Border trade a mixed blessing

Photo: Dalibor Z. Chvatal/Wikimedia Commons/Creative Commons Attribution 3.0 Unported
Photo: Dalibor Z. Chvatal/Wikimedia Commons/Creative Commons Attribution 3.0 Unported
By Reidar Molthe

25 January 2024 09:00

Border trade a mixed blessing

Norwegians' daytrips to shop across the border in Sweden continue to be at a lower level than before the pandemic. The trend through 2023 points towards a stabilization of cross-border trade in Sweden at a new and lower level, reports Norway's biggest bank DNB in a press release.

In 2023, Norwegians travelled on 5.4 million daytrips to Sweden and shopped for NOK 9.6 billion. In the last quarter of the year, they took 1.3 million trips across the border. This is 25 percent fewer than the same period in 2019, and 5 percent fewer than in 2022. To put it in perspective 10 billion accounts for about 5 percent of the total turnover of groceries in Norway.

“There are many factors that have influenced Norwegians' cross-border trade,” says director of data transformation, Ine Oftedahl, at DNB. In a press release for January this year she points out that the higher price increase for food in Sweden, as well as the occasional weakening of the exchange rate, are among the factors that come into play.

“If we take currency fluctuations and price increases in Sweden into account, the shopping basket has shrunk by 12 percent since 2022,” she points out.

On the Swedish side of the border, there are many who oppose DNB's analysis. According to Systembolaget and several merchants in areas close to the border, trade is at least back to pre-pandemic levels.[i] Many also report sales records in 2023 compared to all previous years. A little later in the year, we will probably get more exact analyses. Based on informal conversations with several border residents, this writer assumes that the records have been broken!

Alcohol, tobacco, meat and dairy products

Also, the Maximat boss at Nordby disagrees with the cross-border trade figures from DNB. He expects record sales and that it will soon be back to the level before the pandemic. One can argue about figures, but if the price differences between Norway and Sweden rise from the current level, there is reason to believe in a significant increase in trade. It is the prices of alcohol, tobacco and fuel that drive cross-border trade. Lower fuel prices in Sweden now for the first time in several years are a new significant factor.

Six out of ten Norwegians have shopped for groceries in Sweden in the past year, according to a survey conducted by the Norwegian School of Economics (NHH). Meat, mineral water, cheese, sweets, tobacco and alcohol are at the top of the list of what we buy.

Cross-border trade – blessing and curse

There are many oddities with the attitudes towards branch trade. Virke, the retail organization in Norway, is a strong lobbyist for more liberal trade across national borders – in principle.

The exception is cross-border trade between Norway and Sweden. According to Virke, it is environmentally unfriendly, unfair due to different taxes on many goods, it robs us of Norwegian jobs, and it is economically unviable, to highlight some arguments Virke has used for decades.

In a slightly pointed way, one could argue that Virke is in favour of trade when it comes from countries far away, but against it when it comes from Sweden.

international phenomenon

Cross-border trade between Norway and Sweden has always been a topical issue in both countries, not least after the borders were closed during the pandemic. Then Norwegians could not cross the border and shop turnover (and profitability) in Norwegian shops close to the border doubled and tripled for many. Now, after the pandemic is over, the pattern will return to pre-pandemic times sooner or later.

In the end, it is the price differences that decide. Most people are rational and shop where it is cheapest (all else being equal), where they can save on the household budget in both good economic times and less so.

If it is cheaper in Norway, border residents also shop mostly in Norway. However, as this writer see it, the price difference will probably increase in 2024 when ICA launches its radical price campaign[ii] very soon.

ICA has acknowledged that it has lost market share to Axfood and others because of higher prices than necessary. If ICA goes down in price, competitors in Sweden will have to follow suit. This will not go unnoticed in Halden, Sarpsborg or Kongsvinger, to name a few cities near the border to Sweden.

Lobbyist in Norway has on many occasions called on the Norwegian government to harmonize tax levels with Sweden, so that it pays to shop locally. However, one cannot exactly argue that they[iii] have been particularly successful.

The fact is that cross-border trade is an international phenomenon. Norwegians shop in Sweden, Swedes in Denmark, Danes in Germany, and Germans in Poland. Poles shop in Belarus!

[i] Dagligvarunytt, an Industry journal

[ii] ICA

[iii] NHO & Virke

Sources: DNB, NHH, Dagligvarunytt, NHO, ICA, Handel.

Photo by Dalibor Z. Chvatal on Wikimedia Commons licensed under the Creative Commons Attribution 3.0 Unported license.