners	Norway	2019
Malorama	Home improvement retailers	Icon Capital Group	Norway	2019
XXL Sport & Villmark	Speciality retailers	Altor Equity Partners	Norway	2019
Ideal of Sweden	Speciality retailers	Altor Equity Partners	Sweden	2019
Parfym.se	Speciality retailers	Priveq Investment	Sweden	2019
Ball Group	Apparel retailers	Findos Investor	Denmark	2019
Orange Sky	Apparel retailers	Rite Ventures	Sweden	2019

source: Unquote Data

Best and worst performers
Not every e-commerce sub-sector has been affected equally. Verdane is an investor in 23 online retail businesses, and Morndal says he has seen a 20% average growth in the online retail portfolio since March 2020. The best vertical for the GP has been pharmacy, which has seen growth of several hundred percent during the lockdown period. "For many other e-commerce businesses, it is hard to grow that fast, but medicines are small, they are easy to ship, and there is regulation behind the industry."

Verdane's online grocery companies have seen the second largest boost in growth, in excess of 50%. It has also seen a 40% increase in the sale of home decorations and gardening products, followed by cosmetics and beauty products, for which it has seen a 30-40% increase.

For eEquity, the strong performers have also been grocery retailers, beauty and health product businesses, Wiberg says.

For both GPs, sales for fashion and shoes have been the weakest. Two of Verdane's companies have faced liquidity issues, with both of them being fashion retailers. "But the sector is dynamic and the impact is different depending on country and target age group," Morndal says. Wiberg does note that despite the overall sector not performing as strongly as others, Aim'n and Na-kd, two clothing brands targeted at young consumers in its portfolio, have seen a strong uplift.

Not out of the woods
Even with the introduction of new customers to online shopping, uncertainty from the pandemic still looms. Losing customers to physical shops once lockdowns have eased or losing them as a result of a downturn in the economy are two issues that could impact the sector in the coming months.

Morndal believes that unemployment will go up and there will be negative effects on local GDPs for this year and the next. However, he is positive about the long-term health of the e-commerce industry: "The pandemic is really shaping people's behaviour and solidifying demand. If you buy from a shop just one time, it isn't solidified, but if you buy from the same shop five times, it is. And we're seeing a lot more repeat customers than before."

Wiberg is similarly optimistic with a touch of caution. He says: "After the lockdown has eased, people will continue to practice social distancing. Until we have a vaccine, people will avoid going to physical shops. The only concern is if people lose their jobs. If that happens, whether it is online or offline, people will lose their will to spend as much."

In the meantime, Michael Nyman, a partner at Eversheds Sutherland, says that the current deal volume in the sector has not reflected the underlying appetite for e-commerce businesses yet: "We've not had many M&A transactions in e-commerce yet, because so far subsidies from the government have helped businesses and there have not been as many bankruptcies. But we have seen a lot of interest, and during the summer and beginning of autumn, we will see more of these."

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