Good morning, ladies and gentlemen, and thank you for waiting. Welcome to Magalu's video conference referring to the Q4 of 2020 results. We would like to inform you that this event is being recorded and simultaneously translated. All participants will be in listen only mode during the conference and during the company presentation. Afterwords, we will have a Q and A session and questions should be asked by telephone.
Questions received by a webcast will be answered afterwards by the Investor Relations team. Now we would like to turn the floor over to Mr. Federico Tragena, CEO of Magazini Luisa. Mr. Tragena, you may start.
Good morning, everybody. Thank you for participating in our results video conference. This is my 20th as the CEO of the company. This is a very special call given the fact that we had a very nontypical year in 2020. As we said before, the message of the executive committee was that we lived many years in one last year.
And of course, we are keenly aware of the situation of Brazil as a Brazilian, as a citizen and very sad about everything that happened in Brazil and in the world. And but honestly, from the viewpoint of the company, our team was able to overcome all the hurdles that existed in this period, and we had a very fast reaction. We were very agile, and we worked with human warmth and with all the care with our 40,000 people with millions of clients and thousands of suppliers and thousands of sellers as well. And this is an epic event and ending extraordinary results. And during this call, during all this COVID crisis, we had longer calls as the message from the Executive Committee was, a longer message.
And during this call, I would like to take the opportunity to talk about 2 subjects. The first point in relation to 2020, I would like to mention that it was not by accident 2020 was another good result in a sequence of excellent results that Magalu has been delivering. And of course, the pandemic accelerated position of Brazil. And it worked as a catalyst, but the process was already happening historically. So in the Q4, we grew 66% over a growth of 50% in the previous quarter and 35% in the previous one and 31% in the previous one.
So we have been delivering consistent results, and our results last year were not by accident. If you compare Magalu to the other companies in the market, the other players, mainly online players, we grew 3 25 percent since 2018. We grew significantly in 2020. And during 2018 to 2020, we gained over 13 percentage points of market share. Vaccine, Magalu increased tenfold the GMV, dollars 900,000,000 to $9,000,000,000 So this is a very consistent work being done.
And in these 5 years and even more, we grew 10 times, twice the 2nd ranking among the major players. So this growth is consistent year on year and the base of e commerce, specifically in the last quarter, grew quite a lot in relation to the previous quarter, which was one of the best results of the company. But I believe that more important than that was the fact that we redefined growth based on sustainability. If you look at our historical base since 2016, you can see BRL 2,000,000,000 in accrued net income, the only company in e commerce that had consistent results all year every single year, ZAR3 1,000,000,000 cash, ZAR2 1,000,000,000 in the last quarter, vis a vis ZAR1.5 billion in 2019, ZAR1 1,000,000,000 before. So we Generate Cash, and we deliver consistent results every single year because of the superior business model and the focus on a very efficient execution so that you may grow your sales internationally not to the detriment of your growth and your profit generation.
Of course, we have a trade off in margin, but very far from representing any losses ultimately or cash consumption or cash burn. So we do a very consistent project. In relation to sales, we reached almost BRL 44,000,000,000 in sales last year. In spite of the fact fact that many of our stores were closed in comparison to the previous year or to March last year from March to August, we operated with sometimes 100% stores closed, and we grew 60% year on year and this and 66% in the quarter. So we were able to deliver a fantastic extraordinary year in spite of going through one of the most difficult situations I have ever faced, which was the closing of 100 percent of our stores on March 20, 2020.
And in fact, this is driven by our online operation, which already represent 2 thirds of our business. We grew 120% in the last quarter an over a base for comparison. And I really wanted to show you 93% in 2019. So we grew 120 over 93%. So everybody asked me, so what about 2021 because you had such an accelerated growth in e commerce.
We grew 120% online over one of the best 4th quarters ever in our history, which was 93% in the Q4 of 2019, 7 percentage points of market share being gained end another quarter in e commerce that grew the most in Brazil. We are consistent with sustainability, which is our focus. And if I show you here at 1P and 3P, we grew 120% in 1P, extraordinary. The growth of 1P was higher than we could possibly imagined when we started the year and we expected an exponential growth in 3P but not 1P. And in 1P.
We are reaping the benefits of our superior logistics, our multichannel operation and half of what we sell go to the stores and store pickup or ship from stores. So our operation is really the best. It's very difficult for anybody to have the same level of service, the NPS that we have and the short lead time. So we are gaining a lot of market share even in the B operation, which is growing more than we expected, pit, but not only in 1P. We set up our marketplace 4 years ago, and we had a spectacular year, evolution of sales, 120%, the biggest in the market.
Fit. It had already been like that in the second and the third quarters. And we launched we made an extraordinary launch last year, the first platform to help the offline vendors to sell online. We launched the Parceira Magalu, Magalu partner 1 week after the closing of Commerce in Brazil at the end of March last year, we went from 15,000 to 47,000 sellers, and many of these sellers were saved literally by the Paseiro Magalu platform that we wrote out to the whole country. So in a few hours, they uploaded their catalogs and they issued their invoices thing online and they got their authorization, the end to end platform developed and the Luisa Lab that saved many companies.
And what I'm the most proud in 2020 was the fact that we are having this digital inclusion being rolled out. We went from $13,000,000 to $26,000,000 offers. And today, it's almost impossible to look for a product in our app and not find it. And you will see that we have already achieved to extend our assortment base and the number of categories that we offer. And one thing that makes me very proud in the process is the fact that our sales did not grow to the detriment of physical stores.
We continue to have a very strong growth base from our physical stores. We grew last year 10% same store sales in the last quarter, 11%, the biggest growth that we had during this period. And in spite of the reduction of the corona voucher from BRL600 to BRL300, we got this increase. And I would like to mention in relation to this growth of the 4th quarter, specifically that we were not able to have the Black Friday in our physical stores. So it was, in spite of that, a very positive year.
Okay. Let's continue. The growth in physical stores are extraordinary, and I would like to highlight that it was not to the detriment of stores. And we had record online growth, as I said, 120%, and we grew in the total of the company, 66% in the quarter. The NPS is an all time high for the company, 75 in November, the Black Friday month, and an extraordinary figure.
And this shows that all our investments in service level are already having a return and keeping a high level of service in spite of all the problems that we faced. Having all this growth is a heroic achievement on the part of our team. And I would like to talk about the categories now. We had a very big highlight here for the noncore category of the company. So as you can see, 60 6 percent sports, 166 Fashion 436 Beauty, 293 Market, 300%, the big highlight of the company and books, 276 percent smartphones, 149 percent growth.
So you can see significant growth in all the category following year in which we wanted to show this diversity, and we delivered exceptional Santi results. And I would like to mention our super app. We have been working very hard on this strategy. 76% of our online sales came from mobile 33,000,000 MAU through our app in the last period, so you can see consistent growth. And we also launched, and I will be talking about that, MagaluPay in the super app fully integrated to the super app.
And we are the only digital wallet that is not separated from the super app. Until last tier. We had 2,700,000 accounts opened, so it's really incredible. Board. I will be talking later about this opportunity.
But having the super app at the core of our ecosystem makes a huge difference. And so talking about I talked about 1P, I talked about service level. And let's talk about logistics. LogMe, we have the fastest logistics in Brazil, 45% of all the products we delivered in one day, and this number was 5% in 2019 from 5% to 45% of all the product delivered in one day. It's a fantastic job and we acquired Logbee some years ago.
It was a start up and today it represents almost focus of our deliveries in 1P. And when we look at the reason behind this growth of fast delivery, it's because we use the store differently from the monoline competitors that have 1 single channel. We have all the power of the stores and half of everything that we sell, go through a store or either store pickup or ship from store. And the store is a central point of our platform, our sales platform, our digital system. And this helps us to have very fast deliveries over 1200 points scattered through cities in Brazil.
And the objective this year and later, I will go into detail, but this is the year of logistics. Fixed everything that we did to have this very high level of service for 1P, 14 days to 3P. So the focus of Magalu this year, such as was the case last year with 1P, the focus is 3P. We want to invest in logistic and reduce even more the lead time from 24 hours to a few hours and increasing the 3P. And we have already started, of course to put in place all these initiatives in 2020, 32% of all the orders from sellers already over 10,000,000,000 GMV already used 1400 already used cross docking when we collect the product and it goes through our network and 324 stores are already enabled for the client to buy from the seller and pick up from store.
And this is a significant evidence of our superior logistic and what we do for the sellers. And we made 2 acquisitions this year, DAPEO and Cinclogue, because we wanted to drive this, and we should be extending and increasing our investments in this area as well. Now I would like to give the floor to Alberto so that he may talk about the financial results of the Q4, and I will be coming back to talk about the future. Good morning, everybody. Thank you very much for participating in our video conference.
I would like to start by our financial highlights. We have already talked about the very strong growth in sales, 66% of total sales growth, over 120% in e commerce, 15% in physical stores. In the quarter, we reached almost BRL 15,000,000,000 in sales total sales cash generation of BRL 2,100,000,000 in operating cash flow and adjusted net income of BRL 232,000,000 and 2.3 percent margin in the quarter and growing in this quarter 40% in relation to the same quarter last year or year on year growth. So it was a great growth in all the parameters. When we look at the year as a whole, we grew 60%, e commerce, over 130% in the year as a whole, physical stores growing in spite of so many stores closed for a long time, and we've reached BRL 43,500,000,000 in sales with over $3,000,000,000 in cash generation and adjusted net income of BRL378,000,000, a very robust one, especially if you consider the Q1 where most of the stores were closed.
And now explain the evolution of our EBITDA margin as a whole. Our EBITDA margin went from 7.8% to 5.2% and we the gross margin going down 3.9% because of the very fast growth of our e commerce. So we always explain that in e commerce, our gross margin is lower than in the physical stores. But due to the model, multichannel, fully integrated, we offset most of this difference, most of this get in the level of operating expenses, logistics, marketing and all the expenses are diluted with the e commerce. And I would like to remind you that last year, our e commerce went from 45% total sales to 65 percent, 20 points increase.
And today, practically represent 2 thirds of all sales of the company. So this has an impact on the gross margin, but we offset this in our operating expenses. And we have in this quarter, we had a level of operating expenses that was the lowest ever and the lowest in the market. SG and A, lower than 20% in this quarter, and it was 19.7%, to be precise, much lower than the market average. And also administrative expenses lower than 3 percentage points in a very efficient level.
Now let's go to the one detail. And the reason why we didn't have an additional dilution of operating expenses because as we have been repeating very often, we increased our investments in service level and faster deliveries and in service in general. So we improved our operation, and we showed our NPS at the highest ever level in our history, so an all time high. So all these investments that we are making are helping us grow and go to the next level in sales. And in spite of that, maintaining our net income with 5% of EBITDA margin, for instance, in the quarter, we diluted our financial expenses, and we had a net income that was 40% higher year on year.
On the next slide, we talk about our capital structure. And I would like to mention that the financial expenses went from 2.9% 1.2% of our net revenue and coming from not only the grow the drop of the CDI but to strong cash generation of the company, and we show the evolution of the working capital that has improved over the year. End in the last quarter. Inventory turnover 70 days improving inventory turnover 90 days purchase time and the difference from 70 to 90 allows us to generate cash and grow by generating cash and other accounts in the working capital were very positive, accounts receivable, recoverable taxes and other assets and liabilities, short and long term, so a very efficient management of our working capital. Flow.
And with that, we show that our adjusted net cash increased by BRL 1,000,000,000 going to BRL 7.3 adjusted net cash. On the next slide, we show the total cash that went from BRL 7,000,000,000 to BRL 9,000,000,000, and we closed the quarter with the best ever cash position in our history, an all time high, start with an operating cash flow of BRL 3,000,000,000. We made BRL 600,000,000 in investments, and we paid interest in leasing, we had share buyback and we paid dividend. We raised BRL400 1,000,000 at the beginning of the pandemic and increased our total cash by BRL1.8 billion, BRL1.9 billion. So this is the breakdown of our cash flow.
And on the next slide, we talk about Luisa cred. During the last call, we said that we recovered our growth and we were selling more cards every year. The base of Luisa Card grew 5 reaching 5,300,000 cards at the end of the year. Billings growing, reaching BRL 9,000,000,000 in the quarter and BRL 29,000,000,000 in the year, growing inside and outside Magalu. And lastly, the result of Luisa Creggi, which was spectacular.
Over the quarters, we talked about the level of collection and the receiving and the indicators of past dues dropped to the lowest levels in our history, dropping here from 2.4 to 1.4, April 2 to 6.5 and the coverage ratio increasing at the same time. So you can see that the portfolio performance reached over BRL12 1,000,000,000 and this is outstanding, exceptional really. And the net income of Luisa Credit grew over 50% in the quarter, reaching BRL 53,000,000 in the quarter and over BRL 200,000,000 in the year, one of the best results ever for Luisa Careto. These were the best results. Thank you very much, Berto.
When we prepared the material, the message from the Executive Committee. I think it was very important to really highlight the opportunities that we had. I saw the market only looking at 2021 and very much concerned with the consequences for the e commerce companies in the post pandemic world. And I would like to make something very clear. I know that it's very obvious, but I think we should emphasize this.
Pandemic accelerated and worked as a catalyst in the digitization of the Brazilian companies. And when we but on the other hand, when we compare the Brazilian market to any other economy in the world in terms of digital maturity, even the purity. Even the post pandemic world, we are at a very low level. So I would like to highlight the markets that we are addressing and also Magalu, in spite of the fact that the cash position is excellent, BRL 7,300,000,000, much better than we were at the beginning of last year, the pre pandemic world. Although we are very strong there, we made 11 acquisitions events during this period.
And the 11 acquisitions are for a strategic purpose. We want to set up A strategic world and a platform but to address certain markets. So I would like to make it very clear that everything that we do, we do based on our strategy. Of course, I'm not going to talk about our strategy in detail, but I would like to emphasize the markets that we are addressing, and we want to be the operating system of the Brazilian retail. In terms of opportunities in the Brazilian retail, the opportunity of BRL 1,200,000,000,000.
It's gigantic. It's one of the biggest retail markets in the world. And even in post pandemic world, only 10% of that is online. So a little bit of more than BRL 100,000,000,000 online. So this means that there is a gigantic opportunity to grow participation.
So if we apply the penetration of China to Brazil, the market, if even if it doesn't grow anything the previous slide, please. Even if it doesn't grow at all, it will grow to RMB 300,000,000,000. So If we apply the potential of China to Brazil, this is the number. And even if retail does not grow, only with digital maturity and more people buy online, the potential of the market is R300 1,000,000,000. So you can see that we only have a very small fraction of this business, and we see a major opportunity, which categories have bigger opportunity.
And the main one, one of the main ones is the market categories and food, hygiene, cleaning products. And if you take half of the Brazilian retail, they sell food, beverages, hygiene and cleaning products and penetration in Brazil is 1% only even after the pandemic. So the penetration is very low. It's not a very well penetrated market in the whole world. There is a small penetration because of logistics and cost of freight, etcetera.
But any creative team, intelligent team and any multichannel operation could solve. There is nothing whatsoever that human beings are not able to solve. If you take the China penetration and you put it to Brazil in Brazil, it has EUR 64,000,000,000 potential in Brazil. So I see a major opportunity here. Magalu started organically in this market last year, and we had the launch of the category to help the consumer that didn't want to leave home.
And today, we already have the same policy of all the categories. If you take the GMV of 1P that we launched in the Q1 and you annualize its run rate, you reached EUR 1,000,000,000. So in a little bit less than 1 year, we already have a very relevant operation. If you take the EUR 1,000,000,000 over EUR 64,000,000,000, you can see that it's still too little, so the opportunity is huge. Of course, our view is platform.
It is growing not only 1P, but 3P as well. And for that, we made a super strategic acquisition last week. We acquired Vip Commerce, which is a technology company that helps supermarket owners online. And today, the companies that operate online, they don't have many supermarket clients. And one of the major players in the market, although very incipient, is bibcommerce itself.
It is one of the only players with 100 market chains and 450,000,000 GMV annually, and we are going to make this grow. And besides going 1P in the dark store format that we launched. We are going to grow in 3P as well. And another major market that we have is the beauty market, the fashion market, BRL223,000,000,000
Ladies and gentlemen, please stay connected. Ladies and gentlemen, please hold. So let us resume now. Is everything all right? Okay.
Another important market. Once again, we apologize for this connection problem. So the other problem the other market is the fashion market addressing EUR 220,000,000,000 in Brazil, a very low penetration around 5% if we apply the same penetration process. Considering markets, for instance, like China in Brazil, the total addressable market is BRL67,000,000,000 Brazil. Magalu has already been in the market.
We had Tini Epoca as acquisitions in the past and also hub sales what digitizes fashion hubs. Actually, we have a huge opportunity. We only have EUR 5,000,000,000 of the total potential market. So we still have a lot of room to grow and tap into this market. On the next slide, we can see another opportunity, food delivery market, approximately EUR 200,000,000,000 GMV financial results on an annual basis in the market.
A potential penetration rate of EUR 24,000,000,000 using the same rationale, consumer percentage of a developed country and applying to Brazil. Developed in terms of digital maturity, it's the total flexible market of EUR 24,000,000,000. We acquired Aikifomi last year, And this operation already has EUR 1,000,000,000 s GMV with 20,000 restaurants in 40, 44 cities. So it's a huge opportunity. IQPhormia, the focus this year is integration with the company's super app.
It's growing on its own right now With an independent app and now connected to the system, we believe there will be a greater potential for growth. What about retail Tech mass services for seller. We have a huge opportunity ahead, 5,700,000 retailers in Brazil, only 47,000 are in our base, around 100,000 selling online. So it's a huge opportunity for growth In this context as well. And as for restaurants, 1,600,000 restaurants, our estimate details that only 300,000 restaurants today use delivery apps, and we only have 20,000 of the markets.
So it's a huge opportunity to digitize these companies and doing the same as we did in Magalu this time for 3rd parties. Now we also have a huge potential financial products. By far, we have the greatest opportunity in terms of market size And also opportunity to be profitable and to monetize our sales, our GMV. Everything we do is either inside the ecosystem and payment is very much related to the surrounding areas of retail as well. If you think about everything about debit and credit cards in Brazil.
We are talking about BRL 2,000,000,000,000. And although we have one of the greatest credit card portfolios in Brazil, we launched an account, a digital account last year, and we only have BRL 41,000,000,000 of the total market. So last year, we acquired Fintech at the end of the year to tap into these processes and boost the service we already have, Magalupa, Magalupa Gannetos and Luisa Crad. Just to give an idea what Hub can bring and deliver, I would like to break down the opportunities. Now Magalupe is the digital account for the Anttoyan.
We have a digital account in charge of all the digital account operations. And it's embedded into the app, 2,000,000 700,000 points. And we also have Magalu Payments, Pagamento's, focused on sellers, 47,000 sellers. And It is a sub acquiring with speed of payments receivable prepayment with BRL 7,000,000,000 TPV. So what does Hub financials that we have to add to this digital ecosystem.
First of all, it's a payment institution integrated to SPV with a license for PIX. So it adds value to bring something to our digital account, cash back, off line, online, payment of consumption, which adds a number of functions, TAD, DOC, prepaid card, payment, bank slips and also including lottery stores and recharge transportation added to accounts we already have and also payroll services, which can also be good to our sellers. Magalupagamento's tax payment Expense Management, new voucher and even a license for acquisition. So it's a very strategic acquisition. This company has EUR 1,000,000 of cards processed and EUR 7,000,000,000 as well with a very strategic acquisition.
So just to close, Before we move into our ecosystem and opening for questions, we also have a huge potential to monetize and have our profitable GMV with the digital media. So the total media market in Brazil drives EUR 48,000,000,000, potential to be a EUR 34,000,000,000 digitally, considering digital media. And we only have EUR 90,000,000 last year with ads. So we acquired 2 strategical companies to address the market, CanalTech with more than 20,000,000 hits and expanding our assets, also helping us with e commerce. And we brought in local media, one of the unique platforms in Brazil with media service, a great player in this segment in order to launch Magalu Ads, which will powered by local media.
With the technology and the team, we'll make available a very user friendly tool to our sellers so they can perform their sales So we believe these are huge addressable markets. Potential growth, it will all depend on our execution ability. But like I said, we have a very strong track record with execution. So I'm very confident that we'll be a relevant player. Not necessarily, we're going to be leader in all markets.
That's not the idea. The idea is to be a relevant player in all these markets, and why not, leader in some of them. Maybe we can start with the model we chose, which is the most common in China, being a digital ecosystem. There is a lot of synergies here. For instance, AikiPhomi on its own would never have the same capacity to grow compared to Magalu ecosystem.
And the same goes for Hapseus, CanalTech. They already benefited from relationships with our suppliers. So that's a systemic concept, an ecosystem, an integrated digital platform. The goal and the mission is to go digital in Brazil and particularly in retail and naturally bring fruit to our shareholders financial measures via monetization in these opportunities. So that's what I wanted to say.
I just wanted to show the highlights of the business. And now I'd like to open for the Q and A session. By the way, we have all the executive management here available to take your questions. Thank you. Ladies and gentlemen, we are beginning now the question and answer Our first question comes from Mr.
Joseph Giordano with JPMorgan. Hello. Good morning, everyone. First of all, congratulations on the earnings. Fred, you gave a lot of detail on the ecosystem strategy of the company Involving several growth fronts, which are very robust.
And we believe the company in the future will be standing out. But what about the platform? The company today has a lot of M and As in the platform In order to strengthen some capabilities, if you look at your current ecosystem, where do you think you should dedicate and allocate more capital To speed up the process, and I'd like to have a better understanding of the next steps within FinTech and its integration with Magalu as a service In the connection, particularly with small retailers that are essentially digital today. Thank you. Joseph, first of all, thank you for your question.
Well, I believe our strategy is multi dimension. Actually, it's hard for you to we don't have a silver bullet in terms of where to Invest. We want to diversify our options, our opportunities. Sometimes you dilute risk by having several opportunities. So all the addressable markets that I mentioned will be our focus.
We want to increase digitization in Brazilian retail based on the opportunities I mentioned. I'm not saying that we don't have opportunities in core categories, but big opportunities are underpenetrated, and we believe we can be a key player In the delivery of food, for instance. So this opportunity, both in FinTech and also In ads, that's a big opportunity. And we have to invest on this and also become relevant in these categories. We had a move in hub, and I'll tell you more about it later on.
But naturally, the development of systems and more money in Luisa Labs in developing more people and we have outstanding IT programs to have more opportunities. Now More specifically, about penetration in new categories and digitization in Brazilian retail, there is a means for that. And one of the possibilities is logistics. We described in our earnings release, as you mentioned, that we expect to invest heavily in logistics. This is the logistics year.
So we improved capillarity with new stores, new DCs, new cross docking operations, increase in frequency of supply and new technologies. Anyway, we expect to keep on significantly investing in logistics in order to work more in lower tickets, high frequency categories. It's a competitive edge. So transfer from 3P what we already have in 1P. More specifically about FinTech's opportunities are endless.
Now our focus is on trying to have the approval by Kari and the Central Bank to absorb the hub and manage to implement all the functions I mentioned before, Both for Magalup Pay and Magalup Pagametos, Fattala, Hobson, they are also here to take your questions About Fintech, we are working on that and we are just launching in March PIX in the account. We managed to have the approval indirectly to operate PIX in the month of March in our account. And we accept PIX on our sales checkout as well, starting with e commerce and also brick and mortars later on. We believe fixed is going to bring bank slips to an end, And it will be a very key tool in order to grow the digital accounts and bring in at the same level the new accounts We also launched a card. Remember, we have 5,000,000 credit cards today, one of the best credit card portfolios in Brazil, much higher than syntax in the market, about EUR 12,000,000,000 of credit card portfolio in our Luisa card, but this is not so relevant on the web.
It was launched for brick and mortars. We expect to launch in April the credit card Magalu card fully integrated with the app purchase experience and also integrated to the purchase. No annual fee, and I think it will expand a lot. We already have 116,000 card Permant and with Luisa Card, we expect to see a higher relevance. Berto Hobson, would you like Roberto, would you mind opening your camera, please?
We cannot hear you. Why don't we take the next question and then we go back to Roberto. The next question is from Robert Forres with Bank of America. Please go ahead, sir. Thank you.
Congratulations on the earnings and thank you for taking my question. Fred, What are your thoughts about this long term balance between 1P and 3P? And what about pain points for 3P this year? What about the response on demand? Bob, I've been talking a lot about this.
First of all, thank you. Thank you for your question. Good morning. We talked a lot about the focus on 3P and marketplace and the operating system of the Brazilian retail trying to help retail to go digital. In the last cycle, we increased on our own, And now we want to grow by supporting the others and being supported by them, being basically an enabler of retail in Brazil.
So in the long term, the big opportunity undoubtedly lies on 3P. 1P is really surprising us during the pandemic. Actually, they are the greatest sellers, those who have a structure 1P operation that have T and high inventories to deliver. But once we go back to normal, the future of retail will necessarily go through 3P. It happened worldwide.
Amazon, for instance, boomed after it started 3P. The same happened to China. So the future necessarily for big digital platforms Welcome to Magaluz video conference. As for the balance, I really like to work So first point, why is it we still want to have a strong 1P? In my opinion, 3P our 3P is somebody else's 1P.
So 1P supports you to work on logistics, operations and supports solutions and support you in several aspects in terms of understanding the economics of the categories to delivery services. So if I want to deliver services to a seller, many 3Ps started with 1P, and they learn from us to create interesting platforms and services to sellers. I believe 3P's economics Naturally, we cannot destroy these economics. So I can see many operations exaggerating their input to 3P in terms of take rate, free shipping. We grew at 1P while we became leaders of 1P in Brazil without concessions, with a sustainable operation.
And for many years, We had very irrational competition. So when I started e commerce at Magalu, everybody was Losing money, most 1P lose money in Brazil up today, but we never put aside sustainability and a long term view. We want to do the same for 3P. We want to have a rational structure, a sustainable structure for the future. The secret for that, Bob, lies in multichannel.
1 of the changes we made last year, and by the way, In the organizational structure is the following. What supported our 1P? What helped it to be unique? It was brick and mortars. Like I said, 50% of what happens or the volume in 1P goes through brick and mortars.
And I'd like to make brick and mortars relevant to 3P as well. We also have Hunt and Farming. So benefiting from the synergy of Modi channel is But we intend to keep on opening stores. What I meant by logistics investments also includes investments in more physical points of sale, a geographical performance, and that's also important to sustain 3P. So having Thank you, Fred.
And like you said, if you think about this huge supermarket, but nobody cracked the code, What is different from the way you want to do with e commerce? Well, I believe, First of all, in terms of vip commerce, Bob, We have 1P operations, and our 1P operation increased a lot without a huge impact on our bottom line. We even increased our net profit. Last quarter, we had an annual GMV that was very interesting with no impact on net profit. So it's breakeven in our business, which is difficult worldwide.
And we increased this category basically with the X store model. So we have 1300 stores, last mile with a low cost. So when it comes to 1P, That's a sustainable manner. And obviously, in order to have a huge impact on the market, we have to support from the 5,000,000 retailers. Mostly, they are grocery merchants, so 50% of them sell food and this type of product.
So I need to bring this inventory to our platform. And one of the possibilities is by acquiring a company that is an expert on this. ZIIP today works with small and big retailers, but they also can help smaller ones, Just as we did at Magalu with other categories, so supporting online and platform operations in our super app where these products will be available from these partners, the consumer buys locally. They can check the filters, geolocation, buying local products and then the last mile is shorter. So this is very important, this inventory distribution, I mean, having the inventory close to consumers.
And that's why we need to bring the higher number of local sellers into our platform. And platform and vipcommerce is going to help us tremendously. As for categories, The grocery category is not going to improve our profit that much, but it's very strategic Because it will improve our frequency. So with digital platform, if you consider why all retailers in the world are investing in groceries, They're doing that because it brings frequency in China from 0 to 600,000,000 customers basically owing to grocery categories. So this kind of product is absolutely key for those who want to run a recurring customer base.
You cannot be a dominant digital player if you only have high ticket categories. So there are other strategic components and not only generating margin to the company. Very clear, Fred. Thank you. The next question is from Luiz Guanaiz with BTG.
Good afternoon, everyone. Thank you, Fred. I have two questions. And adding to what you said before About diversification, on the one hand, the average ticket goes down owing to the new categories or at least the majority of them. There are 2 impacts, engagement and frequency.
So can you tell us more about what you expect to see in these indicators And the second question about multichannel. Could you tell us more about the role of brick and mortars now in 3P? I think you have been evolving in the latest quarters, moving in that direction, a natural evolution from ship from store rolled out last year. So could you tell us more about it, Fred, please? Lois, thank you for the question.
With regards to the average ticket and frequency, Naturally, like I said before, about addressable markets, in the long run, The trend in Brazil of e commerce is to grow in lower ticket categories. It happened in all markets, started with electronics, home appliances or media products like books, for instance, or music, and it even turned into streaming. And it also added to lower ticket categories. So that's the digital maturity level of market. So the trend in the future, if you want to grow online, you have to grow in lower ticket categories.
The thing is, is that in the short term, Louis, owing to the pandemic and people are staying home more often or not traveling that much, they're investing more in what they do at home. So durables, for instance, traditional categories. They had an outstanding year last year, and they keep on delivering very well this year Because lockdown measures continue and they are expected to continue for a while, at least in the first half of the year or maybe until the year end, Depending on how the pandemic evolves. So in the short term, we don't expect to see major changes and not because the smaller categories or lower ticket categories are not growing. As you can see, they're even growing more.
But because other traditional categories are also growing at very high rates, 150% for mobile phones, for instance, and they have a high share in GMV. So I believe this will happen later on. And what was the second question, Luis? It was about multichannel. Now 43P with Brick and Mortars, Fred.
You are evolving in recent months. So could you tell us more about how you imagine to see this evolution I don't want to share too many things because that's a strategy for us. But conceptually speaking, like I said before, the store is very important for 1P. And it was the decisive driver for an operation that posted growth above the market and so profitable, which is very rare in recent years. So we want to replicate this model for 3P.
We want to turn the store into a logistics support point to the seller, but also delivering other services for sellers. We have a very strong regional footprint, And we want to benefit from that not only for 1P, but 3P as well. I'm sorry, I'm not going to disclose too many details on this strategy. Okay, this is great. Thank you, Fred.
The next question is from Thiago Macruz with Itau. Hello, everyone. Good afternoon. Thank you for taking my question and congratulations on the earnings for 2020. You talked about some generation results, MagaluPay with recurrent frequency.
But once again, we'd like to talk about the app. It's reasonable to assume that the track record of super app, which is what you want to see in Brazil and Latin America, It should include opening a platform for 3rd party and partners. What about the next steps? Thale is already involved in that. So I would like to understand if it's still on your radar and the next steps for this initiative.
Thank you. Hello, Thiago. Thank you for your question. Totally on our radar, I think we have a platform oriented mind, not only the techniques, but technology as well. We expect to see the first experiences involving the companies acquired, And we want to connect via mini apps.
We're going to integrate the companies to be connected. Fatala, are you with us? Could you share more detail on this, how we can move forward? If you could give us your input. Good morning.
Thank you for the question, Thiago. Like Fred said before, since last year, we've been working on a change in the app architecture to allow us to develop 3rd parties, following developments in our app. And we will actually, we already started putting into practice last year When we brought Luisa Card into the app, and now we are going to expand it to our partnering companies. And this will allow us to have a lot of feedback from developers, including companies on how they use our solution. SDK, that's what we're doing now, which is a small development kit.
You develop it once And you can post and have it on the web, on the super app, and then you won't need to have a native development for Android or iOS, which simplifies the operation. So like Fred said, we'll start with the partnering companies, getting feedback Perfect. Crystal clear, Fred and Fatala. Thank you for your answer. The next question is from Irma Sarges with Goldman Sachs.
Good morning. Good afternoon. So I'd just like to ask you about purchase frequency. I don't know if there is any data that you can disclose. And in the past, you also showed us, for instance, There are some people who download the app and never use it again.
They even delete the app. But I imagine this scenario is changing a lot considering the number of MAUs and also all the new categories and everything they are adding. So anything that you can share with us so we can have a better understanding And the second question has to do And I apologize if I missed something here. But the CTC, I know that a small part of the portfolio, But I know there was a dramatic drop. Is it right to assume this product is migrating into other lines financial services.
What is actually happening? Well, maybe this is related to managing risk in the whole portfolio. So I would like to have a better understanding about this move because there was this drop in the portfolio. Thank you. Irma, good afternoon.
Thank you for your questions. When it comes to frequency, it's very hard if you consider a company that is growing so much in the customer base to check the number, the total frequency based on an indicator alone. Last year, we doubled the number of annual sales based on a very low base. However, we still have a number which is behind what is the number of Alibaba, which 80 purchases per year with 1 customer. So that's a key indicator to the company.
However, For a company that is growing with a new customer base, many new customers kind of pollute the average of annual purchases. Purchase for the first time last year owing to the pandemic. So if you check cohorts, I already have cohorts of customers who buy significant groups, they buy 25 times per year. And we already have this kind of product, this cohort, And I can see that's a trend. So in the long run, we want to have more and more of our customers Moving into this type of segment of very high annual frequency.
Today, we have the right products and categories for that. And naturally, grocery, beauty, fashion, they boost this frequency. And the same goes for food delivery. The frequency of AikiPhome is 3 times per month, which is way above our standard. The idea of acquiring the platform and integrated super app is precisely this.
So we already have cohorts which encourage us And allow us to have high expectations about the future. So that's a very significant goal for all the management at the company financial results in terms of increasing the annual purchase and frequency. I'm sorry I cannot disclose too much in addition to what I said before on how we want to Chief Dad, but that's a big strong focus at the company. As for CTC, Beto, can you help us? Good afternoon.
Can you all hear me? Good afternoon, Irma. Thank you for your question. With regards to CDC, there was a mixed effect actually. CDC was always It was only relevant and only available in brick and mortar stores.
And with a very fast growth in e commerce, following remarks, the total share of brick and mortars became smaller compared to total sales. And consequently, CDC compared to the rest Also got smaller. If we check CTC only in brick and mortar stores, It increased a little, nothing significant because our focus is Luisa Cart, which for us is far more important And it's a long term relationship tool, bringing many benefits to those who are more loyal to Luisa Carte. CDC is a secondary product in our strategy. Customers who don't necessarily want to have a Luisa card or have not been approved to use Luisa card.
So our strategy is to have the card in brick and mortar stores. And when you check the total of the card, apparently, it Decrease a little owing to the mix of stores because on the web, the card is not so relevant. And then Fred Told you about the next card. And with the new card, we want to be more relevant in e commerce as well and therefore, increase this relevance in the total sales, adding particularly Luiza Cart and the new car plus CTC and brick and mortar stores. So that's about the strategy.
And if I may, just adding to With Magalu Pagamentus, which we launched last year, with sellers, The result was outstanding, more than BRL 100,000,000 net profit With sub acquiring, prepayment of receivables and the whole processing of seller's payment. And the beauty with hub is that we can pay sellers in a hub account. So the question is how to get to sellers. Well, it will get to sellers naturally. We're going to make the money available in a hub account.
And Today, we make it available in Magalu Paganento's account that doesn't have a not so minimal for sellers. So actually, they transfer to a different account. And now with a simple payment in a digital account at the hub, financial results, our cash flow will be very high in the account with a lot of services at Hub and also others to be developed in the future. And naturally, the seller is going to use the account a lot to make payments, to work on Payroll and Cards, etcetera. So that's also a strategy behind Magalu, Paganetos and Hub FinTech very fine tuned for sellers as well.
Thank you very much. Ruben Couto from Santander. Good morning, everybody. I apologize if I have lost something. What could we expect in terms of CapEx and OpEx in order to be able to deliver all that?
Is the idea to maximize the use of these two assets in the company now? And a follow-up on the previous question. How much could we expect for the service line or the revenue front services in about 3 to 5 years' time, I would say. Good afternoon, and thank you very much for your question. Differently from the logistics, the idea is the following.
We have already had 3 acquisitions: Logbee, DHL that have similar business models and SyncLog, A Tech platform for logistics. So 3 acquisitions, they are fantastic, and the people there are fantastic and the platforms are fantastic. And the idea, well, of course, we of course could consider new acquisitions, but we already have a very robust platform over which we are going to make investments. And the focus will be to accelerate the organic investments and the significant one. And this acceleration will be in the increase in the penetration when you open a store in the format that we work omni channel, we increase logistics and new cross dockings, for instance, which is a model book of Log BHFL and new distribution centers as well.
In 2022, we are also going to do this. So it's a significant expansion of this network of frequency of supply and investment in teams that are going to develop algorithms and geolocation systems and transactional systems as well. So investment mainly organic. In relation to lines. As you know, our style is not to give any kind of guidance in this regard.
We are showing the potential of the market ads and fintech and the potential of retail as a whole, and that should be explored mainly on 3P. But we do not like to give the market any kind of estimate, I would say. Okay. Thank you. Gustavo Oliveira from UBS.
Good afternoon, everybody. Thank you for the question. Still talking about logistics in your 3P strategy, I would like to better understand the hypothesis that is adjacent or that underlines, it seems to be a little bit different from the other players' logistics approach. Mainly, will you talk about the educational aspect of the stores in the process and the store pickup and delivery and the portman being located in the stores. What I would like to understand is the following.
As you grow the long tail with smaller retailers coming on board. Your pre P becomes more and more localized, and you were talking about the geolocation development that you're carrying out. Have I understood it correctly? Or is it a desire on your part because this is going to facilitate your cost and the delivery of local services and your matches between buyers and sellers. So what is your idea about geolocation?
Because I think this is where the big difference lies between what you are doing and what the other players are doing. Everybody is taking key the products to the fulfillment center. So they imagine that the seller has a more nationwide presence. And you're doing something different because maybe you're thinking, well, I already do this very well, and I can refine it locally. Or do you believe that the local approach is much more important?
Could you clarify your approach, please? Thank you very much for your question. Well, more than a hypothesis, this is a bet that we are placing. We like to think with our own heads. And we understand that we know Brazil in-depth and we know everything regarding logistics.
We are great 1P operators, so logistics is no mystery to us. And we know the cost of operating a system. And I believe that many operations in Brazil, they replicate the Amazon long haul system. But Brazil is not the U. S.
You do not have very high frequency of flights and lots of airports. And you don't have the same structure. You only have a few airports, and they are very concentrated in the capitals. When you go to a small city in the interior of Brazil, the long haul is very events, very slow. So the idea of having 10 centralized distribution systems and having fulfillment for the whole country, it is not feasible for the situation that I have just described about Brazil.
We want to address opportunities of having short haul deliveries, more short haul deliveries and bringing the inventory of the local vendor to our platform and having the local delivery. This is our bet. I'm not saying that I'm right. The market is wrong or the other way around. Only the future will tell.
What I can tell you is that having a logistics operation for sellers totally long haul with gigantic distribution centers and making the goods travel a long haul. It's the cost is unfeasible. The cost is huge and companies will have a very serious problem in terms of results and cash generation. When I placed my bet on multichannels way back then. You know that it's very difficult for me to place my bets on any system that I cannot see a light at the end of the tunnel.
I don't see the economic feasibility in the other system. Well, this is very interesting. But when you look at your data, you already have a big critical mass. You have 14,000. You went from 14,000.
I don't know how many are companies or individuals, but do you have enough data to show this? Well, we are scratching the surface, as I said before. We have 5,700,000 retailers in Brazil, and I only have 40,000 on our platform. So since last year, I have been talking about the Chinese growth, and it's very important for us to gain scale, and the company has to grow a lot and much, much more than the market in all aspects. So we need to continue to focus on growth, on GMV, top line, scale gains, provided there is an economic rationale that really makes sense in terms of ROE.
And so of course, we cannot waive that. But you have to gain scale. You have to have more sellers. You have to have more inventory here. And the digital platforms operate in large figures.
If you are small, if you grow just a little bit or less than your competitor, you have no chance or don't stand one chance in this market. So growing scale and addressing these opportunities and being ambitious and making big investments is imperative. So you cannot just start and be small. Thank you, Fred. And I have one last question, if you allow me.
The impact of the wet form on full results. I believe that you're going to accelerate quite fast because there is a learning curve. The 1st year is slower, but I believe you are already accelerated GMV and an opportunity that due to the pandemic, it even becomes bigger in the short run. But what is the impact that we could see as you accelerate your GMV? What is the impact on your take rate?
How much of the GMV is converted into take rate? And what is the impact on your profitability? This is an RMB1 billion operator of GMV, profitable. They are outstanding entrepreneurs. They have a fantastic technology.
The commercial people are great and the business model is great. It is similar to some syntax choirs that work with local strategy, and they operate in a very efficient fashion. And this is a business that is good by nature. Of course, we know some companies that have a lot of cash burn, but the beauty of our model is the ecosystem. When you integrate the Apple phone in this app, this is going to go down.
You already have clients. When you have our local operation for 100 G Cell helping not only to bring onboard new sellers or even restaurants or whatever. I key synergies in the front, that is to say, in the integration with the super app. And also in the hunting and the farming teams, there is integration. So the economics will be even better.
This is a market that is still very difficult, mainly in the big cities. So the smaller and the medium sized cities have a lower cost of operations. So we're going to follow this line. We acquired a Netshoes that was the only company that we acquired that was in the red and the price was very good. All the other business that we acquire.
They are sustainable and they are lucrative when we acquire them. Thank you very much.
The next question is from Guilherme Assis with Banco Safra. Hello, Fred. Good afternoon. Good afternoon, everyone. Thank you for taking my question.
Fred, I would like to go back about economics in new categories. I think you just announced this acquisition, vipcommerce. And like you said, this segment has a very big potential, maybe height the size of the e commerce potential or retail, I mean, in Brazil with a low penetration even though it is expected to increase. We can see there are many players, including food retailers and also players in the market. And we also decided to be part of it during the pandemic.
So we can see fierce competition. We can see a lot about vouchers being used in order to attract consumers. So now that you have this platform and you are going to deliver services physical retailers. So if I understood you correctly, your strategy is to use the platform as a seller. So what about the economics?
I think it's similar to Gustavo's question about AikiPharmi. But what about take rate and acquisition cost, specifically in the grocery segment? There are several different manners to answer your question. First of all, good afternoon and thank you for your question. We run 1P grocery category.
And this category, if you think about new categories, You are only considering groceries, right? Or are you relating to all new ones like fashion, for instance? Groceries only. Okay. Groceries, well, that's a worldwide challenge.
If you think about online e commerce operations. It entails a challenge because the average ticket is low and the price is high. Logistics is price over weight or price over cubic meter. So groceries So let me go back to the question before. Geolocation is key, you have to have a local inventory with fast delivery, very high frequency, high level of use of the frequency capacity in order to have a lower cost visavis the purchase basket, both in 1P and 3P.
For 1P, we're using brick and mortar like dark stores in order not to travel so much. We have 1300 stores, nearly all of them have a grocery inventory. And we are improving our algorithms to identify which products should be in all markets. Naturally, you're not going to have full basket everywhere. It has to make sense for 1P.
In order to have a higher capillarity, it's important to have the 3P modality, and that's the rationale about zip commerce. It has to be integrated with local small grocery stores or local networks to help them sell directly online. And then you have a direct participation in the system or selling via the closest marketplace. It's not that they're only going to sell at Magalu, but they'll keep on selling directly via their own website as well. And we are going to support them with IT systems or logistics and payments.
So locally, I believe There is a good opportunity for the business to be relevant. It's growing worldwide. All companies are investing in this category, And I see it with good eyes. As for the economics, it's a matter of choice. Historically speaking, Like I showed for the last 5 years, if you check the historical series, we always try to work in areas with economics that make sense for us.
It doesn't necessarily have to profitable, but it delivers good frequency. Not all categories have to be a cash call. Maybe there is a different strategy that is important for you. For grocery, it's not necessarily it has to have a wonderful economics or be a great cash call. All it has to do is not to burn cash that much.
But if it adds frequency, It meets another strategical need. So you have to have a global systemic view. Overall speaking, you have to grow a lot, generate cash and as much as possible, improved profitability in order to bring return on invested capital. So that's always on our radar. We are a rational player.
We'll continue to be that in the future, but not all categories have to deliver the same high margin of contribution. Fred, just a follow-up question about this And not only about groceries categories, but also about marketplace in general. We know marketplace is the kind of business that brings higher margins. Naturally, you have the support that you mentioned. You talked about logistics and how efficient you are.
And You don't have the long haul model, which in my opinion, allow you to have a smaller average cost to the last mile in an integrated system. So when we talk about marketplace and take rate, the idea financials is that we have a high margin business unlike 1P. Sometimes, you have more fierce competition. And sometimes, you need to move away from margin. So we have We've seen competitive moves in marketplace that are very aggressive.
Now If we think about a long term view, do you believe marketplaces' economics will be accretive for margin as we expect? Or considering the circumstance of the market, it's something that will make economic sense, But maybe the margin is not much higher or as good as we expect. So how do you see that, Fred? Guilherme, first of all, marketplace, You need to deploy less capital and you grow with somebody else's assets. So conceptually speaking, okay, think about a bank.
Bank has a huge profit pool. It's one of the best segments, highly profitable. Think about the number of banks that went broke in Brazil. So even in an intrinsically good segment, you can have a poor operation. You can lend to somebody else that you shouldn't have and you are maybe you have a higher cost in the end.
So including marketplace, which has a good economics, maybe you can have mediocre circumstances. And I saw that in 1P. I've been for 20 years in 1P, and many companies went broke in 1P because they wanted to grow Without being profitable, but we have a profitable 1P. And if you can do that with 1P, I can't see why we won't do it with 3P. So it depends far more on the company.
Naturally, in my case, in 1P, I competed with extremely rational companies that would burn cash. At that time, not only at the stock market to subsidized consumer. At that time, it was VC2C, venture capital to consumer VC2C rather than B2C. And today's IPO to see the company gets the money for consumers to subsidize. So we managed to grow in the past even though we had to compete with this kind of company.
So maybe in another quarter, we're not going to play the game I mean, it might slow down, etcetera. But in the long term, I trust our business model. I trust our rationale, our capacity of execution. And when I show that we have 5,000,000 retailers, the The majority is not even online yet. I believe competition has been overrated because that's such a new market.
I think competition is more related to mature companies. If you think competition is more related to mature companies. If you think about price, take rate, mature markets, you have more issues related to that. But when the market is in the first steps, 10% of the Brazilian market, 1,200,000,000,000, only 100,000 sellers online. So there is plenty of opportunities.
So I don't waste my time that much looking to the side. I think we have to focus on blue oceans and opportunities. That's what I want the market to see, so we can move away from this dilemma of looking to the sides.
Beatrice Casa from Bradesco. Good afternoon, everybody. I would like to ask 2 questions. The first one has to be the is about the fashion category. Are you going to accelerate this categories still during this year.
Maybe you need a little bit more marketing 4, maybe you already have everything you need in place. And the second one is about the 24 hours. What was the role played by the market category? Was it this category that drove the faster lead mark? Thank you very much.
So fashion, we talked about market quite a lot, but we should really consider this fashion because it is even abroad. It is more consolidated than other markets in developed countries. And the economics are better than market, for instance, you have many operations that are going very well online, and we made a very high investment there when we acquired net shoe that came with DATINI, one of the biggest in our life as a company and then Epoca Cosmetico that had a brilliant performance last year. So you have sports, for instance, which is also a gigantic operation, fashion but fashion and beauty. You have a penetration that is very low in Brazil, still much lower than other countries in the world, and they are good.
They have a good gross margin. They have a good average ticket. And we invested quite a lot in infrastructure already. We created 2 departments in Magalu last year, one for sports, Julichal Trageno, and on for fashion, Silver Machado, who came from previous experience in Arezo, for instance, SEO, and she is setting up a fantastic team from product development going all the way up to marketing and everything preclusive and dedicated to this category. And the M and A already happened, which was Atiny.
And we have Shustalk, which is one that I we will be developing as our private label and epocacos match. I have already mentioned and hub sales that operates B2C models. And our objective is to have it in well, it is in Franca, which is where most of the footwear in Brazil is produced, but we want to take this to other places in Brazil. So it has we are investing both organically and inorganically in the case of hub sales in order to be able to take advantage of the opportunity. It's a big investment, mainly now investing in teams and talents.
We are attracting fantastic people that are bringing a know how to this category that the company didn't have before. Of course, we have people that came from Netshoes, but it was more focused on foreign goods, and there is a very big opportunity here for the team to work. And your other question, could you repeat it? No, no, it was not driven by market. Smartphones, mobiles, TVs and other categories are being operated with the store inventory.
Market does help, but it's not limited to market. Excellent. Thank you very much. Our next question comes from Daniel Leije from XP Investments. Thank you for the question.
Congratulations for the result. My question has to do with profitability. You said that many competitors are very aggressive in terms of incentives, etcetera. But looking at your margin, what we see is that there is a major pressure, even higher than your peers, although they already have significant gains coming from the digital channel. So I would like to understand the dynamic.
You are having a stronger pressure on your gross margin than your competitors. I understand that you are offsetting this with lower operating expenses, but you said you're making major investments in service level and logistics. But what are the main drivers? Does it have anything to do with categories or some incentives that would make sense in the short run? You said that it's important for the corporation to be sustainable, but it must have scale.
So this investment should make sense in the short term because your company becomes more robust to face the future. So I would like to understand the dynamics of the past and how you see this for the next year. Should we continue to expect this pressure. Maybe it will be smaller because digital is already player and maybe it should flatten out. But what is the trend for your gross margin and EBITDA for this year.
Daniela, thank you for the questions. Gross margin, it has to do with mix and mix alone. We are the company that has been growing the most digitally. We went from onethree to twothree of our sales coming from digital. Nobody has this kind of share online twothree of the sales.
So nobody has that. If you look at the online operations, so you can see that the gross margin of digital channels is always lower than the gross margin of the offline channel. On the other hand, the digital operation has lower expenses. So although the gross margin is lower, our expenses are much lower. But I believe that the major point here about the margin is the following.
Your margin is my opportunity. We talk a lot about Amazon, for instance, Jet Bezos. And he said that the consumer will always want to pay less and receive faster. This was the only certainty that he had in his life. So it's important to have an operation that is profitable and generates cash.
And including last quarter the last quarter, our expenses are the lowest in the market by far. And if you can have this level of expense, you can have lower margin and grow more than the rest of the market. So we have been growing more than the other players. And I reemphasize, Daniela, the importance of scale. This it's a business of big numbers.
No medium sized platform can be a player in this market. So heavy, a growth much higher than the market and having a high GMV annually is fundamental for a successful business. So we have to look for scale. And Chinese growth is one of our strategic pillars. So this is very important for us to grow.
So we do not believe that having a high margin is a competitive advantage, quite the opposite. And our decisions have nothing to do with the market. We grow online because this is where Brazil is growing. I know that you're in the company. In the company, it's only based on the mix.
So if you can add to what you said, What do you expect for the year? Do you see a fiercer competition? Do you see this as an additional challenge for Magalu? Or do you believe that your position protects you enough? Or should you do something in order to help the seller further in this more competitive situation?
Daniela, I have already said that to Guilherme when he asked the question. Our decisions are all made for the long run, we never make a decision for this current quarter or anything like that. So JPY 44,000,000,000 GMV, when I look at the position of DKK100 1,000,000,000 and DKK200 1,000,000,000 in the market. I see that this is a multiple opportunity in multiple category, multiple fronts. And in each one, I have a different competitor.
So it's Fortnite. It's not a World Cup. You compete with many in many different categories. So it's very difficult to map this. I don't spend a lot of time looking at that.
The financial market does. But we focus on the opportunities and the level of service that can be improved and trying to be sustainable at all times, and this is what we have been doing the last few years. So I'm not very much concerned with the short run, it could happen in 1 month or 1 quarter. The company has ZAR 7,300,000,000 in cash. We generate quite a lot of cash.
We have a profitable operation, and we can accelerate should it be necessary. You have 20% operating expenses. This allows us to be more aggressive than any other player in the market. So we are very comfortable that we have a superior model. We have proven execution.
We have fuel, which is cash, and we have an ambitious view for the future. Congratulations for the results.
The next question will be in English. Hazi Zheng with HSBC.
Good morning, Fred. Thank you for the questions. The first one is probably for you and maybe Fathara as well. Digging deeper into Magalu as a service, If you can give us some color on your initial focus, what kind and size of merchants are you going to look at? What services would you prioritize In the near term for the smaller retailers.
And the second question is on Fresh. Maybe, Fred, you can lay out your vision for groceries. What is the mix going to be? Is it going to be driven mainly by the 3P picking and delivery services, specialized 1P fulfillment centers Or something like a community group buying that you that we have seen in China. That will be really helpful.
Thank you, Fred.
Avi, thank you so much for your question. Let me begin talking about Magalu as a service. Fatala can also add to that. Our vision is very focused We have a purpose, which is to generate digital inclusion in Brazilian retail. Usually, larger networks and chains have their own digital initiatives.
Big grocery networks, they have their own digital teams. They don't depend so much on Magalu compared to small and midsize. So we want to develop technology for those who need it. When we move to the small and midsize business universe, there is a broad range of necessities. Some can be very basic, Including education, that's why we acquired ComSchool.
ComSchool is a digital business school, Allowing businessmen to do basic things in e commerce. So we acquired an education company to support SMEs to go digital. You also have to, for instance, have an online invoice. You have to know how to do that, And you need approval by some federal agencies to do that or cataloguing our inventory control or logistics payments. Anyway, go to market strategy and so many options.
And in all of them, the idea is to develop applications our own or like Fathala said before, plug other financial results in the markets in our ecosystem to meet the needs of SMEs. But these are broad opportunities, nothing that we haven't done before So we are making everything available for them according to their size in the segments and categories, they are. Fatala, anything to add? Yes, Fred. Fatala speaking.
Thank you for the question, Javier. One of the points In order to address, at first, Magalu as a service has to do with providing several services, which allow us to have a digital seller and from the beginning bring this catalog geolocated in our platform And with that, help consumers to find the needs that are closer to them. Like Fred said, it's part of the strategy of logistics, So we need to try and support them Very friendly tools. Many of them, like Fred said, are not familiar with marketplace And sales on the web, they don't know how it works. So we're trying to remove complexities So these are the main first tools that we are considering Magalu as a service.
And based on the information that we are going to send About these merchants, we will learn a lot about other services that we can also deliver, This time involving other pillars of the company like, for instance, the financial areas. What are the main financial systems that are a pain to these people and how can we help with the current tools we have without having to contract or use others. So we can benefit already from the services we have and other things we have, for instance, about advertising and publicity. We also want them to have A simple operation to make it easier for them to have publicity on the web and drive more traffic to the products they have on the list And also support them in one of the points that we learned to do, which is to drive traffic to the point of sale physical point of sale or trying to boost revenues. So these are the first steps.
As for the size of the super small business up to an average size, which is already a small network, for instance, or a small merchant chain. We want to well, we had an acquisition of STOQ, which is a little bit more robust, And we want to use this solution as a channel to deliver these services as well. As for groceries, Fred speaking now. I think I made a lot of I made many comments about 1P Back Store and 3P with Vip Commerce. And you mentioned the Chinese model, which is community group, and it has similar characteristics to Magazini Evose.
This is an operation that we're watching very closely. To tell you the truth, Harvey, nobody in the world managed yet to be ultra relevant. Like I said, penetration is lower compared to any other category, including U. S. And China.
It's great in Brazil, but it's still very low. So there is a lot of opportunities. China is tapping into new territories, particularly now with the model you mentioned, and we are keeping our eyes open. We have similar tools of social commerce, And I believe there can be alternatives for the future. So we'll be running tests.
We'll be experimenting several opportunities and see the best to scale. Considering our correct characteristic, we always test, experiment, run, make mistakes, then we'll learn and scale up whatever makes sense to This concludes the question and answer session. We'd like to give the floor back to Mr. Federico Tragena for the final remarks. Over to you, Mr.
Trajano. Thank you very much. Thank you all for Thank you. Thank you. Thank you.
Thank you. And I'd like to say Well, actually, we want to thank you, particularly our team, 40,000 employees, following our leaders, our direct people who have been with us in this extraordinary year. Like I said before, I'm so sad about what we have been living in Brazil right now. It seems to us we went back to 0 when it comes to the pandemic. However, we are happy with our team's ability to react to all those difficulties to make a difference, to support other businesses and take care of our peers and our customers.
My admiration, My gratitude to the team is absolutely huge and also to investors who still Have confidence on us and stakeholders and sellers who are growing with us. Obviously, finally, our customers. And once again, We have to think about the highlights. Upsides, Brazil is relentlessly generating negative news. Since I was a little boy, I started e commerce in the year 2000, and I wonder about all the difficulties.
So many sad news throughout this time. But we continue to be a huge country with plenty of opportunities, amazing companies. They see the glass full and keep on flourishing. So many entrepreneurs, many companies with good cash generation. I don't believe bad news will come to an end.
They'll always be here, but we will focus on what we can do, what is up to us to do based on our talent, our ability and always have a bullish view. Opportunities for us who are digital are huge. Addressable markets are huge as well. There will be obstacles ahead, difficulties. Now we have 800 stores closed out of 1200.
Last year, we had 1200 closed. Obstacles will come, and it will depend on our ability to react, to be firm on our purpose, our mission. And obviously, I would just like to close like saying that we have to do the right thing and fight formal retail in a sustainable manner. I think that's what Magalu has been delivering successfully Thank you. This concludes Magalu's conference call.
Thank you all for being with us. Have a good day.