What Tokmanni and Motonet are facing in Sweden?
The Swedish discount retail market is facing a new kind of competition, as two Finnish non-food retailers are expanding to the country. Motonet and Tokmanni are both expanding to Sweden as major players in Finland. When comparing these two companies to the existing major players in Sweden, one can see that both could become significant competitors in the markets.
The biggest discount retailer in Sweden has, for years, been Rusta. It has grown robustly over the last 10 years. However, it has some significant challenges as well as rapidly growing upstarts.
The other two significant players, Biltema and Jula, have not grown as rapidly as Rusta over the last decade. In fact, in 2014, the biggest discounters in Sweden were ÖoB and these two. Especially ÖoB has been unable to keep growing and thus has been left to 6th place in the market.
Since 2014, Jysk and Dollar Store have grown rapidly. Of these two, Jysk is somewhat narrower in its focus on home goods. Thus, one could question whether it should be included in the list. With almost 5,000 million SEK, Jysk will probably not grow to challenge the biggest non-food discounters.
Strong growth for Dollar Store and Normal
Dollar store, recently acquired by Tokmanni, has grown rapidly from a low base of less than one billion SEK to more than 4 billion SEK. It remains to be seen how much Tokmanni can accelerate the growth and enable Dollar Store to challenge the biggest incumbents.
Dollar Store has been the third fastest discounter over the last five years. Only Eko and Rusta have been able to grow more rapidly. It is notable that as the market leader, Rusta has still been able to grow more rapidly than its main competitors.
When one compares Rusta’s revenue to Tokmanni, Rusta operates a bit less than €800 million (9,5 billion SEK) business. Tokmanni is approaching 1,2 billion € revenue in Finland.
In terms of growth, there is also the Danish discounter, which has shaken retail markets in all Nordic countries, Normal. The company has grown from only a small base in 2018 to more than one billion SEK in 2022. With this explosive growth, Normal can be expected to continue growing. However, it probably won’t challenge the biggest incumbents as their business model and concept is much more limited.
Another interesting competitive dynamic will be between Biltema and Motonet. Both companies are heavily focused on car repairs, catering to many other needs. In Finland, Biltema has not been able to challenge Motonet. Will Motonet be able to compete with Biltema in Sweden?
Good profitability
There seems to be quite a significant variation between different discount retailers regarding their profitability. One has to remember that the profit margins are influenced heavily by the products sold. Those discount retailers selling more food products get more revenue but on a lower margin.
The most profitable discount retailer in Sweden is Jysk. The home goods focus of the company probably leads to the higher EBIT margin of Jysk. There are some differences when one compares the profitability of the Swedish discounters to their Finnish peers. Tokmanni operates on a 7,2% profit margin. The big share of groceries influences it in the assortment. Tokmanni profit margins are lower than Rusta’s or Gekås’ but generally in line with the Swedish market.
On the other hand, Motonet has traditionally operated on a significantly higher profit margin of 10+%. However, the company had a somewhat challenging year in 2022, and the profitability level declined to 7,6 %. Then there is Puuilo, which operates on 15 to 20% profit margins.
The dark horse…
Finally, the American giant discounter that operated for almost a year in Sweden: Costco. If the first Costco would reach the average revenues of an average Costco warehouse, it would be 3/4 of ÖoB revenues. With two average warehouses in Sweden, Costco would be Sweden's fourth biggest discount retailer.