The Swedish consumer is driving the development of the Internet Economy, while business and government require new online tools to keep pace.
The Boston Consulting Group’s (“BCG”) 2013 report investigates the new opportunities for consumers and businesses that can be created by the Internet. Growth in consumer demand for internet-driven goods and services is encouraged by the rapid growth in smartphone and tablet usage. BCG’s report focuses on how Swedish businesses are responding to meet this demand, particularly SMEs. Further opportunities from digitalization are explored for such enterprises, having positive implications for the Swedish economy as a whole.
The Internet’s contribution to the Swedish economy has grown faster than expected. The share of economic activity driven by the internet has grown at 10.3% annually. In 2012, this activity amounted to SEK 275 billion, or 7.7% of Swedish GDP. This is on par with the economic contribution of the construction and utilities industries combined. Such growth has been faster than was projected by BCG in 2011, boosted largely by the adoption of Internet-enabled devices including smartphones and tablets. It is estimated that by 2017, the Internet economy will growth to a total value of SEK 398 billion, or 9.5% of the Swedish economy. This is nearly on par with the economic contribution of the retail and wholesale industries combined.
Such growth appears to be largely driven by the Swedish consumer. It is found that 40% of consumers’ time spent online is on mobile devices. More than 70% of consumers claim to be familiar with online shopping and 20% report using their mobile phones to purchase online. This is made possible through new online payment methods, establishing trust in the security of online transactions. BCG also measures the value Swedish consumers derive from time spent online. It is found that consumers derive six times more value from consumption of digital media as compared to traditional forms of media. Consumers with multiple devices derive 50 percent more value from the Internet than those using one or two devices. Gain to consumers from conducting research online prior to offline purchase is estimated at SEK 85 billion, and further gain from the digital consumer-to-consumer resale market is given at over SEK 200 billion. Finally, each krona spent on mobile hardware has generated an additional three kronor of downstream spending on online consumption.
“Swedish SMEs score well on international rankings for online presence but make less use of advanced commercial tools than some European peers.“
While Sweden’s Internet economy has grown rapidly, business and government appear to be adapting to the change more slowly. Online consumption has grown at 13.5% annually since 2009, but investment made by business and government to meet this demand has grown at a smaller 5.5% and 2.4%, respectively. Indeed, while 30% of SMEs have mobile-friendly websites, only 5% of marketing spend is on mobile devices. Investment in digital tools might relate to online customer relationship management, sales analysis, price comparisons and order management systems. However, many SMEs have not kept up with these technologies. Indeed, half of Swedish businesses are reported to be lacking in expertise to develop new online commercial tools.
Those businesses that have developed more sophisticated technologies have been able to increase their competitiveness and reap productivity gains across the entire value chain from an internet-driven transformation. The value to businesses of the digital business-to-business marketplace is estimated at close to SEK 1 trillion. It is reported that SMEs that invested in digital technologies have gained between 0.2 and 0.5 percentage points in additional growth for every 10% of customer, supplier and employee interaction that has moved online. This suggests there is substantial opportunity for Sweden’s many SMEs to grow through such measures. Government, policy makers and private companies can help to build awareness of and offer support in the movement toward enhanced digitalization.