K+S Urbanism – Will Mega-Retailers Kesko and S Group Ever Think Outside the Box?

Last year my neighborhood in Helsinki experienced a small, but curious change. A stuffy Czech-themed beerhouse called Milenka got refurbished into a somewhat trendy Scandinavian-style one, Ølhus Oslo. Now, the incident that a worn-out joint got replaced by something more hip is not exceptional at all – new eateries and bars get opened all the time in my neighborhood which these days continuously shows up on all sorts of “hipster” lists.

But what caught my attention is that the bar belongs to a national mega-retailer and restaurateur that goes by the name S Group. The Ølhus family is their new chain of bars targeted for the young and trend-conscious urban dweller, a consumer group who apparently were not likely to set foot into the Czech-themed bar.

Olhus Oslo.
Ølhus Oslo in Kallio, Helsinki.

I find this interesting because the bar’s evolution introduced a more consciously and distinctly urban-oriented chain concept than ever before in the S Group’s portfolio of services. The dynamism behind the Ølhus makeover paints a picture of much broader contemporary changes in the consumer market that cities around Finland are dealing with. The big question is how to respond to them adequately.

Let me explain why.

Finland’s seven largest urban centers and especially Helsinki, Tampere and Turku are projected to grow by altogether one million new residents by 2050 due to natural population growth, immigration and an intensifying urbanization process. An increasingly larger proportion of these future citizens also culturally value a richer urban experience than before. To ensure happiness and sustainability for everyone, it really matters how we design our cities today.

From the days when I started writing about contemporary urban issues in Finland, I’m sensing that a dawning paradigm shift is underway within the public urban planning spheres. And what’s delightful is that these new ideas are not solely present in the large urban centers but they’re flowing into smaller cities, too.

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Early this year I had the pleasure to meet Seinäjoki’s City Architect Jussi Aittoniemi and listen to him present local planning projects. His team’s enthusiasm for making Seinäjoki more livable by adding density and people-oriented infrastructure into the center really surprised me. “Younger people appreciate urban living and we need to adapt to that”, Aittoniemi mentioned as one of the core reasons behind the city’s new strategy.

Fantastic. Just a couple of years ago talk like this seemed like a distant utopia. However, although urbanist values are in relatively good currency within the planning sphere, it’s important to understand that planners aren’t the only stakeholders with power to influence the grand urban project. The value systems that particularly business owners carry  have a tremendous impact on what kind of places we live in.

With this blog, I’ve so far explored whether quality urbanism is a topic of any interest with the housing developers, office building developers, or mall developers. Unfortunately it doesn’t so far seem that it would.

This brings us back to Ølhus Oslo and its owner. What about retailers? Obviously, it’s not just planners who make choices about the kind of shopping destinations and retail infrastructures get built in cities. It’s the retailers themselves who are throwing in the money and have their own ideas how its best spent.

An interesting example in this context comes from across the Atlantic. Contrary to all expectations, the king of all out-of-town megastores, Walmart, introduced an urban strategy and evolved to fit into urban areas by rolling out new smaller-footprint concept stores. These are catered for a new generation of shoppers whose spending power is clustering now elsewhere than in Walmart’s home terrain – suburbia.

Urban Walmart. Image courtesy of UrbanTurf.
Not bad, Walmart. An example of a mixed-use urban Walmart project in Washington, DC. Image courtesy of UrbanTurf.

You may think what you like about Walmart as a shopping destination, but the point I want to emphasize is that Walmart has actively “anchored” itself into projects that support the principles of creating good quality mixed-use urban commercial centers. And simultaneously they’ve given their store concept a makeover from something completely incompatible with an urban neighborhood into a version that does.

Another Walmart. Image courtesy of JBG,
A rendering of another urbanized Walmart. Don’t pay attention to the store, but everything wrapped around it. Image courtesy of JBG,

While the urbanizing Walmart is a good example of consumer-led “Ølhus moves” within the US retail scene, in Finland it more exceptionally than in many other countries first matters what kind of culture the retailers themselves value. Ølhus Oslo’s owner is not just any old barkeeper, but the other pair of a corporate duo whose power cannot be overlooked in Finnish urban development.

Kesko and S Group – Two Local Giants

The corporations Kesko and S Group – or the K and S groups as we typically call them – dominate the grocery retail market with a joint share of about 80%. Both have extensive operations with other consumer goods, and the S Group has also very thoroughly expanded to the hospitality industry providing service station, restaurant and hotel services. Like my new Ølhus.

A reality in Finland is that whenever making schemes for new neighborhoods, all cities, towns and villages will necessarily need to deal with the K and/or S groups when it comes to programming services. The companies have a combined revenue of over 20 billion Euros, which gives certain privileges in helping cities and towns sketch exactly where and what kind of supermarkets and other stores they’ll be receiving.

Avoiding using K and S services is literally a tough job. Not because they’re exceptionally charming, but because for instance buying groceries is obviously a necessity. Even here in Helsinki where you’d imagine having an abundance of choices, I live near four supermarkets and two of them are S and one K. The fourth one is the duo’s only foreign competitor Lidl, which bravely tries to combat the local Goliaths.

The cultural dimension of this phenomenon is a bit like as if we’re living in a nation-wide dystopian example of cultural globalization. Someplace where you can only get by with swiping your K-Plussa or S-Etukortti loyalty card in chain after chain, and dream of personalized levels of service and a meaningful consumer experience. If you’ve ever spent time in Finland, you’ll know what I mean.

Globalization. Image source: Velotide.
In an old great Simpson’s episode Bart discovers that Starbucks has opened shop at the local mall in a similar fashion K and S outlets are distributed across Finland. Image source: Velotide.

From an urban planning and design angle, much of the K and S groups’ revenue growth during the past two decades has come from embracing car culture and suburban building designs. This has brought us inhuman and sprawl-inducing exurban or suburban hypermarkets, big-box superstores, gigantic service stations, and so forth.

K-urbanism in Klaukkala. Image courtesy of Rovakate.
K-urbanism in Klaukkala. Lovely. Image courtesy of Rovakate.

Although compared to  e.g. Walmart before their urban strategy, the K and S groups’ outlets are already everywhere from city cores to the exurbs. In the existing downtown areas new shops are placed for example in underground facilities at the basements and street levels of already existing buildings or tugged inside new shopping centers.

But nonetheless, as cities are growing through new neighborhoods or infill development, also the K and S are joining in on the party. And it’s not insignificant how.

Prisma Imatra. Image courtesy of Ark'idea.
The rendering of a new Prisma on its way to ruin Imatra. Image courtesy of Ark’idea.
K&S Urbanism

Since Helsinki is as urban as it gets in Finland, it’s the prime location to get some insight how the K and S are anchoring themselves into a rapidly urbanizing world. For starters, let’s ask which way the wind is blowing.

S Group’s Helsinki Cooperative Society Elanto (HOK-Elanto) Director of Real Estate Jyrki Karjalainen and Kesko Shopping Centre Operations Manager Mika Ohenoja, how do you see the future of K&S retail operations?

JK: “The Helsinki region is growing fast and we are active with ensuring retail services for the growing population. We’re especially seeking to invest in the new brownfield neighborhoods of the expanding inner city (Jätkäsaari, Kalasatama) and around rail transit nodes where a lot of future urban development will occur.”

MO: “People are indeed concentrating into cities and that obviously has an impact on us retailers. We want to be where people are.”

Alright. That sounds promising. Let’s then see how it looks and take a peek at the urban design of their new supermarket-class shopping infrastructure to examine the nature of this burgeoning inwards-directed investment spree.

The inner suburbs Haaga and Maunula are relatively sought-after places to live, especially among those who can’t afford an apartment in the highly competitive housing market of the inner city. Neighborhoods where the “urban” is slowly spilling over to the “suburban” as the city grows. Both have recently experienced infill housing development and the arrival of a new supermarket, Haaga from Kesko (2013) and Maunula from the S Group (2014).

The instant feeling I get from these new projects is that they’re plagued with the same phenomenon as most construction projects around intensifying Finnish cities. It’s as if developers from different business branches are trying to squeeze concepts originally architecturally designed for suburbia to fit into less space. The excess baggage is a complete lack of respect towards shaping public space, featuring a lot of blank walls and ugly architecture.

However, compared to the vast selection of all supermarkets across Finland, these two cases actually portray what K and S retail development is at their best. The S-market in Maunula is in fact, at least to my experience, highly progressive. This is the first and only example where I’ve seen a new supermarket concept retail building that has greet-the-street retail connected to it. Although the other three sides of the building suggest that the design is mostly thanks to the city’s requirements than the S Group embracing better urbanism.

I suppose the verdict with these two is ‘could be worse’. What about the flagship stores in the retailers’ car-culture end then?

K-Citymarket Iisalmi. Photo courtesy of Kesko.
K-Citymarket Iisalmi. There’s not much else to say. Photo courtesy of Kesko.

Kesko’s superstore brand is called K-Citymarket and S Group’s counterpart Prisma. The largest of these monster stores size up to almost 20 000 square meters. More often than not, you’ll find them near highway intersections and surrounded by a sea of parking.

Within Helsinki’s city limits, the stand-alone superstores have however slightly evolved from the basic format due to space issues. The Prisma stores in Viikki (2007) and Itäkeskus (2009) have emerged in somewhat intensely built-up areas ca. 10km from the city center and have been designed to fit into smaller lots than the average suburban hypermarket. The succeeding innovation in format evolution has been to build two stories instead of one – groceries on the bottom and other stuff upstairs. And the regular surface parking lot has been replaced by a garage.

Both superstores are marketed to have excellent accessibility with both public transportation and cars. This may be true in national hypermarket comparison, but only arriving by driving is in fact convenient for most people. This aspect is best reflected by the dull and sometimes horrific pedestrian environments around the buildings.

Terrible. But yeah, these superstores were built ages ago. Anything new on the box front?

Unfortunately, yes. The superstore concept for both corporations was originally just a huge out-of-town grocery store just like any old Walmart, Tesco superstore or what have you. Little by little, the concept has since evolved by inserting a bunch of additional retail space inside the K-Citymarket and Prisma premises, especially for other chains the corporations have created. In other words, the superstores began to slowly “mallify” around the turn of the century and have since strongly been on that path.

Mallificiation in Viikki.
A glimpse of how the mallification started. Just add a few specialty goods next to the check-outs and before you know it, all services of the area are under one roof. The highway photo on the wall is decor from a driving school, if you were wondering. The photo is from inside Prisma Viikki.

The most recent example and current state of this phenomenon is found in Helsinki’s Kannelmäki. Less than two years ago the local suburban hypermarket Prisma grew into a full S-Group-owned indoor shopping mall, Kaari, equipped with about 80 additional stores.

From Prisma to indoor mall.
A view from inside Kannelmäki’s Prisma-to-mall evolution.

And Kesko has proved it knows how to play this game, too. They’ve recently opened new malls in at least the cities of Lahti (2011) and Kouvola (2012). In January, they unveiled a project to splurge hundreds of millions into transforming the site around their old K-Citymarket superstore in Helsinki’s Itäkeskus into a massive shopping mall by 2017. Believe it or not, this is right next door to an even larger shopping mall.

Itäkeskus. Image courtesy of Kesko.
Kesko’s Itäkeskus mall-to-be is the one on the left. Image courtesy of Kesko.

According to Kesko’s Mika Ohenoja, the project “is the outcome from a decade’s worth of development work. Once finished, the mall will create an attractive and easy destination for everyday services and leisure activities. Furthermore, Helsinki Metropolia University of Applied Sciences is developing a large new campus close by and our project will fit that scene perfectly.”

Hmm. If the new students have a mindset in any way similar to mine, I’m not so sure about a perfect match. I’m no retail expert, but the design trends I’m seeing in the K and S retail world are not exactly contributing to the creation of lively and connected shopping districts or urban streets. Since we know the business environment is changing and people also give more value to the pleasantness of their environs, my nose says that a logical move for the K and S groups (or at least one of them) would be to do what Jussi Aittoniemi’s Seinäjoki has done and start adapting their policies towards retail formats and urban design approaches that fit a new culture of living.

But who knows, since the Itäkeskus project took a decade to evolve, maybe there are still-unveiled plans underway for introducing projects uniquely designed for people who also want to consume quality urbanism while shopping. Let’s ask.

Jyrki Karjalainen, I’m concerned about S Group’s mallification trend. What kind of investments are you planning on doing next? Still more indoor malls and superstores?

“At the time we built Kaari [the mall in Kannelmäki], our investments for the Helsinki region were around 100 million Euros per year. Today, the rate has come down to around 40 million. This is because we are focusing on smaller store concepts (Alepa’s & S-Markets) and smaller Prisma hypermarkets. The Prisma in Kannelmäki will likely remain as Finland’s largest hypermarket, we’re downscaling now. Overall, I believe that after the currently developed or planned large shopping malls in the region [Kalasatama, Pasila, Lommila, Kivistö…] we’ve reached a saturation point in Helsinki, and will see less new ones afterwards.”

I’m glad to hear that. Sounds like sometime in the future – if a very distant one with all those malls still unbuilt – Helsinki could see the emergence of a brand new shopping street. That would be something!

It’s a bit as if the S Group is having an urban adaptation trend of some sorts going on. Is that so, Jyrki Karjalainen? Will S Group be actively involved in introducing mixed-use developments?

“The city plans regulating urban development are generally leaning towards more density and urban living, and we also need to comply with them and smaller lots. In the future we’ll be seeing more shopping centers that combine retail and apartments. Good examples to this end are the plans to redevelop the old shopping centers in Lauttasaari and Kannelmäki. We will be actively engaged in these types of projects.”

Great! But not so fast. What about my shopping streets and public space? Does your corporate sustainability program have any dimension focusing on the public realm and urban design? Are you also going to introduce principles promoting walkability etc.?

“…”

Looks like another blow for the future of quality urbanism. But I can’t really say I’m surprised. So far also those urban planners and designers who have discovered the wish to adapt to the needs of urban living are still very much figuring out how to transform their enthusiasm into something real.

The current state of K&S urbanism underlines that planners are also the ones who are going to need to bear the torch in going forward with the “Ølhus move” of the city-building business – and demand it from others, too.

Here in my neighborhood I can luckily vote with my feet and choose where I drink my beer, but a lot of people are stuck with just Milenka as the only option whether they want that or not.

11 thoughts on “K+S Urbanism – Will Mega-Retailers Kesko and S Group Ever Think Outside the Box?”

  1. I’ve always wondered why Finland has so few small businesses, everything is dominated by these two giants in one form or another. It’s the same selection at all the stores, so what’s the point? There are a few other very small stores (Anton & Anton comes to mind) focused on the neighborhood that actually have a different selection, but why not more? It’s surely not that there’s nobody passionate or active enough to start one… Is it really that difficult to open a profitable business here?

    Another related issue is all the petrified shops in the so-called hip neighborhoods. I live in Kallio and it seems like 50% of the possible store fronts are simply unoccupied, and of the occupied ones another 30% are either Thai massage places or hair dressers, neither of which get any business as far as I can tell. How do they manage to stay operational? In my home town, if a storefront was left alone for a minute it would have a new small business moving in right away. I feel like everybody likes the diversity and idea of buying from small businesses, so why aren’t there more?

    1. Yeah, the domination is terrible! But we’ll have to deal with it since I doubt Kesko and S Group will fading away anytime soon. I guess it is very difficult to start anything related to groceries in this market, because K and S have such an established system that the main food producers are married with them in one way or another. But it would be an interesting story to read what led to this current situation? Back in the day, don’t know exactly how far back, there were plenty of different stores. Somehow the idea of having just “one single solution” for everybody is something that characterizes Finnish society in many aspects.

      I also live in Kallio and try to use small businesses as much as possible. Regarding hair dressers, also other foreigners have wondered why we have so many of them! Do we really? I didn’t know Finns are that much into doing their hair 🙂

      1. ‘Somehow the idea of having just “one single solution” for everybody is something that characterizes Finnish society in many aspects.’

        Yeah, this shows itself in the alcohol laws too, every Alko in the entire country needs to be able to stock the same stuff. Why? That’s no fun. 😦

        ‘Do we really? I didn’t know Finns are that much into doing their hair’

        Yeah, I really don’t know. There are way more than any other city, and I swear I never see anybody going into them. I guess once a business is started it’s easy to maintain the status quo, so places aren’t really forced out by lack of business. That’s definitely a problem for diversity because it takes real estate competition out of the equation. Although I still don’t really know how to fix it.

    1. Right, thanks! I already thought that this blank wall would be particularly good for building something new wall-to-wall. Great to hear this is really happening! Much more wall-to-wall development Helsinki, please.

  2. Even if I don’t like the idea of these giant markets/malls outside urban areas I still see a lot of opportunities for sustainable transport here as well. For example, one opportunity would be to get these big chains to realize how much money they would save if they would decrease the number of parking lots and at the same time be able to increase the retail space. The lost parking lots could be compensated by providing free public transport (like the IKEA bus) to these malls or give discounts on products if you show your valid public transport ticket you’ve used to get to the mall. Or customers should be able to borrow some kind of trolleys for transporting groceries by bicycle. Etc. etc.

    1. That certainly would be progress. Out-of-town stores could have limited parking and be obliged to provide a bus or something. Or alternatively, they could fit their stores to fit into mixed-use areas.

  3. Corruption is the main reason why Finland is dominated by cartels and monopolies. The same people who manage and own S and K-group shops are also sitting in the municipal councils that decide on zoning. Needless to say they do their best to prevent any extra competition.

    Opening food related business is not easy in Finland. First, the building must be designated as a food store by the county (no, planned economy didn’t die with Soviet Union, it’s still alive in Finland 25 years later). There are also myriads of rules that officially are there to ensure food safety, while in reality they are raising barriers of entry for new businesses and make running small shops infeasible. In one example, food inspector disallowed selling home made buns in the shop citing health concerns, and as a result owner closed the shop: http://moro.aamulehti.fi/2013/07/18/pullan-myyntikielto-oli-viimeinen-pisara-ollilan-maalaiskauppa-pistaa-lapun-luukulle-pirkkalassa/

  4. Regarding Kaari/the mallified hypermarket in Kannelmäki – unless I’m mistaken, it’s on the same lot as Maxi/Eka used to be before. I happened to live by it in the mid-80s as a child and even back then it was already pretty ‘mallified’ – there were separate electronic stores, banks, cobblers etc in addition to the hypermarket that took up most of the space. Not sure how it was when it turned from Maxi to Prisma, though, so maybe they did take a break in it before making it into a mall again.

    1. That’s certainly possible. I was in diapers back then, so can’t really say anything from my own experience. But now that I think about it, also in the early 90s the Citymarket we often went to with my family also had at least a barber shop, a pet store and a comic book store inside the premises. So the mallification definitely has its roots already at the end of the 20th century.

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