Search

Our operating environment

The trading sector operations are affected by several global megatrends ranging from the digital revolution to climate change. By identifying the trends that affect K Group’s operations we are able to effectively anticipate future challenges and opportunities and to respond to them ever better.

Global megatrends
#

Trends affecting K Group's operations

 

 

 

International operators challenge local companies
  • Intensifying price competition
  • Global supply
  • Affordable products are preferred for the shopping basket
  • Sales of own brands are increasing
What we are doing
  • We focus on a more limited number of businesses
  • We differentiate ourselves from the competition with quality and selections
  • We operate with even greater efficiency and quality
  • We continuously expand the selection of affordable and high-quality own brand products

 

 

Consumers' knowledge and power has increased
  • Transparency of selections, prices and availability
  • Importance of social media channels: access to information, exchange of experiences and interaction
  • Origin of products and responsibility are important selection criteria
  • Quality and healthiness of food
What we are doing
  • We make clear customer promises and deliver on them – service, quality, price
  • Marketing and offering will become personalised
  • We provide comprehensive information about products, prices and availability in all channels

Digital store and services
  • Ease of shopping
  • 24/7 availability of services irrespective of place
  • Mobile access plays an important role
  • Targeted marketing based on customer data
What we are doing
  • We offer an even better customer experience by making use of the possibilities of mobile services, online services and digital marketing
  • We target the offering making it personalised
  • The K-Plussa system is digitalised
  • We build the best mobile services

Individual customer behaviour
  • Ageing population
  • Increase in the number of single-person households
  • Urbanisation
  • Increase in cultural diversity
What we are doing
  • We create new concepts and retailer models
  • We take local conditions into consideration in stores' operations and service offerings
  • We invest especially in the renewal of neighbourhood retail services
  • We make more extensive use of customer data

Corporate responsibility as well as strong brands and identity are preconditions for success
  • Good corporate governance
  • Responsible operating principles
  • Climate change and circular economy
  • Transparency of purchasing chains
  • Open dialogue with stakeholders
  • Responsible investment
What we are doing
  • We take care that corporate responsibility is realised in all our operations
  • We promote the use and production of renewable energy
  • We develop innovative circular economy solutions jointly with partners
  • We make efforts to ensure responsibility in the supply chain
  • We strengthen our corporate identity and core brands
  • We make corporate responsibility visible in stores and marketing

 

K Group's value chain

We take account of the stages and impacts of our value chain

We operate sustainably and responsibly at all stages of our value chain. In addition to its direct impacts, our value chain generates significant indirect impacts.

Raw materials
Kesko Raw materials
Purchasing chain
Kesko Purchasing chain
Logistics
Kesko Logistics
Multichannel trade
Kesko Multichannel trade
Products and services
Kesko Products and services
Circular economy
Kesko Circular economy

Sustainable environment

  • We promote the sustainable use of natural resources
  • Our soy, palm oil, plastic and other policy statements guide our responsible sourcing

Responsibility across purchasing chains

  • We support local production
  • We are accountable for the safety and quality of products
  • We ensure the responsibility of production in high-risk countries

Efficient logistics

  • We have customer oriented logistics models
  • We reduce emissions with an efficient transportation fleet and optimization of logistics

Easy shopping instore and online

  • K Group is a significant employer: 45,000 employees
  • We have nearly 25,000 suppliers
  • Our comprehensive store network is near customers
  • We develop digital services that make customers’ lives easier

We put the customer first

  • Every K-store is different, because every customer is different
  • We make use of customer data and offer personalised benefits and services to our customers
  • We build sustainable partnerships with our business customers

We promote circular economy

  • Waste from our own operations is recovered
  • We develop innovative circular economy solutions
  • We provide extensive recycling services to K-store customers
Taustaviiva
 

Kesko's value chain

Kesko Raw materials
Raw materials

Sustainable environment

  • We promote the sustainable use of natural resources
  • Our soy, palm oil, plastic and other policy statements guide our responsible sourcing
Kesko Purchasing chain
Purchasing chain

Responsibility across purchasing chains

  • We support local production
  • We are accountable for the safety and quality of products
  • We ensure the responsibility of production in high-risk countries
Kesko Logistics
Logistics

Efficient logistics

  • We have customer oriented logistics models
  • We reduce emissions with an efficient transportation fleet and optimization of logistics
Kesko Multichannel trade
Multichannel trade

Easy shopping instore and online

  • K Group is a significant employer: 45,000 employees
  • We have nearly 25,000 suppliers
  • Our comprehensive store network is near customers
  • We develop digital services that make customers’ lives easier
Kesko Products and services
Products and services

We put the customer first

  • Every K-store is different, because every customer is different
  • We make use of customer data and offer personalised benefits and services to our customers
  • We build sustainable partnerships with our business customers
Kesko Circular economy
Circular economy

We promote circular economy

  • Waste from our own operations is recovered
  • We develop innovative circular economy solutions
  • We provide extensive recycling services to K-store customers

Opportunities and risks related to the operating environment

Importance of multi-channel approach

In line with our strategy, we aim to offer customers the best multi-channel shopping experience in the trading sector.

Opportunities

Risks

  • E-commerce and digital services coupled with a comprehensive store site network provide a basis for excellent customer service in K Group.
  • Challenges to e-commerce profitability include: the cost-efficiency of logistics operating models and the adaptability of existing store sites to the logistics of online sales.
  • Our aim is to serve customers as well as possible at different stages of the buying process irrespective of time and place in physical stores, online or using their combination.
  • Continuous changes in e-commerce and digital services present special challenges to the rapid development of new services and their integration into existing systems.
  • In order to improve customer satisfaction and increase sales, we develop personalised customer marketing based on shopping behaviour and increase the availability of online information about products, prices and availability.
  • With the growth of e-commerce or changes in market situation, there is a risk that the operations of a chain relying on physical stores or a store site become unprofitable.

 

Economic operating environment

Our three strategic growth areas are: the grocery trade, the building and technical trade, and the car trade. From the perspective of growth, key objectives include increasing our market share in the Finnish grocery trade, increasing the building and home improvement trade in Europe, strengthening market leadership in the Finnish car trade, and developing digital services and multi-channel trade.

Opportunities

Risks

  • Our strategy emphasises customer orientation and quality in all operations in
    addition to competitive prices.
  • Continuing outlook for slow growth in the Finnish economy, the indebtedness of the public sector may have a negative impact on the development of purchasing power.  
  • In the grocery trade, price is increasingly important.
  • Modest development of the Russian economy.
  • In the building and technical trade, the B2B trade grows clearly faster than B2C trade.
  • The acquisition of Onninen creates a unique entity for Kesko in the B2B trade.
  • In the building sector, cyclical fluctuations may be strong.
  • Our strong financial position provides excellent opportunities to develop operations.
  • Kesko’s market performance varies greatly from one country and division to another.

 

Development of retail market in Kesko's operating countries in 2014–2016

Retail trade excluding motor vehicles, change %, deflated figures (Source: Eurostat, PMR for Russia)

Purchasing chains

Transparency and responsibility in purchasing chains has become increasingly important.

It is necessary to provide customers with increasingly detailed information on the origins and manufacturing methods of products. We take care to ensure that all operations and the whole supply chain are responsible. Product safety management must be flawless and traceable across the entire supply chain.

Opportunities

Risks

  • Networking with suppliers of goods and providers of services requires that all operators in the supply chain adopt the same values, objectives and operating practices and are committed to international sustainability assurance procedures.
  • Non-compliance in the management of social or environmental responsibility within the supply chain may cause human rights violations, environmental damages, financial losses and the loss of customer, owner and investor confidence while negatively affecting the corporate responsibility work and its credibility.
  • We can help customers make responsible purchasing decisions by means of corporate responsibility communications, the stores' K-responsibility concept and product labelling.
  • We strengthen customer confidence in K Group through careful and traceable product safety control and quality assurance.
  • A failure in product safety control or in the quality assurance of the supply chain can result in financial losses, the loss of customer confidence or, in the worst case, a health hazard to customers.

 

Impacts of climate change

Climate change causes risks and opportunities affecting habitats, regulations and reputation factors.

Emissions from the generation of electrical and heat energy of properties represent a significant proportion of the environmental impacts of Kesko and K Group stores. In accordance with our environmental and energy policy, our real estate functions work in cooperation with business partners to develop solutions for the building, renovation, concept changes, maintenance and use of real estate properties which reduce the consumption of materials and energy during the life cycles of these properties. We also help our customers find energy-efficient solutions. Read more about energy-efficient solutions.

Opportunities

Risks

  • We efficiently recover waste heat, such as condensation heat generated by store refrigeration units, for heating using the latest technology.
  • Climate change will increase the risk of extreme weather phenomena.
  • Extreme phenomena may cause damage or business interruptions that cannot be prevented or covered with insurances.

 

  • We also actively examine the use of renewable energy sources. Among other things, the use of soil and water as heat and cold storages, as well as the use of solar energy, will increasingly be potential alternatives as technical solutions become more sophisticated.
  • Products and services that enhance energy efficiency in homes and are available at the building and home improvement stores make it easy for customers to improve the energy efficiency of their homes and to find solutions that support sustainable development.
  • If our energy source policies prove wrong, they may lead to unpopularity among customers, owners and investors, and cause financial losses.

 

in Action:
Management by information provides stores with competitive advantage

K Group is one of the trading sector's pioneers in collecting and utilising customer data. Retailers are using an application that supports store management and offers a tool for targeted marketing. For customers, utilisation of data will lead to personal, interactive and multi-channel service.

It is important for retailers to monitor the wishes of their customers, the development of sales and trends in the trading sector. When the business is busy, it has often been challenging to search and analyse data quickly and, in several cases, some data has remained completely unused.

"We wanted to get all of the data into a form that is easier for retailers to take in and use. We developed an entirely new visual reporting tool to enable retailers to see the information about customers, market areas and competitors that is relevant to their own stores. A clearer reporting entity makes it essentially easier for a store to manage by information," says Minna Vakkilainen, VP, Head of Customer Data in the K Digital unit.

Easier to use data has reinforced the understanding that stores, areas, competitive situations and customers are different. That is why every K-store is different – tailored to the demands and profiles of local customers.

Targeted email marketing

Easy, fruitful marketing based on data plays a key role in the everyday work of digitalising stores.

The targeted marketing service, Kampanjatiski, is an application that enables retailers to quickly and cost-efficiently make store-specific email marketing based on K-Plussa customer data.

K-food retailers see the application as a great opportunity to do marketing.

"It is positive that I can do marketing whenever I want. Retailers need to be agile and make decisions quickly. Kampanjatiski enables us to react quickly," says Jouni Ekholm, retailer at K-Supermarket Mustapekka.

In addition to the Kampanjatiski application for retailers, K Group's other forms of marketing are increasingly transitioning towards the use of customer data.

"In 2016, we expanded K Group's targeted marketing using customer data and began carrying out programmatic marketing relying on our own team of experts. By utilising our own customer data and digital technologies, we are developing more customer-oriented marketing and laying the foundations for future marketing," Vakkilainen says.

Utilising customer data to provide more personal customer service

Customers expect stores to provide a new form of personalised and interactive service. They want to get a wider range of service in return for the information that they give to companies. However, this does not necessarily mean that customers are only looking for special offers. It is also important to offer service, information and inspiration.

We create marketing based on customer data to offer the best customer experience in the trading sector. We communicate to customers at the right time, using the right media and with exactly the right content for each customer.

"By utilising internet browsing data, we can help customers who are planning renovations to get through the various phases of the renovation by offering them relevant content in different channels, telling them about the renovation services offered by K-Rauta and providing interior decoration tips," says Mari Huuki, Marketing Analyst for the building and technical trade.

Read more:


K-Plussa is changing

K-food mobile application (In Finnish)

Read more