Report: a punishing may for the Swedish eCommerce sector

The Swedish Chamber of Commerce released its eCommerce indicator for May 2023, and the numbers look sad. However, the total number of accounts that we manage saw a 20% increase in conversion value during the same period.

The Swedish Chamber of Commerce has released its eCommerce indicator for January to May 2023. The numbers make for grim reading. Compared to May 2022, domestic eCommerce activity is down a full 12%.

It’s the most significant decline in revenue since January 2023’s troubling numbers, putting paid to hopes that we had turned an economic corner.

Let’s explore the economic data in finer detail.

Diving deeper into the eCommerce indicator

The number of people shopping online has increased compared to May 2022 (69% vs 68%). But only slightly. What is driving the drop in eCommerce revenues is that:

  • Buyers are shopping in fewer categories
  • The average value of purchases has declined

The cost of living crisis has hit consumers in a variety of ways. One obvious consequence is that people have less money to spend on high-ticket items. We can see this reflected in the drop-off.

When compared to previous years’ purchase volumes, 2023 is:

  • 12% lower than May 2022
  • 20% lower than May 2021

That’s a pretty catastrophic decline. However, some sectors have fared better than others.

 

Causes for the decline in e-commerce sales

For the last 15 years, eCommerce sales experienced constant growth. As the online generation emerged as a more significant market force, their preferences influenced the market. Safer online transactions and better technology also made eCommerce a more viable solution for every demographic.

COVID-19 accelerated this upward trend. Restrictions and health concerns meant more people staying indoors. Retailers pivoted to home delivery models, and sales skyrocketed.

However, as the pandemic subsided, some people naturally returned to their previous habits. The eCommerce indicator statistics suggest that consumers have adopted online shopping habits for good. Better prices and more convenience are powerful motivators. But while adoption has stayed strong, macroeconomic factors have come into play.

High inflation and subsequent interest rate hikes have hurt the spending power of the average consumer. eCommerce purchases are just one area where people are cutting back, which has led to a drop in revenue from 2021 and 2022 levels.

 

What sectors are affected?

One of the more interesting wrinkles of the decline in consumer behavior is that shoppers seem to be pivoting away from specific industries.

The government has forecast an economic recession for 2023. GDP growth is set to decline by 1% this year before recovering to +1.2% in 2024. Consumer behaviors typically change during these times, with specific products becoming more or less popular.

If we look at the figures for revenue growth by product category, some patterns start to emerge.

 

The winners

Nicotine and tobacco products

Nicotine and tobacco products have enjoyed a 43% revenue rise in Jan-May 2023 compared to the same period last year. The market growth is partly due to the increase in harm-reduction products, such as Snus and tobacco-free nicotine pouches.

Sweden looks set to reach a smoking prevalence rate of just 5% this year, compared to 20% across the rest of the EU. When combined, these figures suggest ex-smokers are moving toward healthier and cheaper products, which are easily purchased online.

Pharmacies

Online pharmacies have also experienced growth. In 2021, Sweden had the fastest-growing online pharmacy market in the Nordic countries. Research from Klarna suggests that almost half of Swedish shoppers go online for pharmaceutical products.

Brands like Apotea have embraced warehouse automation to drive efficiency and keep prices low. Macroeconomic factors have not been able to suppress this growth, which stands at 7%.

Clothes and shoes

Clothes and shoe sales have also spiked online during 2023. However, part of this increase is down to rising prices. When adjusted for inflation, the 5% rise seems less rosy.

 

The losers

Furniture & home decor

The Swedish housing market crash of 15% from the 2022 peak could be affecting online furniture & home decor sales. Rising interest rates and materials costs have seen developers pull the plug on some projects in a market that was already artificially inflated by a chronic lack of supply.

Housing demand fell by nearly 9% in 2022. This could partly explain the drop in furniture & home decor revenue by 33% and 22%. Building supplies have also dropped by 12% over the same period, suggesting a stubborn trend.

Alcohol

Typically touted as recession-proof, online alcohol sales have seen revenue drops of about 15% this year. There’s a definite element of a post-pandemic hangover here, but it’s also a mix of health and consumers cutting back on non-essential spending that contributes to the drop in revenue.

Children’s items and toys

Again, the pandemic looms over the decline of the toy market. It’s down about 18% this year. Part of this is to do with more outdoor activities and less time and home.

Another interesting factor is the knock-on effect of global supply chain issues. In December 2022, many toys arrived late, disrupting the traditional cycle. As a result, retailers offer discounts after Christmas, which has driven down demand and prices.

Books and electronics

Both sectors are down 10%. Again, less at-home leisure time can help partly explain the drop since 2021. Economic restraints could also be driving consumers to seek low-cost alternatives.

Sports and leisure products

Sports and leisure goods have lost 11% of revenue. Again, that could be part of a larger cost-cutting and reduction in luxury pursuits.

The outlook for the future

While declines in eCommerce revenues are a concern, an economic uptick in 2024 could turn things around. For now, responding to changing patterns in consumer behavior is essential for retailers.

Online marketplaces are still a long-term trend. Some reports suggest a CAGR of over 25% globally by 2028. Better digital payment technology will continue to improve shopper confidence, and demographic shifts and buy now pay later (BNPL) may tip the balance.

While the overall figures are pessimistic, there is hope. This May, at Amanda AI, we had our best month in a long time. Let’s explore how our clients performed against the market.

 

Amanda AI accounts May 2023 vs. May 2022

The information above showed the revenue totals for eCommerce in Sweden in May 2023. So, let’s explore our client’s conversion totals for the same period.

On average, across the accounts we manage, we increased conversion value by 20% compared to May 2022. The median increase is 0.2%.

Let’s break down these YoY figures further.

  • 5% of accounts have a lower conversion rate
  • 7%  have increased their conversion rate
  • 6% are unchanged (i.e., their conversion rates are less than +/-5% difference

 Now, you’ll note that the bulk of the accounts are in the unchanged category. However, comparing this segment against an eCommerce market that has dropped 12% on average helps to put these gains in content.

Despite a broader drop in nationwide eCommerce sales, these declines have not affected most of our client’s accounts. Indeed, by, at minimum, holding steady, a full 71% of our accounts are beating the overall market by at least 12%.

So, yes, times are tough. Marketing and advertising budgets have taken a hit, and consumers are worried about rising costs and the recession. However, demand is still there, and you can find it with the right marketing approach.

The number of online shoppers has not dropped. Collectively, they are making smaller purchases. At the same time, customer acquisition costs (CAC) have gone up considerably.

All of that highlights the importance of an effective sales and marketing strategy. Amanda AI helps you find the people who need your products and get the right message in front of them. Our robot achieves this at the lowest cost, allowing you to outwork your rivals with intelligent targeting, ad creation, and bidding.

 

Read the full report here.

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