ODA, a Norwegian online grocery retailer, announced last week it is considering packing up its virtual bags in Finland.
The Norwegian company highlighted that it managed to become the largest home delivery service specifically for groceries in its little over a year of operation in Finland. It generated over 22 million euros in revenue in the 11 months of last fiscal year it was active in the country, with the revenue on track to improve to 34 million euros in 2023.
“Despite the successes, the capital market has changed dramatically since Oda entered Finland. The cost of financing has risen, turning what was previously an operating model that could attract financing into one that could not,” its press release reads.
“The achieved level of profitability is no longer sufficient in the current, exceptional market environment to secure financing.”
The company said it is exploring the possibility of providing logistics services in Finland.
Oda in 2022 became the first company in two decades to attempt to take over a piece of the heavily concentrated grocery market in Finland. Helsingin Sanomat on Thursday reported that the market is the most concentrated in the western world, with 82.2 per cent of it dominated by K Group and S Group.
The Norwegian company packing up its bags will further concentrate the market and dampen hopes of a new player entering the market, Arhi Kivilahti, a retail analyst at Ada Insights, said to the newspaper.
“Oda is leaving Finland feet first. There’s a mood that this could be the final nail in the coffin for a change in the market within a reasonable time frame,” he said. “There’s definitely room in the market, but Finland is small and distant.”
With K Group and S Group together generating an estimated 200 million euros from online grocery sales, Oda was off to a promising start in light of its revenue, estimated Kivilahti.
“It doesn’t seem like we’re talking about lack of demand, but about building something new being a very slow process.”
Kivilahti viewed that Oda leaving the market is a blow to the development of online grocery trade in Finland. K Group and S Group, he pointed out, have been fairly passive when it comes to pricing home deliveries for groceries, despite delivery cost being one of the key factor for purchase decisions, and had effectively “left” the market to Oda.
“It’s somewhat surprising that neither of the large retail groups is competing with delivery prices, even though S Group has pushed down prices for its pick-up service.”
As Oda charged less for home deliveries than the two domestic giants, its departure is not expected to fuel price competition in the delivery space. “Food home delivery prices are very high already, and they definitely aren’t about to decline,” predicted Kivilahti.
Nor is the departure likely to encourage Lidl, the third major grocery retailer in Finland, to develop its online presence in Finland, he added.
“I’m sure Lidl has been offered all kinds of online retail solutions from all directions. It has great potential on the web, but it hasn’t found a model that it could distribute to several of its countries of operation,” he said to Helsingin Sanomat.
Aleksi Teivainen – HT
