Amazon and Costco in Sweden: A looming threat that Nordic retailers ignore at their peril

Arhi Kivilahti, Ada Insights' retail analyst, will start writing for Inderes about the Nordic Retail Industry. His views do not represent the view of Inderes, and should not be interpreted as an investment recommendation.

Changes that are small and happen gradually are the most difficult to respond to. The indirect threat is hard to measure. Thus responding is ignored as the threat of loss of business is barely noticeable in the business case excels.

Small streams of lost revenue accumulate over time. As they accumulate, they start to gather steam. These small streams of unimportant challengers were the threat that dethroned department stores over decades in the 1900s.

This is what Clayton Christensen also wrote. His work revolved around disruptive innovations. This case is not about disruptions, but there are many similarities. Both giants building their presence in the Nordics are small, and their business is distributed narrowly, thus not directly challenging any retailer.

However, the companies are the world's second and third biggest retailers with the capacity and track record of building a big and robust business.

Businesses that eventually take a significant share of the market and thus eat away the revenues of other retailers.

Why aren’t companies paying more attention?

Despite the massive size of the challengers, there is scant discussion in the Nordic retail industry about what their emergence means. This is partly because there is little data available to understand the threat.

How about Amazon?

Amazon entered Sweden two years ago. Before that, the company sold to Nordic customers through German and British websites.

Since the launch in 2020, the discussion around Amazon has faded off. Not many retailers pay much attention (in public) to what Amazon does.

Costco - a more recent entrant

Costco opened its first warehouse in Arninge, Stockholm, last year. You can read more about the store **here**. In an interview with Dagligvarunytt Costco representative said that the company sees potential to open five warehouses in Sweden.

An average Costco warehouse grows its revenues in 10 years to about 261 million dollars, equalling 244 million €.

With five warehouses that make up more than a billion in revenue. That will be one of the biggest retailers in the Nordics if one takes out the traditional grocers like ICA, Kesko…

Avarage Sales Per Warehouse

Why is it difficult to respond?

The challenge this time, as with department stores, is the sales are coming from a broad selection of different categories. Thus, they are directly challenging only a few retailers.

It is easier to focus on a specialist retailer entering a market than a generalist.

Amazon and Costco are not competing with any specific retailer, but they are competing with almost every retailer.

Especially Costco competes on a comprehensive spectrum but very differently from traditional companies. That is one reason why Costco is such a great strategic differentiator.

They compete with non-food retailers but even more with food retailers (50% of revenue comes from food). Besides that, they also compete with Foodservice wholesalers.

This allows Costco to fly under the radar of most retailers. The same has happened with the German discounters Aldi and Lidl.

The limited selection of products restricts the growth potential of the companies. Thus, they are not seen as a threat to big local grocers in assortment or revenue. This has enabled rapid internationalisation.

Therefore, despite being among the world’s biggest retailers, Lidl and Aldi are not among the biggest grocers in any individual market. The same applies to Costco, maybe even more because of its vast and differentiated selection from TVs to toys and bicycles to apples.

Amazon and Costco are still coming

The growth of Amazon in the Nordics has a parallel in Australia. There Amazon has grown to approximately 2 billion AUSD, roughly 1,3 billion €.

Amazon Is Coming

For a non-food retailer, that is the country's most significant pure-play online player. Amazon would be one of the biggest among all non-food retailers (store-based players included)

The exact process of growing to become one of the biggest non-food retailers has happened in the UK and Germany. However, there Amazon has been present for almost (?) two decades. The company is the biggest non-food retailer (online and offline) in both countries.

There is no significant reason why the same would not happen in the Nordics.

Nordics are roughly similar sized to Australia. Thus, comparable revenue levels for Amazon should be expected.

In Sweden, there is little concrete evidence of the sales levels of Amazon. has analysed Amazon from the perspective of the VAT paid by the company.

Their analysis concludes that Amazon’s revenue is probably around 1,1 billion SEK (about 100 million €). The revenues did not grow much during 2022 but did not decline.

Many online retailers in the Nordics have seen declining revenues in 2022. BHG and saw revenues decline. The biggest pure online retailer Boozt had only a slight increase in revenues. The overall online retail market declined by -4,2%.

Changes take time

Aldi entered the UK already in 1990. Tesco CEO at the time, Terry Leahy, explains in his book “Management in 10 Words” how Tesco understood the threat. Tesco did fend off Aldi in the 1990s, as they did later with the entrance of Walmart. In the 2000s, everything seemed clear about the market dominance of Tesco. Tesco was the clear market leader with a 30+% market share and a big lead against others.

However, the 2010s changed everything. Tesco started to have problems of its own with too many stores and problems with internal processes.

Another threat emerged, the company that they had already fended off in the 1990s. All these years, Aldi had accumulated scale. In 2011 that scale, coupled with a downturn in the economy, enabled Aldi to start growing even more rapidly.

In the ten years from 2011 to 2021, Aldi grew its revenues by £11,4 billion. Its market share jumped from around 2% to around 8%. The same happened with Aldi’s German counterpart Lidl. Their rise correlates with the decline in the market share of Tesco, Sainsbury’s, Asda and Morrisons, the Big 4.

Amazon and Costco will grow eventually

Despite the slow start for Amazon, they are one of the most patient companies in retailing. They have time and money to wait for growth. The same applies to Costco.

They will grab significant shares of the Nordic retail markets in due course. This might happen in the next five years, or it could happen in the next ten years. But the probabilities are high that it will happen.

Now is the optimal time to start paying attention to these two giants and how to respond. What kinds of customers will they attract, and how will that impact our company? How should we improve our business to be more competitive in the future?

Arhi Kivilahti is Ada Insights’ retail analyst. He has studied the industry from many perspectives starting as a researcher in Aalto University and spent a year as a visiting researcher in Saïd Business School in the University of Oxford. After academia Kivilahti has worked for example in Kesko corporation where he was responsible for building the ecommerce website and fulfilment operations. More insights about the retail industry at