John Palmer was running an ad agency in steamy Kuala Lumpur when Asia's financial crisis erupted last year. The Australian marketing specialist promptly packed away his tropical-weight clothes and headed to a frosty zone where the economic boom is still going strong: Scandinavia's cyber frontier. Now, Palmer is living in Stockholm, where he has taken the reins of a new E-commerce buyers' co-op called Letsbuyit.com. He's launching localized versions of the site in Denmark, Finland, and Norway. The plan is to push it into the richer German and British markets by fall. "Lots of other sites are going to be moving to Europe," he says. "We want to get there first."
It's a Nordic invasion. All of a sudden, Scandinavian Internet companies that have thrived in their home countries are making aggressive plans to spread south to the great, largely untapped cybermarkets of Germany, France, and Italy. Already, Sweden's Boxman is selling music CDs all across the Continent, and Finnish E-brokerage eQ Online is preparing to offer stock trading in Germany. The prize is a big piece of pan-European E-business, which International Data Corp. projects will grow from $5 billion last year to $197 billion in 2002.
The Scandinavians are betting they can quickly come up with customized products for their neighbors, putting up Web sites geared to local tastes and languages. They hope to offer multilingual and multicultural alternatives to the Web, which is dominated by the Americans and English. In the process, their efforts should spur E-business growth in Europe, bringing the Web far closer to fulfilling its promise as a medium for connecting all of humanity.
NO HOLIDAY. There's no time to waste. The Scandinavians already are starting to face American Web giants turbopowered by fabulous stock valuations. Amazon.com Inc., the American shopping site, and online auction pioneer eBay have both established E-commerce sites in Britain. Meanwhile, the Western Europeans, who so far haven't done much beyond starting Internet-access services, are constructing E-commerce sites of their own. So intent are they on getting a head start that many Nordic Netrepreneurs are even skipping their normally sacrosanct month-long July vacations as they race to colonize Europe.
And why would Scandinavian sites have an inside track? It's simple. Unlike many Europeans, the Nordics are already online and have been for years. Indeed, Scandinavia boasts the highest Web-surfing population per capita in the world, with Finland, Norway, and Sweden all topping 30 Internet users per 100 adults, while the U.S. trails with 28. The Scandinavians have plenty of E-commerce expertise, too. Pioneer shopping sites like Sweden's Torget have been operating since early 1996, when Amazon was still known principally as a jungle.
In the race to win with E-commerce, the Scandinavians have another crucial advantage: world leadership in mobile telephony. If they succeed in creating winning Web applications for the phone, they'll be positioned to sell to a vast cell-phone market in Europe all operating on a single standard, something that American Web masters can only dream of. Cell phones--in effect, pocket-sized computers--now number 115 million in Western Europe and are growing at a 50%-per-year clip. Soon, Euro Web merchants will be able to reach a continent of consumers in their pockets and purses. If the Scandinavians can master these mobile Web applications, they could be titans of the post-PC era.
For now, though, most are focusing on Internet services via the PC. And they're marketing up a storm. At this summer's Glastonbury rock festival in Britain, for instance, a double-decker London bus pulled up to one side of the stage and offered the 130,000 fans a cybercafe upstairs, where they could check their E-mail and order CDs, and a "chill-out zone" below, with videos and refreshments. The sponsor of the bus was Boxman, the up-and-coming Swedish E-merchant of CDs, which is rolling into Britain and other markets with a bang. Boxman is gaining fast in the northlands, winning 5% of the total CD market in Sweden--a percentage that dwarfs Amazon's market share there in books.
Boxman is spending heavily on radio and billboards, even TV, to build its brand throughout Europe. Its formula, now common among Scandinavian online merchants, calls for establishing customized European sites but creating a universal brand identity. "We've got $2 million to launch this in Britain," says Boxman U.K. Managing Director Joe Wilson. "Now is the time to brand ourselves, while the market is still relatively uncluttered."
It won't be for long. In shaded office parks in the suburbs of Helsinki and Stockholm, Web entrepreneurs are hatching Continental plans. They range from juice merchants to travel agents to a Finnish electronic brokerage that's opening a service for stock trading on mobile phones. This ferment is breeding a cultural revolution. For decades, engineers, computer scientists, and business grads coming out of the top universities filed straight into 40-year careers at Volvo, Ericsson, Electrolux, and Nokia. Now they're detouring into startups. "We used to be very safety-oriented," says Tomas Althen, CEO at Effnet Group, a Swedish network company. "Now, people know that even if the startup fails, they can always get a job somewhere else."
In their enthusiasm for startup mania, the Scandinavians aren't limiting their expansion to Europe, either. Finland's Infosto Group in May opened an E-commerce Web site for the international fruit-juice industry, and plunked the headquarters in Florida. The site, eFruit International, is designed to speed up everything from orange-pulp purchasing to quality control of concord grapes.
To be sure, Scandinavia is still a far cry from Silicon Valley when it comes to funding Web businesses. Unlike American investors, who focus on market share and dazzling possibilities, hard-headed Scandinavians have until recently judged ventures by traditional cash-flow and revenue standards. "It's been much easier to get financing for a steel mill than an E-business," says Johan Stael von Holstein, a leading Web entrepreneur in Sweden. That has left Web startups in the cold. Letsbuyit.com, for example, languished as an unfunded idea for three years before financing arrived--$13 million from backers in Germany and the United States.
HEATING UP. Now, that's changing. Finland's first Web initial public offering, Nedicon, a Web designer, was eight times oversubscribed when it went public this spring. Today, global investors are prowling Europe's Weblands--with a focus on Scandinavia. In the last month alone, French giants Vivendi and LVMH Moet Hennessey Louis Vuitton, Britain's News Corp., and Japan's Softbank all announced multi-hundred-million dollar Internet venture funds for Europe. Meanwhile, U.S. ventures firms such as Vision Capital and Apex Partners are making the rounds in Stockholm and Helsinki. "I expect things are going to heat up in the next year," says William R. Cardwell, managing director of Eqvitec Partners in Helsinki, the representative for U.S. investment banker BancBoston Robertson Stephens Inc.
If Scandinavia has been slow to bankroll startups, it's because the industry grew largely without them. In Sweden, for example, the trailblazer on the Web was none other than the post office. In 1995, postal officials realized that the Web was likely to revolutionize their business--with them or without them. They jumped on board, creating Torget. The reasoning: Torget would direct the flood of packages that resulted from E-commerce straight to the postal service.
That kind of success got the attention of Scandinavian entrepreneurs. For instance, Stael von Holstein, a Swede working as a banker in Luxembourg, quit his job in 1996 and moved home to set up a Web business. The result was Icon Medialab, a Web page designer and consultant. Working with CEO Franco Fedeli, Stael von Holstein set the pattern for expansion. First Icon opened offices in neighboring countries and then proceeded south. Now Icon, with $24 million in annual sales, has 600 employees in 12 countries and puts together Web pages for leading European companies, from SAS to L'Oreal. Equally important, Icon's European network serves as a staging ground for other Scandinavian E-businesses, such as Letsbuyit.com, as they spread southward. "With us, they don't need to reinvent the wheel in 12 countries," says Stael von Holstein.
In each country, though, there's the potential for a different marketing message. And the Scandinavians feel confident they'll be able to pluck the right chords. Letsbuyit.com, for instance, is billing itself in Scandinavian advertisements as an antidote to traditional capitalism--with consumers taking power away from producers. This is an appealing notion in Scandinavia, with its long socialist traditions. The Web site surveys surfers to learn their buying preferences--and then uses the clout of a large customer list to haggle down manufacturers' prices.
Now it's time for Letsbuyit.com to expand. CEO Palmer plans to spend the $13 million raised in a private placement to build up the brand in a hurry. First, he needs to spread to more populous countries to build up a customer base. And he's also anxious to move into Western Europe before the arrival of rich cyberpowers from America.
To date, though, big American brands are barely established on the Continent. America Online Inc. has taken a bruising from free Internet providers in Britain and from a host of national ISPs run by large phone companies. Amazon.com has set up a successful branch in Britain but has yet to dent the book markets outside of the English language. And eBay Inc., while opening a site in Britain, is still a foreigner to the rest of Europe.
The Scandinavians must move fast to remain one step ahead of their American rivals. Web phones are one way to do that. EQ Online, a Helsinki company that went online a year ago, offers standard brokerage services on PCs. But the company is preparing a similar service for mobile phones, with a German-language version for export. CEO Petri Rutanen says his company's plans coincide with the development of Internet-surfing smart phones at nearby phone giants Nokia and Ericsson, which should be hitting the market in Europe later this summer. Already, the region's phone titans are pouring money into software startups focused on cell-phone E-commerce. Ericsson ventured to Iceland to invest $13 million last month into software developer Oz.com, whose iPulse product allows people to communicate via phone, computer, pager, or mobile phones with small screens.
If E-commerce ever fulfills its promise of putting a mall into everyone's pocket, the Scandinavians may be selling the gadgets--and running the E-commerce sites as well.