The Finnish Electrical Wholesaling Industry – a brief history
The birth of the Finnish electrical wholesaling industry
Finland has often been at the forefront of European electrification. The initial stage of the history of electricity dates back to the turn of the year 1877-78, when Finland carried out its first experiments with electric light. The first permanent power plant producing electric light, which was also one of the first in Europe, was erected at the Finlayson factory in Tampere in the spring of 1882. Within a year, electric light was coming on in Pori, Jyväskylä and Oulu. Helsinki received its first power plant in 1884, the same year as Berlin. The first pioneers of Finnish electrification built power plants, acted as importers of electrical goods, and even manufactured the equipment and appliances needed to produce electric light. At first, all electrical goods were imported from abroad. In 1889, Gottfrid Strömberg set up a company in Helsinki bearing his own name, and this company became the mainstay of the Finnish electrical industry for almost the next one hundred years.
At the turn of the last century, some small-scale hydroelectric power stations and other kinds of power plants were built in Finland, and these brought electrical power to factories and light to urban dwellings.
The First World War and the Civil War slowed the pace of Finland’s electrification, but after the war, a large number of electrical companies were established in Finland, and new factories were built, such as Suomen Kaapelitehdas (the Finnish Cable Factory), later to be called Nokia Cable, a forerunner to today’s Nokia. Old German companies also returned to the Finnish market, and a group of new companies was set up, including Osram of Germany, Philips of the Netherlands and L M Ericsson of Sweden.
In the 1920’s, much national effort went into the construction of the power station at Imatra and the erection of a power line from Imatra all the way to Turku. A great many businesses carrying out electrical installations were set up in Finland, and several wholesalers of electrical goods were established to provide them with supplies. As well as engaging in wholesaling, these companies usually acted either as manufacturers or importers of electrical goods, as electrical contractors, or as a combination of all of these. Large foreign companies were also significant wholesalers.
In 1925, companies working in electrical wholesaling founded the Electrical Wholesalers’ Credit Information Office, which monitored the ability of customers of electrical wholesalers to pay their bills. During the Great Depression of 1931, the industry set up its own federation, the Finnish Electrical Wholesalers Federation (SSTL), the name of which is today Finnish Electrotechnical Trade Association (STK). Through this federation, the members aimed to safeguard and monitor the granting of credit to electrical businesses. Once the federation was up-and-running, work began on establishing a common set of ground rules. For example, purchasing and sales contracts for trading in electrical goods were drawn up between electrical wholesalers and manufacturers.
War and rationing
During the Second World War, the electrification of Finland almost came to a standstill. Electrical goods and foreign exchange were in short supply, and the government began to ration them. At the request of the Ministry of Emergency Supply, SSTL prepared a standard price list for electrical goods, which was introduced on 1st February 1941, and which was also published in the statute book on 18th June 1941. This was the start of standard pricing for the trading of electrical goods, a system administered by SSTL, which continued right up until the 1990’s. SSTL’s price and product catalogue was known as the ‘Black Book’.
The war ended in 1944, but that did not signal the end of rationing and shortages of electrical goods. German-owned companies ended up in the hands of the Soviet Union, until they were returned to German ownership in different ways midway through the 1950’s , or transferred into Finnish hands. During the war and particularly after it, many companies and factories producing electrical goods sprang up. The government began to support their sales and those of the old manufacturers by introducing import licences and by creating domestic electrical standards. New electrical wholesalers, such as Sähköliikkeiden Oy (SLO), were set up and many old importers began electrical wholesaling in order to join SSTL and to be entitled to better wholesale discounts.
The electrification that had been halted by the war restarted in the 1950’s with renewed vigour. Hydroelectric power stations were constructed on rivers in Northern Finland, new power lines were erected and industry grew. At the same time electrification spread to rural areas in Northern and Eastern Finland. Electrical goods were in great demand.
SSTL’s role at the head of electrical wholesaling assumed new importance in the 1950’s. The federation had a strong inner circle, which got the best discount percentages in agreements that they made with manufacturers. They also wanted to keep control of standard pricing, because that way the federation’s members could regulate the business and prevent ’unhealthy competition’. When a new act on cartels came into force in 1958, SSTL provided the cartel authorities with an explanation about regulations restricting competition in purchasing and sales agreements, that were in force within the federation. At the same time, the federation was registered as a public cartel. The federation began to fine members, if they broke the agreements that were in force.
Competition tests the cartel
Competition in electrical wholesaling became tighter at the beginning of the 1960's. Toughening competition caused rifts in the industry’s internal regulation, because members broke the joint agreements more and more often. SSTL's hold over its members weakened. At the same time, cheap imports of electrical goods from Eastern Europe increased, which resulted in prices falling, so, for many companies, electrical wholesaling became unprofitable.
The change in the competition situation was also hard because some electrical wholesalers began regularly to transport goods, and set up regional warehouses in different parts of Finland. New local players also got involved, when some electrical contractors started electrical wholesaling operations.
Computers were introduced into the electrical wholesaling industry in the 1960's. SSTL began to develop a new system of electrical code numbers applicable to computers. This new coding system was introduced in 1972, and all Finnish electrical wholesalers and companies in the electrical industry began to use it. SSTL set up a code number database. Every new electrical installation accessory in the domestic market had to apply for an electrical code number from SSTL. The association continues to maintain the register of electrical code numbers.
The electrical wholesaling industry in transition
The first mergers and acquisitions in electrical wholesaling began in the recession resulting from the oil crisis after the mid-1970’s. The major period of transition did not, however, begin until the 1980’s, when price became the major competitive factor in the industry. Profit margins in the industry plummeted. When there was a short recession in the building industry in 1985, and the following year a long strike by electricians, major structural change lay ahead for the electrical wholesaling industry, whereby small, local wholesalers ended up in the hands of the major wholesalers.
The most important acquisition took place in 1986, when Finland’s largest electrical wholesaler, Sähköliikkeiden Oy, was bought by Nokia. The electrical industry was also affected by mergers and acquisitions, when Strömberg was transferred to the ownership of Asea in 1986. A year later, Asea merged with the Swiss Brown-Boveri Corporation, and ABB was born. The 1980’s also saw the establishment of many new electrical goods importers and their subsidiaries. In 1986, when the membership criteria for the SSTL were relaxed, the membership of the federation grew rapidly from about 20 to over 40. The federation currently has more than 50 members.
In 1988, the Finnish Competition Authority approached the federation, because, in its opinion, the 'Black Book' was a cartel. In 1990 SSTL decided to dispense with standard pricing, and change the 'Black Book' to a product catalogue as of 1992.
As Finland was suffering economic recession at the same time, the electrical wholesalers were faced with the major rationalisation of their operations. Because of the recession, the numbers of personnel and warehouses were reduced, operations streamlined and competitors acquired. By the end of the recession, there were only three major electrical wholesalers left in Finland: ABB Asea Skandia, Onninen and SLO (formerly Sähköliikkeiden Oy). In addition to these, there were a group of small specialised wholesalers and a few regional wholesalers.
During the recession, Finnish companies went off in search of new markets and expanded their operations to such places as the Baltic countries, which had just celebrated their independence from the Soviet Union, and also to St Petersburg in Russia. To support its members’ push for internationalisation, in 1994 SSTL published its 'Black Book' in local English and Russian versions. Later, the book was also published in Estonian, Latvian and Lithuanian.
Looking to the global market
The pace of internationalisation accelerated, when the major European electrical wholesalers expanded into Finland. In 1993, Nokia sold SLO to the Dutch company, Otra. ABB sold its Nordic electrical wholesaling business to the Dutch company Hagemeyer in 1997, with the result that the name of ABB Asea Skandia was changed to Elektroskandia. In 2000, Nordisk Solar of Denmark bought Viikinkikaapeli. On the manufacturing side too, Finnish companies ended up under foreign ownership. In 1996, Nokia sold its cable-machine manufacturing operations to Switzerland and, a year later, its cable manufacturing business to the Netherlands. For its part, Ahlström Sähkötarvike established the Lexel Group in 1995 together with NKT Holdings of Denmark, and this company fell into the hands of Schneider Electric of France in 1999. The internationalisation of electrical wholesalers and manufacturers has continued at a fast pace, both in the Baltic region and globally. In the past ten years, the Finnish electrical industry has made great strides from Finland’s protectionist market to the global market.
The electrical wholesaling sector has paid great attention to the development of work practices, particularly using information technology. During the 1990’s, Finland widely introduced Electrical Data Interchange (EDI) for trade between wholesalers and manufacturers. The use of EDI and electronic commerce for trade between wholesalers and customers has also strongly increased since the turn of the millennium.
The name of the association was changed to Finnish Electrotechnical Trade Association (STK) in 2011 as this name better describes its members, the majority of which are importers and manufacturers.
Today STK provides statistical, product data, communication and lobbying services to its members and the whole electrical supply chain.
See STK in English.