Good morning, ladies and gentlemen, and thank you for waiting. Welcome to Magazine Luiza's conference call to discuss the results of the third quarter of 2019. At this time, all participants are connected in listen- only mode. Afterwards, we will have a question-and-answer session when further instructions for you to participate will be given. Should you need assistance during the call, please press star zero to reach the operator. Now, we would like to turn the floor over to Mr. Frederico Trajano, CEO of Magazine Luiza. Mr. Trajano, please start your presentation.
Good morning, everyone, and thank you for participating in our call for the third quarter of 2019 results. I'm here as usual with all the executive committee, and everybody will be available to answer your questions at the end of the call. I will be making the presentation, the introduction, and then Bellissimo will continue, and then we will be opening for questions. This quarter was a historic one, full of very important things.
Even if you consider an over 60 years of age company, I would like to highlight some of these brands for the company. We opened the number 1,000 store in August in Franco da Rocha, 63, practically after the first one that we opened. The coming on board of two new states in Brazil, Mato Grosso and Pará. The purchase of Netshoes, the acquisition of Netshoes, although we announced it in the previous quarter, we integrated, and now it is part of our financial statements as of this quarter. In the previous quarter, it was only three days. Now it's the first time that we have a full quarter with the consolidation of the results of Netshoes.
We held the first large B2B event, Expo Magalu, in our history. It was held in September with practically 1,500 people, most of them entrepreneurs that are trying to make their businesses digital by means of our platform. It was an event by Marketplace and with sellers and service delivery people in our ecosystem. It was in the Center Norte. It was a very special event for us. I would like to highlight as well, specifically in September, another very important point that shows the results of all these efforts of digitalization of the company in September. As we said in our executive message, with the growth of Marketplace, we had 50% of our sales of Netshoes.
I think this figure is very important. It's very emblematic of what we have been saying. We digitalized the company, and this represents quantitatively the digitalization of the company. I think it is especially relevant if we take into account the fact that it was not to the detriment of our physical stores. The physical stores, as you will be seeing, had a very robust quarter as well. Besides having a number 1,000 store being opened, and same store sales 9% over 16% of the last quarter. Overall, our physical store is growing by 20%. Omni-channel strategy and the summation of the channels, once again, this is very well evidenced in this quarter.
Also this quarter, there was a lot of competition, a lot of PR, a lot of investment, a lot of moves, and from the viewpoint of competition, both from foreign players and Brazilian players as well. I think it's very interesting because for over 15 quarters, we have been delivering very positive results. Most of them are much higher than the market expectation. In some moments, I heard that these results were coming from a weak competition, and the competition was not well structured, and that they were suboptimal from the investment viewpoint. This quarter, nobody can say this because there are many things happening in the market.
I would like to mention this because the result that the company has been delivering is driven by a totally talented and hardworking people, and our staff and our team is excellent and performed in a strategy that I believe is extremely winning and assertive. This strategy is being implemented with a lot of discipline over many, many years. Recently it went through a redefinition, I would say. I would like to start my presentation by reinforcing this point. We presented this during the Magalu Day at the end of last year. Trying to give one example of this strategy, we digitalized Magalu, and now we want to digitalize Brazil, starting by the Brazilian retail.
Everything that we lived as a company and all the effort that we made in terms of digitalizing the company, now we want to roll this out by means of 3P and the SuperApp and all our endeavors in terms of building a technology and a platform. We want to make this available. We want to roll this out to the market as a whole, and this is the new strategic cycle that we are already living. I would like to start with the first slide here, which are the strategic drivers of the company. Here we have 2019, but of course it is pluriannual. As we said at the beginning of the year, we are focused on the strategic pillars: exponential growth, platform leverage, SuperApp, new categories growth, best retail experience, fast delivery, and data-driven and automation culture. I'm not going to get into many details.
I'm going to focus on the result of the third quarter. What is very clear, based on our figures, is that when you start a new strategic driver consistently, you have to show it in your figures, in your quarterly results, more than in a PR narrative. You have to show this quarter-over-quarter. The big highlight of the third quarter is exponential growth, which is the first driver. If we look at the results, I would like to start by the e-commerce slide, you can turn to the next page. You will see that we grew 96% in e-commerce. Of course, BRL 700 million Netshoes. 54%. Even without considering Netshoes, we had a 54% growth, over 50% growth base in the previous quarter. This is exponential growth based on an exponential growth that we achieved in the last quarter.
We have been talking a lot about the SuperApp as a main growth driver. I always say that this is the future, including the apps of the companies, of Netshoes for instance. We reached a MAU, monthly average user, of 14 million MAUs in this month. This is a major growth vis-à-vis last year. 14 million people. Including Magalu, SuperApp, Netshoes, Zattini, and Época. The number of expressive users using the app this month. Now we want to grow it even further, that is to say, from now on. We have already reached a very important figure there if we consider all the apps in the group.
The group of the highest number of downloads, both if you look at the Google Store and iOS store, you will see that we have two, three apps and the Magalu App fighting to be the first in shopping. In downloads, we are in the top 20 and competing with social media apps that are very relevant to the market. The strategy from the viewpoint of apps has been very good. Also for sales. It's not only for downloads. The apps are very representative in our sales growth. The App sales are driving the sales overall besides Marketplace that I will refer to on the next page. I would like to focus now on Netshoes much this year. You will be talking too. You see that it's much higher than we expected.
The full quarter totally integrated from the view of financial statement and not from the view of integrated systems. We have BRL 700 million sale, much higher than what we expected initially. In the dynamic of supply chain of this category, and we have been learning consistently within Netshoes team. These purchases are made ahead of time. We are programming for next year, and we have conditioned to increase our supply for the next quarters because these purchases were made in cycles that were before our acquisition. In spite of that, we had a very expressive result from Netshoes, both in sales based on the previous quarter as well as in a positive direction regarding balancing the profitability, but because we already have practically a break-even in our EBITDA of operating results, and we reported this as well in our message from the executive committee.
Already reaping the fruits from this match, from this marriage from Magalu [audio distortion] . The bulk of the savings, mainly in SG&A, come from the logistics integration, most of them. Mainly from the back office that will be done over next year. Logistics, we have already announced and in the presentation we already have the in-store pickup at some Magalu stores. One of the stores had over 1,000 orders in this modality. On the Netshoes platforms, you can select the Magalu store for the in-store pickup. One store of, I think it was on Direita Street , had over 1,000 orders in two days only. The client bought and chose to pick it up there.
If we roll this out to all the stores, and we only have a handful of stores, the power of penetration and the savings in terms of shipping, because you also have free freight. There will be a very good impact in the fourth quarter as well. This is very positive. A few days later, or after the authorization by CADE and the integration of Netshoes, we integrated the catalog and we put it in the SuperApp and the brands, as they authorized us, we integrated in the catalog and from the viewpoint of search and catalog. We already have most of the brands that we integrated at the beginning, and some authorized us recently, such as Adidas. We are still going up in these categories, and we are seeing a very good evolution in our integration.
Eduardo and [Marcus] will give you more flavor regarding Netshoes. I'm particularly satisfied and positively surprised with the first quarter of Netshoes and also the way that we are integrating. Congratulations to all of you and to all of us. You responded very quickly after this process because this process of acquisition, M&A, et cetera, is not an easy task from the viewpoint of e-commerce, besides the in-store pickup, which is already over 30% of the e-commerce purchases. We are rolling out the shipping from store in order to deliver. We have over 145 stores already in this modality and rolling this further out. This is another factor that will help us a lot in terms of our delivery, and I will come back to that later.
One of the highlights of e-commerce in the quarter, as it was in the previous quarter, I have already talked about tech for Magalu, but I would like to talk the 300% growth of our 3P vis-à-vis the previous year. This is a very robust figure. We are talking about almost BRL 1 billion of GMV in the quarter. It's incredible from the viewpoint of growth and over 1/4 of the sales of e-commerce overall of Magalu, 11,000 sellers. I would like to remind you that we have a very good curatorship for sellers. By far, we have the most rigid process for the authorization of sellers coming on board and also the most robust process in terms of obliging the seller to issue invoices in all sales.
We are extremely careful in our marketplace, and we want to grow, but grow in the right direction, in the right way. We don't want to have people who are not in the legal market, so to say. We want to have sellers that are as serious as we are in terms of paying their taxes and issuing their invoices and delivering the best service to our customers in Magalu. I interacted personally with many of these sellers, and I saw that there are so many good people there with the same commitment as Magalu regarding the level of service. By the way, it has been improving a lot with this exponential growth. All the NPS indicators of 3P have been improving. They are not yet at the level of 1P, but with a consistent improvement with sustainability. Informal companies, they do not grow.
If you look at the productivity of the informal companies, they come to a ceiling, they can no longer grow more. You cannot have a large company growing informally or not paying taxes. We want these companies in our platform to become bigger and bigger in the future. We made it very clear from the start that in order to work for Magalu, all sellers have to abide by our requirements and delivering the same level of service. It's very good for the sellers as well in the long run. I would like to talk about the Magalu Entregas, our delivery system. We have to tap into this base even more, and we want to monetize this base with additional services, both Entregas or deliveries and Magalu Pagamentos, Magalu Payments.
There is a lot of room to improve the GMV, and we do not really monetize this very much. We are delivering a basic model. As we roll out special delivery services and special payment services, we will be able to tap into this more and more and delivering a better and better service to our sellers and to our consumers. Here I'm talking about two points, delivery or fulfillment, and payment, which is a prepayment of receivables and credit and financial operations for these three actions that go through the marketplace. We have opportunities there, and we will probably be able to tap into them as we roll out the services that we are developing in our labs and with the help of our business people in marketplace.
The most basic model of delivery, which is Magalu Entregas, we already have 72% of our sellers, but I still consider this very basic cross-docking and other things. We will be growing over next year. During the Q&A, we will be able to talk about this. Talking about the physical stores, it was a very positive quarter after a quarter in which we grew less because of the comparison base with the World Cup. I highlight the entry into two new states, Mato Grosso and the historical inauguration in Pará. The whole state practically came to a halt because of this. Even in the greater São Paulo, Santa Catarina, Rio Grande do Sul, for instance, and the Northeast as a whole.
This entry in Pará was really symbolic because we started very strongly with a very assertive market, a very well-located base of our stores, and a fantastic team. I went there on the inauguration day, and I was really impressed. It continues to be very robust, and it is very positive. Also, the fact that we are getting into Mato Grosso. In this quarter, we opened 52 new stores. With an expressive gain of market share. We're very well-distributed in all categories, technology, white line, light product. Our core categories continue to be very good, and we are getting to new categories with our Marketplace and with Netshoes and 1P, many of our categories. We want to be a one-stop shop, but we don't forget our traditional categories.
They are the cash cow of the company, so it is important for us to continue to gain share, and there is a lot of room to grow. If we look at the standard categories, our market share is about 15%. We still have a lot of room to gain share in our core categories. We are growing in other categories, but we have a lot of room to continue in our core categories online and physical. About 15 quarters in this good dynamic. To end my presentation and give the floor to Roberto for the financials. The clients are one of the most important KPIs for us. We involved a lot, 24 million active customers.
We reached this, here I include almost 5 million active clients of Netshoes with a lot of representation in our base, which was of one of the big objective of Netshoes acquisition. You can see we grew 44% versus the 3 Q 20 18, we are growing not only the base, but the service level much higher than the others in the market. We are the only one that has the RA1000. We have the best score in the Reclame Aqui site. We have to grow exponentially, top-notch service level. I'm very happy with this evolution. It's very difficult to grow as much as we grow and at the same time improve the level of service at the call center. We have a first call wait time less than two minutes, the first call resolution reached 95%.
We're improving our level of service. We don't want any problems to arise, but when one arises, then we need to have a first call resolution. We have been doing a very good job in terms of avoiding problems. If there is a problem, we have to solve it quickly. The average NPS is 79, and those who are familiar with the Net Promoter Score, this is an indicator by means of which you compare with companies all over the world. This is the first time that we opened this. We went up three percentage points vis-à-vis last year. This NPS of 79% is one of the highest levels of retail, not only in Brazil, but in the rest of the world. This is totally impartial. That is to say, we hire external companies in order to evaluate this.
Based on that, on the next quarters, I will continue to show you our NPS. The NPS is very important, and it is also one of the indicators for the compensation of executives, including the CEO of the company. It's very important for all of us. One of the things that has been helping the NPS is the fact that we are raising the bar for logistics as well, for 1P. The data that I will talk about is for 1P. We have over 42% of total last mile deliveries. That is just the express delivery. In Brazil, the average was five to six days, and we are bringing this down with the fantastic work being done by the logistics and the supply people, the commercial people, and the operations people as well. The stores also participate in that. 42% is very high.
If I consider 48 hours that we deliver in two days, we are talking about over 60% that are delivered in up to two days. We promised 42%. In fact, almost 60% we deliver in two days. In some cities, we promise one-day delivery for most of the categories of our SKUs. In terms of, I talked about 1P and 3P. We are making our best endeavors to roll this out to 3P. As I mentioned before, this refers to 1P and rolling this out to 3P, using Magazine Luiza and LogBee and everything that we did for 1P, we want to do for 3P. Undoubtedly, the NPS is very high, mainly because of the brilliant job done by our logistics team. I would like to highlight these factors. Now, Roberto, I give you the floor to talk about the financials.
Good morning, and thank you for participating in our call. I will be talking about our figures. We talked about sales already. The adjusted highlights. Now, here, first, we will be talking about the adjusted highlights because we had tax credits and non-recurrent credits and provisions, and the results are more comparable to last year's, but they include Netshoes for the first time. Our gross sales growing. We were able to increase our gross margin by 0.9% because of Netshoes itself, that has a gross margin which is higher, around 40%. Also because of the marketplace. Marketplace helps us a lot. Marketplace is based on gross profit, and this helped a lot Magalu and Magalu with Netshoes.
On the operating expenses line, we increased our operating expenses a little bit because of the acquisition of Netshoes and due to the first steps of integration, also because of the increase in service levels and faster delivery and acquisition of new customers in line with our strategy. With that, we had an adjusted EBITDA of about BRL 300 million with a 6.2% margin already including Netshoes, practically with a break even in the EBITDA margin. We had a dilution of expenses, financial expenses, and benefits regarding interest on equity. We got BRL 136 million adjusted net income, including a 2.8% margin net income growing vis-à-vis last year. This was a very sound result. We continue to generate a lot of cash, practically BRL 800 million in the last 12 months with a ROIC of 20%, and return on equity very high as well.
We continue to have a very comfortable cash position, BRL 600 million net cash, BRL 1.8 billion total, including receivables. I think the main message is that we continue to grow profitably and generating cash. Including the non-recurrent events, the EBITDA was over BRL 500 million and IFRS 16, a margin of over 10% and net income BRL 235 million. We go to our client base. The MAUs, Fred has already referred to this. We show you the evolution of new stores. We opened 52 new stores, and we started investment to open an additional 50 stores in the fourth quarter. This is already, or most of that is included in the total investment that were BRL 186 million in this quarter, growing over 65% vis-à-vis last year. End of the year as a whole, we have already invested almost BRL 400 million in line with our strategy.
On the next page, we show you the quarterly evolution of our sales. Year to date, 33% growth with a major market share gain online and offline, and also the evolution of market rate, almost BRL 2 billion in the year. We show you the quarterly evolution of our gross profit. On the equity income line, here we see a better result of Luizacred in IFRS 9, already impacted by the improvement of the short-term delinquency indicators. This was the best IFRS quarter this year. Expenses, they went up. Operating expenses went up due to the acquisition of Netshoes and also investments in increased service level. We show you the EBITDA on the next page. The evolution of the EBITDA, once again, very consistent around BRL 300 million every quarter. EBITDA margin 6.2%.
Here we are talking about operating expenses over net revenue, but in GMV, expenses have a lower weight because we are growing a lot with Marketplace. The performance of e-commerce Marketplace, et cetera, helped growing the nominal EBITDA that went from BRL 281 million to BRL 301 million. Margin from 7.7% to 6.2%, but due to the factors that we have already referred to. Financial results, we were able to dilute our financial expenses in spite of all the investments made this year, not only in CapEx, but also the acquisition and the payment of previous debt. Financial expenses, 1.9%. Dropping and in adjusted working capital, we continue to generate cash based on the working capital around 70 days. The average term for purchases, 90 days, so a favorable cycle for cash generatio n.
Netshoes has already improved its working capital profile as well, and has already improved the inventory turnover and the average term for purchases and generating cash for its own operation. Here we show the adjusted cash flow. Adjusted cash flow in the quarter over BRL 200 million from the operations, we invested BRL 186 million as we have already said. The net income, BRL 136 million , BRL 367 million year-to-date, 2.7% adjusted, including non-recurrent events, higher results. Luizacred, we continue to sell a lot of Luiza cards. We increased our base, reaching almost 5 million cards in total, 90% active with a very high utilization. We highlight that the TPV of Luizacred reached BRL 7 billion. BRL 1.6 billion inside Magazine Luiza and BRL 5.3 billion practically outside Magazine Luiza. Our card is co-branded, so this means that it can be used in the whole market.
Our credit portfolio reached over BRL 10 billion, growing more than 40% in the last 12 months, a very healthy figure. We showed that the NPL90 had a slight increase from 8.5 to 8.8, reflecting once again, such as in the last quarter we explained, the very high number of new customers. On the other hand, we highlight the reduction of the short-term non-performing loans, which is very positive, and it ultimately generated benefits in our net income in IFRS 9, as we said. These were the main financial highlights, and now I would like to give the floor back to Fred.
I would like to open for questions already.
Ladies and gentlemen, we will start the Q&A session. In order to ask a question, please press star one. If your question has already been answered, please press star two. Our first question comes from Thiago Macruz from Itaú.
Good afternoon. I have two questions. Could you share with us the KPIs of the 200 sellers that are doing crossdocking with you, and what about the improvement in the sellers' service that you're piloting? It's very clear that you're going towards a SuperApp, and the brands are already mini apps inside. You have always said that payment will be part of the strategy. Could you give us an update in this sense? What about the fintechs operations and how do you see this?
Good morning, Thiago. Thank you for your question. There is an important component, a strategic component there, some information is not public. I will do my best to answer about the sellers that are in the crossdocking model. I can give you an overview, but as I said, we have 60% of our deliveries up to 60 days for 1P. If you consider 3P, I believe that we have been less than 20% in D+4.
The service level and the delivery time in 3P is much worse than in 1P. These 200 sellers, Well, there is time regarding you sending this to the mail, et cetera, and the operation becomes a little bit more complex. For the seller that can do this up to one day, we can already bring them on board for the three-day delivery. We see a significant reduction already in delivery times and a 60%, 70% reduction on average, and also a significant reduction in the delivery costs.
We have a level of expenses that is much lower than with the standard carriers, both for higher volume products such as [audio distortion]. I would say that 20%, 30%, but overall, just ballpark figures so that you may understand. Delivery time and the reduction in delivery cost, only these 200 sellers are benefiting from that. In Magalu Entregas, I already have a benefit because my contract with the large carriers, which is this Magalu Entregas and not cross-docking, which is the 70% that I talked about. The volumes are much higher than the small sellers, so there is an advantage there, mainly in terms of delivery cost and the level of service is better because when it is in Magalu Entregas, our tracking of the goods is much better. For the consumers, it's much better, the NPS is better of the deliveries.
More or less, this is the answer, but the focus is to roll out the cross-docking modality. In Brazil, I don't believe that storage will be as relevant as it is abroad, but we will be prepared to do this as well. We are going to expand our area to have it also, but mainly in cross-docking, and not so much in shipping from store. We collect from the store, we pick up at the store, and then we do the cross-docking using the whole mesh. Storage will be part of that, but it is not necessarily the core in my view. We will be prepared for both situations.
About payment, I can say even less, because in order to increase the MAU, the monthly active users in the App, we want to do this with new categories and with lower ticket categories and higher shopping frequency, such as the Netshoes categories in Mercado Magalu, which is already representative. 25% of the website customers already come from e-commerce. We will not achieve the high frequency. What we are talking about monthly active users, we want to go to daily active users, and we cannot do this with goods alone. We will have to have other services. You talked about mini apps, and we are preparing to connect these mini apps. Payment is important, mainly in the context of increasing the frequency of utilization. The SuperApp is the major part of our strategy.
However, I cannot get into details regarding the timing, et cetera, but we will certainly be doing something. What is more in the short run, it is a prepayment and there lies a good monetization opportunity. Payment to customers today is like a red sheet . Although it is important from the viewpoint of generating frequency of use, which is important for our strategy, a major investment is being made, and it's like having the carteira Magazine without [Olet]. In the [Olet] market, [Olets] for bonus and cash back and coupons, et cetera.
In order to give this kind of attraction, it is too expensive, but from the viewpoint of profitability, with everything that is going on in the world, even the online-- Well, of course, sometimes you can have a trade-off, but we have to be very careful in terms of the direction not to get into this war of cash back, et cetera. We will making some move, but not so quickly. It has the possibility of representing something more significant to our bottom line. We have a very good opportunity in receivables discount for the sellers. This is the priority in terms of our endeavors in this direction. I'm not saying that payments to final end customers is not important, but from the viewpoint of results and monetization, the prepayment for sellers should be the first direction.
Thank you very much, and congratulations for the quarter.
Robert Ford from Bank of America.
Good morning, everybody. Congratulations for the results. Could you talk about the response of MaaS, Magalu as a Service? How does it work in terms of monetization, and how do you expect this to evolve Magalu as a Service?
Good afternoon. In fact, Rob, thank you for the question. Magalu as a Service, the concept is retail as a service. What we do today in Marketplace is a standard operation. We are generating sales for the seller. We are working with customer acquisition and taking advantage of the traffic that we already have in our digital channels and stores. It's the basic service level in the context of the marketplace, and our strategy is to be a digital platform that will help the Brazilian retail to become digital. We have to have value-added services such as payment.
That was the object of the previous question. Magalu Pagamentos is part of Magalu as a Service. That the seller may use working capital, et cetera, from the viewpoint of fintechs for sellers in this component. This is the most basic one. There are many others regarding payment and credit that we can offer the sellers that will be coming on board, and we also have the deliveries and the Entregas. If I take a delivery that I do for 1P and I make it available as a service to the seller, it will be under the context of Magalu as a Service. I talked a lot about delivery in the previous answer, and we have an opportunity to monetize here. Although in the short run, it is more to increase the level of service and decrease the numbers of days for delivery.
Those who use Magalu Entregas here, it is free shipping and Magalu subsidizes this. We announced this during the Expo Magalu, and it helped to increase the delivery service. This is a service. I have contracts with carriers, and I have a delivery service, and I am either making it available to the seller or via technology, via APIs, via platform, I'm doing the delivery for them. That is to say, retail as a service again. There is an important component that we announced during the Expo Magalu, Rob, which is the following. Today, most of the sellers that are selling online are companies that have well, there are maybe 50,000 - 100,000 companies that sell online, but it is over 1,300,000 retailers overall, and only 50,000 - 100,000 sell online. We are growing over 1,000 sellers online per month.
Via IntegraCommerce, that was the company that we acquired in our platform. We want to develop systems so that the analog sellers may sell. We announced one of the first products, well, the startup, Softbox, developed the iPDV. The physical retailer places this in their store, the small and medium-sized retailers, and most of the large ones already sell online. They installed this in their physical stores, and the system does all the tax part and inventory and issues invoices. When you have the inventory on this iPDV, it is made available through the Magalu App. It is still a pilot in Uberlândia. We intend to roll this out. We have already had some sales of goods that were in the physical world only and that were sold over the Magalu App, and we intend to develop this even further.
During Expo Magalu, we launched Magalu Tech for the sellers that do it by hand. That is, they issue their invoices by hand. Even in the 11,000 sellers that sell through Magalu Luiza, the marketplace, some of them have the financial ERP, but some don't, and they do this manually and very small sellers among these 11,000. We launched Magalu Tech in order to help them to collect taxes and issue invoices in an easier fashion. These are services that we will be delivering to sellers to make their lives easier, and we will be charging a very small fee. These are opportunities that we have to improve the level of service in 3P. We want to be as good as in 1P, and at the same time monetizing this base that has already grown 300% in this quarter, almost BRL 2 billion year-to-date.
We developed Luizalabs. At Luizalabs, we will be developing everything digital with software as a service. On the platform, we will be making this available to the sellers and of course, deriving some revenue from that.
Thank you, Fred. There is a question about Netshoes. You said that Netshoes has already reached equilibrium or breakeven? Which is the highest gross margin in the category. How should we think about Netshoes margins in the long run?
I will ask Eduardo to describe the integration process, okay? I will come back and talk about margin.
Well, this last quarter, we made a commitment to get to November with the design of this integration already completed with many work groups. We are reaching the final process, the organization design. We are getting to the Black Friday, and we have to be totally focused on that. Right now we have already been able to tap into very important things, integration of catalogs and the possibility of have store pickup for Netshoes. We launched a new version, which is much more user-friendly with filters, and this is already in our app and Netshoes.
We have already taken LogBee to cater to Netshoes orders in order to reduce delivery times. We have already done the work in terms of synergy with contract for service providers. Collectively, we have already decided to marketing initiatives, the Champions League, which will be broadcast by Facebook and our sponsors only because we are together with these two brands. From the viewpoint of structural integration, we are finalizing the plan to be executed in 2020. From the business viewpoint, we are already capturing some advantages. I would like to turn the floor to [Marcus], who will be talking about this.
Adding to what Edu said, it's very important to have the inventory levels with the best situation possible. This is what we have already achieved. We have new inventories, and the payment terms already reflect the partnership that we have with all our suppliers, with our partners, and growing more than 20%. With the EBITDA already capturing everything that Edu said, it's important to stress the new sponsorships with marketing. This places Netshoes as a very beloved mark. Zattini, of course, as well, but sports growing up. The creation of a world within Magalu, together with the brands in a very well-structured model. We are bringing gradually to a controlled environment, a healthy environment, all that, so that we may grow very quickly.
Just to give you an idea, we are already completing over 50,000 products on the base of Magalu for November for Black Friday. These are some details of the business. From the margin viewpoint, we do not give guidance. Together with integration, we are doing our strategic planning for Netshoes. We hired a consultancy company, and we are drafting a business plan, tapping into opportunities. My view is the following: Net sells BRL 2.5 billion, well, last year in a market of BRL 140 billion. The penetration of fashion in Brazil is still very low if you compare this to any other place in the world. One of the biggest opportunities for growth in e-commerce is fashion, and there I include sports goods as well. Net has achieved a high penetration in Brazil. It really changed the world of sports goods.
If you look at fashion as a whole, the penetration is low, about 5%, not considering some figures from Marketplace, some countries already have 20% in penetration. The focus of Netshoes is growth. We want to balance the result, and we already have some signs of this break even. We want to improve the cash generation of the company. This quarter, we already have evidence of that. Achieving this break even, the focus of the company will be growth. Growth in revenues, because looking at the opportunity as a whole, where there, including the fashion opportunity, we can further increase the GMV of all the categories that Netshoes operates with. This is Marcio's focus and his team's focus. Growth with balance because Magalu grows with balance. This is the way we do things.
Working with higher margins, this is the principle after we get to a higher revenue. The advantage is that this helps dilute fixed cost, and part of the dilution will be with the integration of the back office next year. Netshoes would have to have a large structure for BRL 2.5 billion , and for Magalu, for a higher GMV needs less. Part of that has to do with Magazine Luiza and the store pickup reducing in many geographies. São Paulo, not so much, but in many other places, this will help reduce the delivery expenses of Net. The focus of Netshoes is to tap into this great opportunity, which is the apparel and fashion and sports goods market. I believe that the major wave that is coming is in these categories, such as was the case with electronics and appliances before.
Luiz Felipe from BTG.
Good afternoon, everybody. I have two questions. The first one has to do with Netshoes. Can you already see some cross-selling? You said that 25% of traffic in the platform already comes from new customers. Do you already see some cross-selling, Netshoes customers buying products that were only sold in Magazine Luiza? The ways you monetize. This is the second question. You talked about Magalu as a Service. What are the opportunities when you think about monetizing traffic? Mainly in terms of advertising. Can you already see an opportunity such as you already see in more mature markets, more mature than Brazil?
Thank you for the question. From the viewpoint of cross-sell, very little. Well, we do have some categories. Adidas will be coming on board this week. The major brands are coming on board now, and the iOS store was updated during this last weekend. We still have integration and CRM that are already being debated, but it is still scratching the surface.
Basically, we have grown with the new categories that were already in Magalu and the new categories that were already in Netshoes. Within Magalu, but far from achieving the potential. We already see something, and we have to celebrate every million that we generate. We are still scratching the surface. It is the tip of the iceberg, and we have a lot of room to grow in terms of CRM and cross-sell. About Magalu Ads, the purpose now, and when we talked about these strategic priorities, I said that we have a lot to grow in GMV as an audience, and we have to grow sustainably.
The focus, well, we are very much focused in on growth to the detriment of margin even, because when you have a large margin base, it's easier to monetize. I'm not prioritizing new services yet. Magalu Pagamentos is the focus in terms of monetizing and receivables from sellers and not end customers. Magalu Entregas, even less than Magalu Pagamentos. I would say that the main focus is to increase the active client base. We are talking about 25 million of 150 million economically active population. We want to have a much bigger base. We already have Magalu Ads, this is not our main focus. We are focused on increasing the base and the frequency, we want the customers to return more and use the app more. This audience has to be monetizable.
It's not only having the clients that bought in the last 12 months, but always going to the app, et cetera. We will have relevant results in the future. This is an important business line for the future. This is an important path for our monetization. The focus is to increase monetization, the frequency of use, the MAU, and the DAU as well. First the audience, then the revenues. We are focusing on the audience first.
Excellent. Thank you very much.
Joseph Giordano from JP Morgan.
Good afternoon. Thank you for taking my question. The first question has to do with the customer base. I would like to understand the behavior in your physical stores and how the Luiza card, which is a major part of the total revenue of the company, how do you compare the use of the Cartão Luiza, the Luiza card in the physical world and the online world? Do you have a lot of room to grow with your loyal customers? Talking about Netshoes, you talked about Adidas and other brands that are coming on board and leading the assortment of marketplace in the company. As your competitor has a partnership now with another e-commerce platform, do you have any talks going on in terms of expanding the mix of Netshoes? Because there are some products of these brands that are not available online.
Joseph, could you repeat your last question afterwards? I will start by answering your first questions, then I would like to ask you to repeat your last question because I have not understood it well. Physical stores. In the quarter. In the active client base of physical stores. Yes, there was an increase in the customer base in stores, 16% growth in physical stores. Most of the growth in the active base of e-commerce comes from 3P, and as 1P is growing, with and without Netshoes, less than 30%. I'm talking about 1P now, okay? Overall, 54%. Of course, the customer base grows proportionally to the growth in revenue. With Netshoes, you have 90% growth. This is a major growth of the e-commerce. A major generator has been e-commerce, 1P.
Mainly, there was a significant impact coming from the active customers of Netshoes and also the marketplace that helps ultimately in the Magalu context. Physical stores growing 16% in the quarter, and this is a very important figure, considerable figure for the physical stores. Such as e-commerce. The store teams have targets for active customers, and of course, the base is older. We have a very healthy growth rate in terms of new customers and the active base, and we are including clients of other markets as well. All these from Pará, Mato Grosso, they are new customers. Some of them bought online, but most of them are new customers. The proportion of new customers is high.
About the Luiza card, it is very representative. The customer that buys with the Luiza card is more loyal, and the frequency is much higher than the customer that buys without the card. The lifetime value of this customer is five times bigger than the customer without the card. It's super important for us to increase the number of customers that buy with the Luiza card. The IPP, 50% in physical stores is not so big. In e-commerce, less than 10%, in fact. This is still a very low figure, but there is a huge opportunity to increase the penetration of the financial product in e-commerce. We are now tackling these questions in terms of the flow of the shopping process and also to have a better product for the online customer.
It's a little bit different from the offline customers, and we have a huge opportunity to increase the penetration of the card in e-commerce. Not to mention digital payments. It's not only credit. Sometimes it's bank account, et cetera. It has to do with what I said to Thiago. There will be an opportunity as well. In terms of digital payment as well. I cannot give you any details because this information is not public. Could you repeat the last question, please?
The Netshoes assortment. The management of channels of global brands, Nike, Adidas, and others. Some items were not available through online channels such as Netshoes. We saw another company making a partnership with another company with a similar operation. Do you intend to further strengthen the presence of Netshoes online because of these reasons?
Fred has already said that we are doing strategic work with the brands, with Net, sports, fashion, so that in 2020, we can achieve exponential growth. Increasing the portfolio of Netshoes in sports. We are talking with all the brands, a very well-structured and very transparent talk. Nothing is being done in an underhanded fashion. We're working hand in hand with these brands. Of the 10 biggest brands in sports, nine have already given us the green light for the Netshoes world. The 10th is already underway, and we intend to increase the mix, respecting segmentations, respecting all the different environments, magalu.com, Zattini, et cetera, with a very well-structured way and seeing how Netshoes can advance in this portfolio. The competitor's partnership has not made available the full portfolio.
We are already talking with the brands about this as well. Well, when we talk about the integration of Netshoes with Magalu, this is an integration that is done in a highly complex level with a systems integration that is much higher. It's not a web view. We took the catalog, we integrated. In the Magalu App, you can search products and the catalog is indexed. You have it in SEO, in Google, et cetera. You cannot do two overnight, it's a native integration between the Net catalog and our own catalog, and it is indexed. On the Internet, if you do not integrate natively, if it's not in the catalog, it's not in the search, it's the same as not being there. Regarding this, what we did, I'm not saying that nobody will do this with another partner. This is not what I'm saying.
What I mean is that we have a native integration, and the brand have to be consulted, and I need to have the authorization of the brand. It is in the search, it is in the world. It's so indexed that I need the brand to authorize me. Otherwise, I will not go ahead. It is as if it were not integrated. The difference that we have is that we did the native integration, as Fred said, and all the functionalities that we can give our clients come also with an Netshoes product. Now we are increasing the store pickup and all the experiences. Natively, they're going to be delivered there, all the improvements in the searches.
In the analysis that we carried out, we have this desktop mobile site version with a wireframe that invokes the site of the other brand inside the desktop and inside the mobile site. It's totally different from the experience in which all the features that get into the Magalu App. All the customers will benefit from there because it is fully integrated and natively integrated. It will be only natural for offline companies making partnerships with online partners, and we will be looking for other companies to have in our app. We are looking for native integration, maybe with a different look and feel, but with a unique shopping experience. If you do not have this natively indexed in search sites and the catalogs for internal search and external search, this integration will not bring benefit to anyone, neither to the retailer nor to the platform.
We are not talking against any movement, but we are explaining the difference between our approach and how we want to get ahead. I intend to have the iPDV and other integrations with physical retailers that may place their physical catalogs on our platform. We want to be a digital platform, not only with our own physical stores. Our MaaS strategy or part of the strategy is to integrate not only with the large retailers, but the small and medium size, of course, the large ones as well, and we will make our best endeavors to integrate with large companies as well. When you have the product or the catalog inserted in our experience, it has to be totally seamless for all customers. I'm trying to explain. It's not very easy to explain. The cart, the shopping cart is unique, is only one.
I do not want to create many different environments within my SuperApp. Everything has to be totally integrated with a shopping funnel, so to say, with no friction whatsoever. Very user-friendly, in other words.
Richard Cathcart from Bradesco BBI.
Good afternoon. I have two questions. The first one has to do with [audio distortion]. You said that you're delivering in four hours in 40 cities. Do you see any change of conversion and frequency in the customers that are using this service in these cities? Also regarding the initial results of what you made available in October. I would like to know what you see in this regard.
Richard , this is Eduardo. Thank you for your question. About the impact regarding conversion, it is directly proportional. We have internal studies that show the conversion in terms of the promise of delivery times. This is very obsessive on our part. That is to say, reducing at LogBee today is the main tool or main strategy to get this reduction. Today in São Paulo City, we can give you more information, but most of the deliveries in São Paulo, in 1P, already have one-day promise delivery time.
When you go from one day to two, you have a drop in conversion, which is about 20% drop in conversion rate. About Click and Collect for Netshoes. Richard, I really didn't understand your second question. Could you repeat it?
Frederico, you said that the initial results of Click and Collect in the Magalu stores were outstanding. I would like to better understand the results that you see so far.
Well, today we have four stores. In one of these four stores, we had 1,000 orders that were done in Click and Collect. In 10 days, not in one day. In 10 days. In one of the stores only. We are very positively surprised. In all the stores, you see a big amount or big number of. You have the Center, the Lapa, the Santo André, and the other. These are four stores. I visit Lapa yesterday. I went to 595 as well, and all of them have a lot of items available in the store that are being collected by the client. Talking with the teams, it's great to see that most of the customers go there and they are new customers. They had never been to a Magalu store before.
There is an opportunity for the physical stores to convert, both selling financial products and financial services, physical products, or insurance or other products, financial products. There is a big opportunity there. Of course, we are going to roll this out. We should be rolling this out very quickly. What is done for Netshoes is valid for 3P in general. We have a pilot for Netshoes, we are going to roll this out to Netshoes, soon we are going to roll this out to other partners of the platform. Other sellers. Well, Netshoes as a seller and other sellers will benefit from this movement, and it's part of MaaS.
Thank you, Fred and Eduardo.
Ruben Couto from Santander.
Good morning, everybody. I'm curious about Netshoes and Click and Collect. What about opening new stores focusing on this category? I understand the relationship with the industry is very specific, it comes from Netshoes. With all the benefit that you see from Click and Collect, I would like to know: how do you see this possibility?
This is Márcio. Thank you for the question. As we said before, we already have four stores of Magalu, super surprised and the orders going there, and we are using this as a pickup point right now. We do not intend to use Magalu stores for sales or just to show the products, and we will see how Netshoes behaves and thinking about online, physical, digital, all the models being discussed. Going to the previous question, so that we may increase our portfolio and have a bigger footprint, and also using these stores in an omni-channel operation, more on the Magalu chassis, so to say.
We are very happy with the Click and Collect so far. The customers. Well, there are new customers on both sides, and we did not expect to have this level of adherence. We have to fill the Magalu stores with these purple bags and bring other clients to Magalu, other customers to Magalu.
I would like to go back to the initiatives that you mentioned to increase marketplace and mainly the reduction in the prepayment of receivables. What do you intend to do in the fourth quarter? Can you see already some degree of acceleration in sales from sellers that are now participating and were not participating yet, but that want to take advantage of the free shipping or free delivery? Do you have people coming on board only because of that?
Well, it's still very incipient. We launched this last month, and many things have to be done by the seller, such as the time for mailing it and many other requirements. We are not going to give you a guidance regarding impact on our margins. We made our studies, and there is nothing very significant in this regard. The logistics is very efficient, and we have good quotes, and there are some criteria for the app, like over BRL 99 and so on and so forth. We are already giving free shipping or free delivery for 1P. The investment is not so difficult in the context of 3P. It's very difficult to segregate 3P because it's going well overall. To know exactly what contributes, it's very difficult. It's going very well. Payment likewise. Pagamento likewise. The advantage is the fact that the seller uses the platform more often.
Today we still have a third-party platform, and when we already have Magalu Pagamentos, but the economics is [audio distortion] the company. We intend to do this 100% internally and not using other acquirers. The objective of giving the discount to the sellers is to help them have working capital and have more products, and also show that the seller uses the tool. As the seller gets used to that, it will facilitate our rollout. Just to give you some more color, the main driver to make the seller join this free delivery is to give him a better term of payment. All the sellers that came on board in the program had a significant reduction in the delivery times promised. In São Paulo, it was about 30% drop, and when you go out of São Paulo, it's over 15% reduction in delivery times.
Connecting to what I said before, this has a direct impact on the increase in conversion. We are learning a lot with this initiative.
Thank you.
Irma Sgarz from Goldman Sachs.
Conceptually, marketing is under SG&A. How do you conciliate this? Of course, the level of investment has to be higher right now for competitiveness reason. How do you think about this line in the future? Maybe if it impacts your profitability, will you be still looking or focusing your eyes on growth? The second question. It has to do with the macro environment. Do you believe that customers or the market has a higher degree of confidence? What are your plans for 2020 and for the end of the year?
Once again, we do not break down the marketing expenses. What I can tell you is that when we look at our investment in the context of SG&A over revenues, there is an important consideration by Roberto. When you look at the quarter figures, you have to include the net effect because regard to a break-even in the EBITDA, there is an impact on our margin. You have to exclude the following.
As the GMV of the marketplace becomes higher than the total GMV of the company, it's already 25% of e-commerce. When you compare the operating expenses with the net revenue, you're not considering GMV, you're considering the take rate. When you look at your expenses vis-à-vis the total GMV and not the net revenue, it has been increasing much less than it's shown in the financial statements. The marketing expenses percentually, vis-à-vis the GMV, have not been going up significantly. They are remaining flat.
I'm keeping it flat. You ask me why are financial expenses going up vis-à-vis the GMV? Mainly because of logistics investments in teams. We have been doing work for D +2 . We are investing a lot in the whole supply chain, more trucks frequency, more travel frequency, a higher number of people in the DCs, a higher number of people in the brick-and-mortar stores. We had to increase the number of inventory clerks because a lot is being picked up at the stores. The inventory guys are the ones that are doing the hard work. That there is a team of inventory people in the stores. We are investing much more in logistics percentage-wise. I'm very careful, and I do not do any overspending in marketing.
We have a more assertive marketing investment, more focused on the app and on customers that give us a higher CLV. Client, card customers, channels, and others who have a higher frequency. A major part of the investment that we are making, and it shows in our results, are not in marketing. We are increasing the team in our marketplace and labs people. We are investing in many different areas, so that we may grow our revenues and not overspending in marketing. I don't like the dynamics of companies that grow based on customer acquisition costs that is very high, and our customer acquisition cost is very low vis-à-vis the market. As I said, we have not started digital payment, for instance, so we are not participating in this expensive game of wallet.
The idea is to get into that, take advantage of the SuperApp, not making an investment in order to have an additional app base. It's different from what the market is doing, and I think it's going to be cheaper.
What about the macro environment? The second question.
I'm very bullish about the market. We had the approval of the reform last week. The decision about the FGTS, which was very good because the government had done this in one and a half years, and it would not give the impact that retail needed. With the stronger stimulus given by the government now, we will see in next quarter or fourth quarter that will be very positive with tailwind and not frontwind. We have been growing for four years, but the best that we got was 1%. It was either negative or zero.
Finally, we have to grow with the help of the macro environment. I'm bullish because with all the players I have been talking with, I see that the economic recovery will be driven by the private initiative and not the public sector. It takes a longer time because companies have to set up a business plan and submit it to the board, and it has to have the necessary funding because companies or private companies usually do not spend money that they don't have, usually. I see a high cycle of investments, and this generates jobs, and jobs generates consumption. I see this as a recovery that will be slower initially, slower than the ones that we saw in the past. Once it comes, it will be more sustainable and sound.
I'm very bullish about it, and we have been accelerating investment to see many initiatives in terms of automation of DCs, and we already have this in place. In the Louveira DC, a very heavy investment, and we are accelerating investment in all the fronts, and we are very bullish. We believe that recovery will come, and it will become stronger in 2020 and in the following years.
Thank you.
The Q&A session has come to an end. I would like to give the floor back to Mr. Frederico Trajano for his closing remarks.
Well, I have already talked a lot. It's already five minutes past 1:00 P.M., a very long call, and I would like once again to congratulate our team for the outstanding job done during this quarter, and I wish you all a very good afternoon. Thank you.
Magazine Luiza's conference call has come to an end. Thank you very much for participating, and we wish you a good day.