Right. So let's move from this rather short term performance view to actually what's most important for us and a long term view where we actually see our company heading in the next 5 years. If you look to the next 5 years, there's actually 3 key messages we'd like to discuss with you today. Number 1, we very much believe in a huge opportunity of building the starting point for fashion. Now This one destination where customers gravitate towards for all their fashion needs.
Number 2, if we build the starting point, we are sure that our platform approach is actually key to scaling our business. That's what Robert will describe then in a bit. And number 3, our platform will translate into quite attractive financial profile in the long run. And that translation to numbers then Rubin is going to make. So if you asked me 10 years ago where I see the company today, I would have made huge understatement.
I would never have guessed that we celebrate our 10th anniversary with our teams on the airfield in Tempelhof. Would also not have guessed that we hold this Capital Markets Day here in this newly built campus, for me the coolest office in Berlin. And I think that's quite characteristic for us that in a long time frame, we underestimate actually what we can do. And that's why this quote from Bill Gates also resonates very well with us. And he said that people underestimate what they can do in 10 years.
However, there's also moments where we don't quite reach our targets. We had those difficult moments. 2013, for example, was one of those. Also last year, Q3, we had a highly irregular season. But those short term challenges, they didn't keep us from delivering like an extremely successful decade for the company.
So, for us, it's actually extremely important to take this long term view and have like a strong vision and a strong picture in mind because that's something where we draw a lot of personal motivation from. And we also believe that it's the right thing to do from a shareholder perspective to really create this long term value. So before we look ahead for the next 5 years, let's also very quickly reflect on the past 5 years because I think we've built quite a strong foundation for this starting point. For example, we have grown our customer base to now 26,000,000 customer, doubled them in those 5 years' time. Now we have not only grown the customer base, customers are also a lot happier.
We are at an all time high in our net promoter score. So what do happy customers do? They shop more. So we increased our GMV per customer. And while doubling the customer base in the same time frame, which actually tripled our revenues from 1,700,000,000 to 5,400,000,000 euros So if you look at the next 5 years, we see this huge opportunity to really become an indispensable part in our customers' lives and also in the business from our professional partners.
For customers, we aim to be this one place to be whenever she thinks of fashion. If she's looking for a concrete shoe in size 38, if she wants a new jacket, if Mahogany is her new favorite color, if she's excited about the release of a new sneaker, that's exactly where we want to be. In any of these moments, we want to be the very first place the customer goes to. So we aim to be that start point for fashion. Now this is not entirely new.
We have worked on that for years now, and we are already on that way. It's rather about doubling down on that strategy and of our customers. So while I keep mentioning this word starting point, also to make clear like what we actually mean by that. So the starting point for us is that destination where customers actively naturally gravitate to whenever they want to shop a certain product or a service. And you might know that from your own behavior.
If you have a Spotify app, that's your starting point whenever you want to listen to music. If you have Netflix, then that's your starting point when you want to get entertained. And I think this behavior is especially pronounced in an app world. How many apps do you download? How many apps do you actively use?
So we clearly aim to be one of these few apps. We aim to be the fashion app. So everybody who downloads that app, whenever you think of fashion, you should pull out your phone and hit that orange triangle. So and then we also see that this general trend, it also holds very much true for fashion. In fashion, we know that people buy across many different brands.
We see it in our own data. Almost every second order contains more than one brand. A female customer shops on average 13 different brands throughout the year with us. So if you take that jointly, like a general trend, few destinations and natural fashion behavior, I think it's super logical that people will not have 20 different apps for individual brands or occasions. They're looking for this one place they go to.
And then the good news for us is like if we want to build a starting point, we're already in a very leading position. We are already top of mind. Whenever you asked someone in Europe where they would buy fashion, we're already way ahead of any competitor. For example, in our DASK region, our unaided brand awareness is 2.5 times higher than the next best competitor. We had 3,000,000,000 visits in 2018.
So that makes us already like the most visited fashion destination in Europe. But more importantly, customers come to us directly. And so not only that the traffic is increasing, but the share of direct traffic has gone up from 70% to now 90%. And I think those numbers they show quite clearly that we're already on that way of becoming the starting point. All this is especially pronounced if you look at the usage of app.
I mean, our customers are clearly gravitate towards app. App has become our biggest sales channel already. By now, 44% of our GMV. And if you want to take an indicator for the future, look at young customers. Customers below 25, they're already at 60% of their purchase through app.
And then those customers who pick the app, they're extremely engaged. They visit more frequently. They spend more time. They look at more products. They shop more, 30% uplift in app users in GMV.
And they're happier, 8 points more in NPS. But I think if we look at all this, at the general consumer trends, at fashion behavior and at our own data, it very clearly points in one direction that people are picking that one favorite place for fashion that we are in the best position of actually building the starting point. But now all of this is not entirely new. We had those ideas and those hypotheses already years ago, and we invested quite heavily into this. Just now we see very clear proof points that this is actually happening in progress.
Our early platform approach was a bit ample. Like we tried out different customer propositions. We invested in different B2B services. So now it's rather about taking all those learnings and bundle those learnings, all our efforts, our investment in like one clear joint goal to become that starting point for fashion. So, in order to do this, to realize this, I mentioned it that our platform is quite crucial to scale our business.
That's why I would hand over to Robert to explain a bit more how we aim to build that.
Thank you, David. So how do we achieve to become the starting profession? We believe the only way is with a platform strategy that really aligns our interest with the interest of fashion brands that enables them to help us to build the proposition for okay, here. So we believe the only way is with the platform strategy that aligns our interest with the interest of fashion brands, that enable them to really help us to build a proposition that qualifies for being the starting point for fashion for our consumers. And ultimately, what customers want is like a flawless selection at one single destination.
So when they think of Zalando, they can think of like if it's not on Zalando, it probably doesn't exist at all. And what is well now is when the ordering is as easy and convenient and fast as possible as it possibly really can get. We'll discuss the customer proposition in more detail in our later section today. At this degree of flawless selection and strong convenience, we can only offer by enabling very strong partnerships with our fashion brands, by connecting their warehouses, by servicing our warehouses to them, by even connecting their offline stores to us. We're making it feel very comfortable to offer the entire assortment on Zalando by putting that into the driver's seat of their business, putting that into the driver's seat of their brand on Zalando.
And we do that by giving our brands access to the European digital consumer. So more than 3,000,000,000 visits we had on Zalando in last year, 3,000,000,000 visits that are interested in fashion highly relevant to the fashion brands. And by working with us, a fashion brand can easily focus on its core competencies, like building beautiful merchandise, driving its brand. And for the rest, they can really leverage our infrastructure, our reach, consumer reach, our expertise in technology and our e com infrastructure. And we are then really in the sweet spot.
So the platform where everybody invests in. So customers invest in their time, share their profile, tell us something about their sizes, we'll learn more about what they like in fashion, what they don't like. Brands invest their resources because it's the ultimate gateway for them to drive in the digital business here in Europe. And the more customers invest in it, the more brands invest into it, the more powerful our platform will get. So ultimately, we service our assets of consumer reach and technology to the brands.
And in the same time, we as well limit our inventory risk. So our platform strategy is about creating win win win situations, wins for the consumers and customers, wins for the brands and wins for us. So we have been driving this deep transition of our models now for a few years now. Then 2018 was a year where we achieved a number of very important milestones. So first, like our partner program reached the biggest scale in absolute terms and crossed more than €500,000,000 in GMV.
So now more than 10% of the consumer demand, which is of our platform, is actually fulfilled by the partner program. Our Zalando fulfillment solutions more than doubled its share of our partner programs since 2018. So more than 25% of the items of our partner programs are shipped out of our warehouses at better unit economics for our partners and greater customer satisfaction and brands still own this business. Our marketing services that start to get heavily used and frequented by the brands. So brands increasingly by their visibility on our platform, They engage with us to drive more traffic from outside on the brands' destinations of Zalando.
And they use as well our influencer solutions to actually tell their brand stories to the relevant customers. In 2018 alone, our ZMS has grown by more than 60% year on year. And now since we as we optimize this product and start to market more, just in general alone, they have grown again 75% year on year. So it continues to accelerate now. Maybe even more important, 2018 was a year where we made great progress in solving the conceptual questions of how to scale a successful platform business on Zalando.
As we're actively disrupting our own wholesale model, getting the scaling of the platform a process very, very crucial to us. So and then the growth of the Partner Program, we have encountered 3 major challenges, which now have been resolved or where we have a clear path of how to resolve them going forward. So first, the partner program fulfills orders that are not fulfilled by our warehouse. They actually yielded a lower customer satisfaction than our own wholesale orders. This has now been resolved through very strict performance management with our partners and obviously as well with the scaling of ZFS where it really comes out of our warehouses.
So now the NPS of partner program and wholesale is on very similar levels. 2nd, our partner program has a lower profitability than the wholesale business on a GMV basis. Now we target similar profitability on a GMV levels between wholesale and partner program as we continue to bundle like very attractive services, B2B services such as fulfillment solutions or ZMS into this proposition. And third, we are facing the challenge that the scaling of the partner program obviously eats into the profitability of our wholesale business. So we ship less items per order.
And now with the scaling of ZFS, we have a solution which enables both. So it increases the profitability of our partners and as well it protects our wholesale business. So going forward, this will reduce the negative impact it has on our unit economics. So 3 major challenges and all of them we either solved or have it very clear how to solve them going forward. Speaking of fulfillment solutions.
So we have plenty of capacity already in the process of building. So our warehouse infrastructure of the 11 warehouses alone by 2021 will allow for the fulfillment of €12,000,000,000 GMV. But it's not only this unmatched scale of our footprint. This dense network also improves our convenience proposition to become increasingly fast to our customers. So by 2020, we will have a share of 30% next day orders, so up from about lower than 20% today.
So no single fashion brand has such a network and no other dedicated infrastructure tailored to fashion allows for such a coverage in Europe. And this is what we are now opening up increasingly to the fashion brands in order to drive their digital business in Europe. Our marketing service now have developed into the ultimate gateway for our brands to grow on the platform and drive their brand communication. And beyond the organic visibility of our brands, we enable them to connect directly to the Zohano consumers through ZMS. And over the past year, this business has grown very substantially.
So several hundreds of campaigns from our fashion brands are live every like every single day at the same time across all Zalando touch points and drives traffic to the brand's destinations on Zalando. And over time, we added a lot of different service on the marketing value chain. We increasingly can make a difference for consumers and as well for brands. So for example, our influencer product, Calabri, we understand better than anybody else of what kind of fashion audience an influencer has, how to price a campaign or for which kind of campaigns to engage them So on Calabrio, we have more than 5,000 in fashion influencers across Europe, and we have provided coverage of more than 600,000,000 followership on Calabrio. And in Consumer Insights, another product, we provide brands with unparalleled insights into benchmark performance in Zalando, for example, how they do in the organic searches of Zalando.
But even more, we as well building a data ecosystem that really enables them to enables the brand to build strong business based on our data insights. So for example, one recently one big outer brand designs new styles for the upcoming season and summer only based on our data insights that we provided them with. But probably most importantly, we're bringing this all together in huge holistic large scale campaign strategies. So for example, Under Armour last summer, engaged a European wide female sports offering customer audiences in their 20s to increase the awareness for Under Armour. So they reached with us 37,000,000 unique female users and generate a great marketing return on the best.
So I think in summary, like to sum it up, so 100 of our top brands are loyal customers of our ZMS services. And a large and increasing proportion of them really drive their business, optimize their visibility on Zalom on a daily basis. So and therefore, we are very, very convinced that ZMS will be a major part of the monetization of the platform going forward. And with that, I will hand over to Ruben, who will now translate you all this into the financial numbers.
Okay. So let's talk about some numbers. What I would like to do in the 3rd part of the presentation is really to explain to you how the platform transition can help us to build a superior business model in the long term. I think like any big business transition also this one has its cost. And we have talked about some of that cost in sort of the first presentation and the last earnings call.
But this is really to bring across that we are convinced that the long term benefits will by far outweigh these costs. The long term benefits are increased scale, increased market share and a really attractive margin and cash generation at scale. So this page, in one form or the other, has been, I think, in every single investor presentation I have done over the last 9 years, yes? And I'm sure many of you know it. Sometimes the market is in the square.
Sometimes the market is the circle. It doesn't really matter. The key message is really to bring across how small we are compared to the opportunity that we have ahead of us. And I like this page actually more of all the pages because when I prepare for these sessions, I think this is the one that always also creates clarity in my mind that really there can only be like one number one priority goal for us, which is capturing market share and capturing growth as long as the window of opportunity is still there. So let's look at the opportunity.
The overall fashion market in Europe is forecasted to grow to a level of more than €450,000,000,000 in the next 5 to 10 years. So I think that's a big enough market. Compared to that, we are still tiny, like 1.5% market share. Secondly, the online portion of that market is forecasted to continue to grow to more than 25% online share. That might feel like a high number, but if you compare it to other consumer categories, actually not that high.
So consumer electronics in the U. S. Already is above 30% and is forecast to go above 40% in the next 5 years. We have said before that our own ambition long term is to serve more than 5% of the overall European fashion market, which would correspond to about 20% of the online market. Now why do we think that is feasible?
I think there are 2 ways of explaining it. The first way is to look at other online aggregators and the market share that they have been able to achieve because as David explained, we really want to be that online aggregator for fashion in Europe. So for example, 80% of hotel bookings online in Europe happen through Expedia or Booking.com. About 50% of the online book sales happen through Amazon. We know that Alibaba in the Chinese online market has a share of about 60%.
So I think that gives you an idea sort of how high some other of these platforms are aiming. So I think in that context, aiming for 20% of the overall European online fashion market doesn't seem out of reach. I think the second way to explain it is actually to look at our own numbers. And as you know, we have already shown that we can reach a 5% market share of the overall market, which we have already achieved for shoes in the DACH market, which corresponds to probably a 25% share of the overall online shoe market in the DACH region. So this continues to be a really high ambition, but I also think it's feasible.
But we also know there are certain things that we really have to get right if we want to get to such a scale in the future. And those are the 2 things that David and Robert talked about. So the first one is really to make sure that we are the starting point, that we are this destination that consumers automatically gravitate to whenever they want to shop fashion. What does that mean financially though? So to just give you one example, we talked about how we already have more than 26,000,000 active customers.
That is already almost 7% of the European population. We are serving them with a share of wallet of about 25%. So if we really are successful to build these deeper relationships and take the share of wallet up, that already yields quite some significant growth potential in the future. And we'll need to achieve that if we want to come to something like a 5% market share overall. The second thing that we have to get right is really this platform transformation.
That's what Robert explained because this really yields a much more scalable business model. Why is that? Because it creates very clear incentives and a very clear and efficient separation of tasks. The brands get in the driver's seat. They get to do all the fashion.
They get to do all the content. They get to do all the merchandising. And we really focus on those parts of the ecosystem that are highly scalable, reach, technology, logistics infrastructure. Now what are some of the important milestones on this way towards a sort of our long term ambition? We think there are 2 that I would like to point out.
The first one is we want to grow to about €10,000,000,000 in GMV by 2020. I think that's a number that we also have talked about previously and that we continue to aim for. And then we really want to take the business to a scale of about €20,000,000,000 by 2023, twenty 24. So that means we actually intend to build the scale of this company in the next 5 to 6 years. I think there are few companies in Europe that have this level of ambition to grow at such rates and already are at such scale.
Now on the journey, how will the business model mix evolve? So we think that about 60% of the volume equates to about SEK 12,000,000,000 will be through wholesale, which is our current core business. It will continue to grow. In order to reach these targets, it has to more than double the scale over the next 5 to 6 years. But as Robert explained, we expect the Partner Program to actually grow faster because of its scalability to about 40% of our business.
Right now, it's about 10%. Now as you know, the high share of the Partner Program will mean that also GMV and revenue will be more different in the future because for the Partner Program share, we only account for the commission. So we expect CHF 20,000,000,000 in GMV to translate roughly into CHF 13,000,000,000 in revenues, with a growing share of that coming from commission income, ZMS fees and ZFS fees. That also means that the CAGRs are going to be different. And we already hinted at that in the guidance today.
So we expect GMV to continue to grow at 20 to 25%, whereas revenue over the next 5 years will probably have a CAGR between 15% 20%. Now building all of the scale, of course, also has a purpose of building scale now and then being able to enjoy the benefits of scale in later years. And I think that is already today something that really differentiates us from our online fashion pure play competitors, our ability and our willingness to invest today into the scalability of our business and to have the benefits in the years to come. Essentially, all parts of our business are a scale game, right? So reach and customer acquisition.
David already talked about the vast reach that we have created in the European market. Now think of a €20,000,000,000 scale. That means we would have more than 40,000,000 active customers. That's more than 10% of the European population and aiming to serve them a really high share of wallet. When we come to that stage, obviously, we will become even more interesting for our brand partners.
So already today, we have a really special partnership with them. But if we manage to get to such a scale, imagine how really will be their number one digital channel to the European consumer. Data and technology clearly is a scale game. Scale gives us the ability to really invest like nobody else in technology innovation. Scale gives us access to the biggest pool of data that the European fashion industry ever has seen.
And logistics, I think it's super clear. Over the last years, we have invested a lot of money, a lot of backs into really building the number one fulfillment infrastructure for fashion e commerce. And if we continue to do this, we believe we built an asset that the entire fashion industry can rely on. Now we think that scale will result in a bigger resilience of our business model, but also more attractive long term margins. And I think this is a page I think you will find this page interesting because we revisit the discussion around target margin.
In the last years, always the question came up, what does the partner program, how does it contribute to your target margin? How does it change your target economics? And we have not answered that question in great detail because we always felt the partner program is still small, but we think now it has reached the scale that we can maybe give some more disclosure on this topic and it will maybe help you to better understand what we are trying to achieve. First of all, I have to make one big disclaimer that this is a target model discussion, So we are talking about the profitability potential of our business once we reach something like a steady state. So for example, once we start to grow in line with or slightly faster than the online fashion market.
It is not realistic to achieve a margin like this when you still continue to outgrow the market by a factor of 3 or 4. Okay? So with that disclaimer, let's take a look at some numbers. So first big part of our business, wholesale. We expect the wholesale margin in our target model to be between 6% 8%.
That is slightly lower than the number that we communicated in the IPO. Why is that? It's really the impact from this transformation that driving a business model where wholesale is not 100%, but only part of the business, leads to some complexities for this wholesale business, for example, the impact on the basket that we already have discussed. The second business model comes into play, which is the partner program. We expect this to have really high target margin of 20% to 25%.
Why is that? 1st of all, because it's a commission income, right? So the commission that we book essentially has a really high gross margin. Secondly, it's because of the scalability of this business model that we talked about. And it's also because of the high profitability of some of the additional revenue streams that will come into this.
For example, Robert already talked about our Zalando marketing services. On a group level, if you take those 2 together, that would lead us to a target margin of 10% to 13%. So I think a very healthy double digit target margin level. The negative effect of the transformation on wholesale will be overcompensated by the positive effect of bringing a more scalable business model into the mix. I also would like to point out that compared to what we discussed during the IPO, of course, one great benefit of this is that we will be able to enjoy this target margin on a much higher revenue base because we just continue to grow the business for an even longer time if we go for this €20,000,000,000 target picture.
Now I quickly would like to point out some of the key assumptions that have gone into this model. So number 1 is for the purpose of this model, we have assumed partner program share of about 50% of GMV. The reality is that in the very long term, we don't really know what exactly it will be. It could be sixty-forty. It could be forty-sixty.
The reality is also in that model, it doesn't make the biggest difference because in terms of the profitability relative to GMV, the two models actually turn out to be similar. The second assumption, ZFS share, we forecast at about 75% of the items shipped through the partner program. That is pretty high, but we think the model is really proving to have great benefits. As Robert explained, it benefits our customers. It benefits our brand partners because it makes their fulfillment more feasible and cheaper because they get to leverage our scale.
And for us, it mitigates some of the negative impacts on our wholesale business. Assumption number 3 is that we think ZMS can be a really big part of our business in the long term. We estimate these revenues to be at about 3% to 4% of GMV, and we think this is a really highly profitable revenue stream, which I think is backed up if you look at many other marketing platforms that you can see. The 4th assumption is coming back to scale that we will see operating leverage really across all cost lines and fixed cost regression. I think that's quite clear.
And last but not least, if you want to translate this into cash flow, we would assume working capital to be broadly neutral and CapEx only slightly above depreciation and amortization because in this target picture, of course, we still could continue to grow with the online fashion market. Okay. To summarize this, maybe to go to the cost lines where you see these arrows, right? So in getting to this target margin, we assume gross margin to be higher compared to today, mainly driven by the nature of our commission income and ZMS income. We expect fulfillment costs to be around similar.
We will continue to invest into convenience. We'll also continue to see factor costs going up. That's also baked into this. But we also will have some additional revenue streams that don't have any logistics costs, for example, the commission income or ZMS fees. On marketing costs, we think long term, we'll continue to see operating leverage.
I think as we have seen also in the last years, as our active customer base grows and gets more and more active, that makes our marketing more efficient. On admin expenses, we will see this scale benefit. And I think here also we come back to something I said earlier in the earnings call that going forward, we put really high emphasis to make sure that our business really scales faster than our cost base. This was a lot of information. Should I repeat it?
No. Okay, great. So we have talked about the target margin. Now really to underline, this is not something that will happen sort of next year or the year after or the year after, but really to talk a little bit about our transition towards the target margin. How do we think about that conceptually?
So in my mind, there are 3 phases. The first one we call the transition phase, where really most of that reshuffling towards the platform business is happening. So that will be sort of the next 2, 3 years. In that time, we expect to continue to grow 20% to 25% in GMV. We expect a margin level somewhere between 2% 4%, which is driven by the continued investment into that strong growth and also the adverse effects on the short term that we see for managing this transformation.
From a cash perspective, we expect to be cash flow negative, driven primarily by the CapEx, which we expect to be between 4% 5 percent, also here driven by continued investment into ZFS and into the growth of our wholesale business. After that, we want to continue to grow fast. Of course, eventually growth rates might start to come down. But so after this transition phase, that's actually where we'd expect then margin levels to increase as especially the benefit from ZMS and the commission income starts to kick in and starts to have a bigger and bigger effect on the P and L. And then so the 3rd phase, someday in the future, we would expect to reach that target model, however, in combination with a growth that is roughly in line with the market.
Now obviously, these are big targets. There are many things we have to get right to get there. There are many exciting projects that we want to work on. And in that context, we actually discussed and agreed with the supervisory board to extend the management board in order to have even more execution power, even more expertise in that group. So going forward, Robert will be focused on marketing and sales, which is was also his focus in the very early days of Zalando.
David, that's not a very big surprise. He will continue to focus on our assortment and continue to work with our brand partners because that is such an important part of our business. I will start to focus more on strategy and long term projects. So I'll step away a little bit from the very operational mode and get more into a long term mode. And we'll have 2 new members in our team.
1 will be Jim, who's sitting in the 1st row in the red sweater. You will also have the chance to meet him over lunch, and you will also see him in the customer section, which comes next. He will join our team as CTO. We think it's really important to have his technology and product expertise in our team. And then the 5th member will be David Schroder joining as CFO.
He is like whenever we talk about our logistics network, so he is the main driver behind that over the last 9 years. And we really think he has proven that he knows our business extraordinarily well. And this is why we think he will be able to really help us to also steer our business well from a financial perspective. We decided to start to work on that setup as of April 1. Now maybe to, at the end, summarize again what we have said in this session, right?
We started off by saying our vision is really to be the starting point for customer, the destination that all the customers the app that all the customers naturally gravitate to when they think of fashion. Secondly, we have explained that the major building block of getting there is the platform transformation, and we have talked about the building blocks, partner program, ZMS, ZFS. And then we have closed it up by explaining how that really will lead into a very attractive long term business model characterized by high margin, double digit margin and high cash generation at scale. We think that this is the right path forward. This is the best path to create the most value for customers, the most value for our brand partners and the most value for our shareholders in the long term.
And this is why we're really excited about this direction. And with that, we can come to your questions.
So we're again open for questions. The rule is still the same, who states southern. We'll see you when the queue comes up. So you got lots of information on 28 sites. So we'll start directly the Q and A with the row number 2.
Please state your name and the company
then. Yes. Thank you
very much. Charlie Muir Sands from Exane. I just wanted to get back to your business model. And apologies, I was doing some of the maths on the back of a FAG packet. But the way I encircled it was that you expect to get, let's say, roughly CHF 12,000,000,000 of revenues from wholesale,
60 percent of the GBP 20,000,000,000.
Of GMV, GBP 12,000,000,000 of GMV?
Yes. But that's the wholesale model, so that would be GBP 12,000,000,000 of revenues. So that GBP 1,000,000,000 of revenues from everything else. And that's on £8,000,000,000 of GMV, which is only 12.5% margin, not the 25 percent. And your fulfillment costs are clearly more than 12.5%.
So I just wanted to sort of understand that.
So the important thing of GMV to keep in mind is that as it is measuring what really customers are spending, it includes VAT, right? So, dollars 12,000,000,000 wholesale translates into roughly GMV translates into roughly 10 in revenues. Most companies use that definition and it's also helpful because when you talk about market share, right, and that's the logic that we use, the market also includes VAT. Right.
And sorry, so those margins at the bottom of the page you're talking about were percentages of GMV Inc. VAT or
That's percentages of revenues. Like our adjusted EBIT margin that will also not change going forward is sort of as percent of revenues. So when you look at it as percent of revenues, there is a big difference. And as I tried to explain, that is primarily because of this commission mechanism that you get the commission and you don't really have any cost associated to that. So the gross margin is really high and that leads to a very high margin relative to revenues.
If you look at the 2 relative to GMV, the difference is much smaller, yes.
And then the second question is about the CapEx. I think a year ago, you were talking about CapEx that's of 6%, 6.5% of sales. Now you're talking 4% to 5% and not just this year, but sort of for the next few years. Can you talk about is this a structural level of efficiency that you found relative to your previous budgets? Or is this about phasing?
I think it's probably 2 effects. One is really that we have because of these high CapEx level, we have put more work into figuring out how we can build this network in a more efficient way. So I think Birgit mentioned also in this earnings call this morning that we will have, for example, inbound distribution centers, which will increase the turnover that we have in the fulfillment center and therefore make our network more efficient. So that is something that we have incorporated into our planning. We have also adjusted the phasing a little bit because we felt in some areas we are too conservative to maybe have some capacity coming in too early.
And I think a third effect is that we just in the process of doing this long term model, we have also made our long term CapEx planning maybe a bit more granular. And as a result, we come out slightly lower. I think in general, our philosophy is still to continue to invest into this footprint because we think it's a great asset and it's a great differentiator. But we think it actually will be a bit cheaper than we initially thought, which is good.
Charlie, let's start Magnus first.
Okay. Magnus Stroman, Handels Miken. Perhaps I can get back to the initial part of the presentation with the young app customers profitability of those younger customer cohorts. If they order more frequently, is the average basket size of this customer audience lower? Returns rate, is it higher, etcetera?
Yes. So we're going to share like some of the later court analysis in section right after where we not single out on apps or something, but like in terms of like last year.
Okay. So a cliffhanger on that one. Then on the Parton program, you mentioned here that the share of ZFS is now 25%. You aim for 75%. Could you perhaps describe how come you believe that such a large part of your partners would like to utilize your fulfillment since larger brands should possibly have a quite large fulfillment footprint themselves and being willing to utilize their own?
Do you want to take that?
Yes, I can take that. By the way, we'll also cover that quite in detail in the section. But to give you the short answer for brands, it's a huge economic benefit, a, because imagine in a partner program, how it works if you have an order from a customer, we have several items and then the partner has to ship 1 or 2 of them. So it's a lot of like single item shipments and the logistic costs relative to that order very high. So now if you move that in into our own infrastructure, we bundle the package.
So suddenly the partner, they only have to pay maybe a third of this logistic spend. So for them, it's highly more attractive. And we've experimented it with partners. Actually, we have, let's say, Inditex partners, for example, we started in a partner program model, but low price points are quite challenging in that model. So now they moved into ZFS, so that makes it extremely more attractive for them.
It gives a lot more reason to actually then invest additionally in wider assortment, better availability or even ZMS. And I think that just to complete the second part of many brands for them, they very actively use our infrastructure because the capabilities are a lot further along than their own. And that's why we even start offering that that we're even able to ship and for example to their own e com so they can actively use our capabilities.
So for example, would Massimo Dutti be prepared then to ship in a Zalando parcel instead of a Massimo Duarte parcel?
Yes. I mean, that's spot the right brands. Like we have Massimo, for example, we have in the text the 2 different models. So all of the younger and lower price points are moving to ZFS. Masimo is actually in pure partner program.
So that works because the price points are higher, so economics are better. And of course, they might also care more about branding. But even for them, I think they also take all those learnings we do with the other brands. So it's also in quite a tough discussion if that's actually even the better model for them to go.
This is Tushar from Goldman Sachs. Two questions. Just trying to understand within your assumptions of GMV, how much cannibalization impact are you taking on the wholesale side of the business given only the 50% of partner programs are incremental orders, I'm assuming the rest is cannibalizing the wholesale channel.
55, sorry, I didn't understand the question.
So I'm just thinking if the partner programs increases so dramatically, do you see an impact of cannibalization happening in the wholesale channel? You need to adjust your purchasing because people might be more I mean more SKUs are being listed on a partner program. They're picking up SKUs on the partner program and not actually picking up the SKUs from the wholesale side of the program. Is there that impact kicks in or no?
Yes, I can also take that. I mean, first of all, like if you look at last year, for example, of our partner program, €190,000,000 is actually a backfill mechanism. So those to explain, it's really like things we have already bought and the partners only ship them once we're sold out. So that already makes up quite a proportion. You imagine, I mean, those would be customers that would have left unhappy or didn't find like their size available.
In the additional styles, we do look at brands quite carefully. I mean, we have a segmentation logic where actually you see how relevant our brands, how much incrementality do they actually add. And we have strong brands like Masimo Tutti, we have Mango. I think exactly those cases where we see they add a lot of benefit. And we also see still, like although we have already quite a wide assortment, if we add more relevant brands, we also see that this actually drives volume.
So we see a lot of incremental value and not unnecessarily undermining what we have in our wholesale.
Second question in terms of your long term gross margin assumption, which is going up. So can you just clarify, are you expecting wholesale gross margin to go up as well or it's just incremental partner programs just adding the gross margin benefit?
We think also in a business that grows so much in scale like our wholesale business, of course, there will be opportunities to improve gross margin from sort of more scale, optimized pricing. I think there are sort of many, many ideas. But really, the bigger effect, of course, comes from the shift in business model, right? If you all of a sudden have 40% of the GMV with a very high gross margin, obviously, that's a much bigger effect.
I mean, the reason I'm asking because during the IPO, your gross margin was between 45 percent and 47%. Currently, it's close to 42%. So I mean, to get to the 6% to 8% EBIT margin, is it all operating leverage and the OpEx cost, which is much higher than what you expected during the IPO process, by the way?
Yes. There would be some improvement in gross margin. We actually expect to also see that over the next years. I think 2018 for several reasons also was a bit tougher for the gross margin. Also as we discussed, of course, to invest in gross margin, to offer great prices and to invest into marketing are really, to some extent, the same thing.
They just show up in different cost lines. So maybe that's also something to keep in mind.
Mind.
Paul Buney from Bank of America Merrill Lynch. Two questions from me. You assume the marketing spend to go down in the long term, but some of it will have to relate to GMV on the partner program. So ultimately, it means on GMV, they go down even more because in revenue, they come down. Can you explain that a little bit?
Yes. If I understood you correctly, marketing would come down faster as percent of GMV than as percent of revenues,
right? Yes.
But you're assuming your long term expectations that in percentage of revenues it goes down. So I mean
Yes, exactly.
So which is the effect we also have seen over the last 5 years, right? I think 5 years ago, we started at I think it was like 12% or something. And now we are sort of more towards 6%, 7%. And I think the main driver behind that is just sort of building this customer base means you acquire new customers once, but then they stay with you and grow their spending, which is then not necessarily tied to marketing spending. So if you look at the last years, we have been keeping our absolute spending roughly stable, but grown our revenues and then you have this effect.
I think more recently, in the Q4 specifically, we have increased our absolute level of spending because we thought good we saw good ROI investment opportunities in marketing. So you might also see some of that. But really for the long term, I think it's pretty clear that we'll come down as a percent of revenues.
Thank you. And second question from me. About the economics of the Partner Program plus Zalando fulfillment solution at present, Can you let us know a little bit not in 5 to 10 years, but is it kind of accretive as a package right now on a relative and absolute level?
Yes. But I think in general, we had the earnings call to talk about Q4 and like the next year. And I think now we really try to talk about the next 5 years, right? And I think there the story of ZFS is pretty clear, and I think the progress we are making is really fast. I can understand that you're really interested in the next quarter, so maybe let's talk about it over lunch.
But I would like let's focus here on the 5 year questions maybe.
Okay. So in 5 years, you think Zalando will be more solution plus Zalando partner program will be what because it's not going to be 20% to 25% to 75 years, right? It's a 10 year target, but we don't really have clarity over a 3 year to 5 year view even.
So for 5 years, the answer is yes. Sorry, for the target model, the answer is yes. And I think also when you think further out, as the partner program continues to pick up and we see I mean the growth rates of ZFS are just really strong, right? I mean we already in January, we again see that the share is picking up. So I think that is something that can also will have an effect also in the coming years because as David mentioned, it really creates this win win for partners and for ourselves.
Thank you. Volker Bossel, Baader Bank. Looking at your targets from a product split perspective, first on beauty, how much beauty sales have you affected into your targets? And could you share with us your first experience of cross selling experience between fashion and beauty? And second, also how much incremental new product segments have you factored in, for example, home accessories?
What's your view on that to expand in this kind of direction? And is that part of your long term guidance already?
Yes. So first of all, when we talked about the market share, right, with 5%, that we purposefully just focused on the fashion market, right? So the more than €450,000,000,000 in 5 to 10 years, that's only fashion. Beauty would come on top of that. Home accessories and furniture would come on top of that.
So I think those are opportunities to further expand our target market. We have not included that yet because we think beauty is just too early. I mean, to be honest, we don't know how big it's going to be in 5 to 10 years. We think it can be significant, but we I think it doesn't make sense now to start to forecast any market shares there. Although I think in principle, I don't see like a structural reason why we shouldn't be able to aim for similar market shares in the long term.
When I think about the sort of ambition of €20,000,000,000 I hope that beauty will actually help us to some extent to get to that very high ambition and maybe also sort of home appliances will help us in some way at some point to get to that ambition. But in terms of the market share, we have not included it into the target market.
I can also add a bit from a partner perspective. I think beauty is like an extremely interesting case. From a consumer perspective, I think it makes sense because it's very related to fashion. And from an industry perspective, that's why it's also so highly interesting because we have this access to all those fashion customers. And that is something that beauty brands, they usually don't get because they work with other pure play beauty partners.
And they'll say they're especially interested in actually getting that fashion angle in. And that for us it opens up I think a whole new world. We have partners like Estee Lauder, those international players coming on board. And those are also the players that are very interested, for example, in doing joint marketing. Like ZMS, for example, is super relevant service for them to actually target the digital audience.
So that's why we haven't fixed the factored that into that calculation. But I mean this is really I think that opens up like new interesting opportunities.
So have you already experienced that the cross selling experience is working as you expected?
The what?
The cross selling opportunities out
of Yes.
I mean beauty, I mean, of course, it's still I mean, it's fairly small in comparison to like the overall, but I mean, that's the general idea. Like, we have all those fashion customers, and we know those customers. I mean, we know they purchase a lot of beauty items, yes? So now we have to increase awareness. So if you look at the past months, I mean, it's been very quiet.
I mean, we have not pushed it on them yet. We actually start campaigning it. For example, now in April, we actually start more actively communicating, yes, because I mean, it's a bit of now always start to get like the offer and the assortment really right before we claim it too much. But in general, I mean that's I think overall our game. Once we have that access, once we have customers quite locked in, then we can offer them more and more and get more and more of their basically of their wallet, of their overall spend throughout the year.
Perhaps one more question from Dan in the back on row 7. Thanks, Patrick.
Dan Herman from Citi. A couple of questions. First of all, on ZFS. I think previously you've spoken about you charged ZFS at a logistics margin rather than charging a sort of fully loaded commission basis like Amazon would do for its partners. Is that something you're minded to change over the next few years as ZFS grows?
And then related to that, do you think the terms that you give on ZFS are fairly generous to the brands? And do you think in your planning assumptions, have you assumed better terms for yourselves as you go forward?
I can maybe start with the second. I'm not sure if I got the first one completely right. So for generating our margin through that. I mean, of course, an additional add on, but it's always it's a means, yes, because we think by offering that, it's a huge incentive for partners, like I said, because we add capabilities they don't have it economically. It's way better for them.
So that incentivizes partners to actually go all in to really show all the assortment, go into a lot of availability. So we believe that's hugely beneficial for platform because we do more in GMV, again more access monetize, for example, through marketing. So overall, ZFS is rather like games and that's why we're also priced it in a way that it's attractive for partners, that it actually makes sense for them to very actively invest into it.
Okay. So in your sort of long term planning assumptions on margin, you don't expect to charge the partners more than you are at the moment for ZFS. You can keep the commission rates or logistics rates where they are.
Yes. I think on ZFS, I think the assumption is pretty similar to what David just explained. I mean it is earning a good margin. It's a viable business in itself, but it's not, I think, our main way of earning money in the future, especially if you compare it to margin profile, for example, on Zalando marketing services, right? And I think those are the areas where in terms of margin development, I think there will be significantly more upside as we scale it.
Okay, great. And then maybe if I can just squeeze one more in the full launch. Again, on the relationship with the brands, you've obviously gained a huge amount of scale over the last few years. When you're talking to the brands, what's the most important terms that you're trying to get from them? Is it better pricing, better cash profile?
Or is it availability of products, exclusive products? Where do you prioritize your relationship the brands and what you ask them for?
So for us, it's very clearly on the customer side. I mean, we say we want to be that starting point for fashion. So product access, that's one of the most important things. I think that's also one of the biggest differentiators we have. So, if we go to brands, I mean, what we ask for is we want to, a, get all relevant brands on board and with the brands we want to get all the relevant styles.
And that's not easy if we talk to Nike or Adidas like to really get this full access, latest styles, new stuff, even exclusives. So product access is the first priority. And then the second priority would also be around content and really create like those exciting experiences, because that is also something if we want to personalize the experience more to our now 26,000,000 customers, we need a lot of exciting fresh stories. And that's what we need. And of course, I mean, in the 3rd, I mean, the I think the economic results, I mean, we aim for a model that is actually attractive for both ends, yes?
I mean, we need of course, we want to have our margin, but we also have to find a model that actually provides a good return for brands because we I think we have a very different relationship, not so much like this supplier retailer type of thing, but it's rather like those partnerships we want to create like those situations where it makes sense for brands to actively invest into us.
I think that was a good conclusion of that session.
So Andy, welcome to the second part of our Capital Markets Day. So joining me on stage is now Jim Freeman. We talked about him. So Jim joined Zalando initially in 2000 like in April 2018. And prior to his role at Zalando, he was responsible for launching and scaling the Amazon Prime Video and as well for long communication experiences on Alexa and Echo devices.
So we are super excited that Jim is now taking over the role of our CTO as of April 1 and driving these customer propositions really to the scale that I that we will talk about now. So as we explained in the main presentation, we believe that being the starting point for European Fashion is the big prize to win. And we want to take a deeper look at the customer side of our strategy focusing on very much three key messages. 1st, we have made very strong progress in being the starting point for Fashion for Customers, which is evidenced by healthy development of our customer base. 2nd, in order to be the starting point, we doubled down on our compelling customer experience and we continue to invest key areas of our proposition.
And 3rd, going forward, we will prioritize our goal of being the starting point for every for our most committed customers over being just another fashion destination for many. So we do this by we achieve this by differentiating our customer proposition going forward and investing into Zalando Plus. So let's jump right into it. We have made strong progress towards being the starting point for fashion, which is evidenced by very healthy development of our customer base. So as you know, in the past, we have been super successful in winning more and more customers.
As we have shown you already in the first presentation today, we more than doubled our active customer base since 2013. And only in the Q4 alone of this year of last year, we added 1,300,000 more active customers, which is the biggest net increase of active customers for 5 years. And as you know, these customers shop more and more often with us. So the order frequency now stands at 4.4. And this all is actually very much done by our ever increasing focus on customer satisfaction.
So from 2013 to 2018, we managed to increase our NPS for our customers by 40 percentage points. And even now in January, it has peaked another all time high. Last year, we shared Discord and this with you for the first time, you were pleased to see that now. So today, 1 year later, we wanted to present you with an update on that. And you can clearly see that the positive trends that we discussed with you last year are very much still intact.
So in this chart, you see the total GMV per cohort per order year. And on the gray the light gray actually shows the cohorts that we have acquired before 2014. And second, on top of that are the cohorts that we acquired in the years thereafter. So what does this chart actually tell us about our customers? So first, all cohorts grow again over time.
Once a cohort has digested the natural churn of the 1st year, they then grow again. So on average, 5% per year. And second, the 1st year churn is already coming down. So last year, we told that the churn in the 1st years for 2014 to 2016 cohorts has actually come down 25%. So now I'm pleased that to actually tell like the 2017 cohort, actually their 1st year churn was even 13% lower than the one from 2016.
So 3rd, every new cohort spending is bigger than the spending of the previous ones. So since 2015 each year, our new cohort spending was on average 8% larger than the spending of the previous year's cohorts. And lastly, it was even 10% higher. So I think this really confirms that our customer base continues to be very, very healthy. And it also confirms that it does not only make sense to invest into new customer acquisition, it makes as well sense to invest into the development of our customer.
So we need to create deep relationships with them and become their starting point for fashion is what we focus on, and this is really the price to win for us. So how do we define the starting point for fashion? So the starting point for fashion business for us is ultimately the brand, the destination, the service that people have in mind where they gravitate to. So when thinking about discovering fashion, getting advice, getting inspired or just buying fashion, where do people actually start this fashion journey to? So where do they go to?
And we're at the starting point of fashion for our customers when we are top of mind, when we are top of consideration and ultimately as well the top choice for our customers. And we're doing great in all these areas in these aspects of the proposition already. So we're the most known fashion brand in Europe. So we have an unaided brand awareness of staggering 70%, in some markets even 80%. And we're not only the most known brand, we as well the most visited one.
With 3 there's more than 3,000,000,000 visits, 90% of this topic is coming direct. So people naturally gravitate to us. And when it comes to Top Choice, our share of wallet was very great. So our 26,000,000 customers, which is 6% of the European population, they spend on average about €250 with us, which is roughly like 25% of their annual fashion spend. So this is great, but it's actually far from the potential of our platform.
If you think about like how many searches when you search in the Internet, how many searches didn't you start on Google? So how many how much music didn't you actually listen to on Spotify when you are subscribed to Spotify? Or how many hotel rooms since you really book on booking.com. So as a platform, when you really manage to deliver on all the customer wants and needs, there's actually no reason to go anywhere else. So you're not limited in 25%, 30%.
You're only limited by 100%. So in delivering on these reasons why our customers will spend another 75% with us and why another 94% of Europeans will join Zaland now is what Jim is now going to tell us a little bit more
about.
Thanks, Robert. So now we want to look at how do we take this opportunity we've been talking about all day long and really unlock that. What are the areas of focus we need? And how do we make this happen? Becoming the starting point of fashion for our customers.
So, we're going to look at a couple of different areas where we believe we need to really continue to elevate the experience, make this happen. And we start by imagining what would our customers say if we did make it happen And what key areas would they focus on? And first, we imagine them thinking of our assortment. And that assortment becoming so strong that they would say, if it's not on Zalando, it does not exist. Next, we think they would consider our digital experience.
And here, we imagine they would say, Delendo knows me and inspires me. Next, we think they would consider the convenience that we offer. And here, we imagine they would say, Zalando was so convenient, why would I go elsewhere? And lastly, we imagine they would say, no matter what my fashion need, Zalando is my one stop shop. So, let's look at these different areas in a bit more detail.
When it comes to assortment, there are 3 critical dimensions we consider. How complete is the offer? How fresh is the offer? And how desirable is it? We have a team that's been working hard on scaling our assortment and looking for more and more ways for brands to offer up their assortment through our platform.
And this is really paying off. You can see in Q4 of 2018, we scaled to over 500,000 articles available to our customers, a significant improvement over where we were in the past, 2.4x over the last 4 years. But it's not just about the size of the assortment, it's also about how fresh is the assortment. And here our teams have worked super hard to remove friction from the onboarding process, and we're now adding 1500 articles every single day for our customers, a 3x improvement over where we were 4 years ago. And as you'll learn in the next presentation from Dave and the team, it's also of course about the desirability of the assortment.
In 2018, we added, for example, Massimo Dutti, which is a popular brand in my household. But we ask ourselves, are we there yet? And the answer is clearly no, not yet. We've developed the capabilities in house to look at the incrementality of our assortment and understand the areas of opportunity that we have, and we see significant areas of opportunity. Not only that, we heard directly from customers every single day.
We received 200,000 size related requests from customers who have found something they would love to purchase on Zalando that's not currently in stock or available through partner program. So, we see huge upside in continuing our journey of improving assortment with the ultimate aspiration that 5 years from now, customers will be able to say, if it's not on Zalando, it does not exist, online or offline. Next, let's consider the digital experience. And today, I want to focus you on 2 complications. The first complication is relevance.
If you scale Assortment significantly, it becomes increasingly difficult to find the relevant items for one customer. 4 years ago, we began really scaling our engineering talent, and in particular, our data science talent, and they have taken on this relevance challenge. And in the last several years in particular, we've been building the operational systems and infrastructure required to make more and more portions of the Zalando experience highly relevant for our customers. And this is paying off. As you can see, engagement in our app has significantly scaled over time.
Now we're at 69 minutes on average per customer per month from 16 just 4 years ago. And the demonstration on the right of the slide illustrates how 2 different customers are receiving very different content based on their behaviors and their interests. And there are more and more areas of the experience that will benefit from this relevance engine in the coming months. The second complication, of course, is fit. This is a significant challenge for the whole industry, but obviously a special challenge in online.
The perfect experience would be one where every single item fits you perfectly. Of course, we're not there yet, but we're also making progress. We have a simple size recommendation product today that shows customers when something runs large or small. This is currently covering 86% of our wholesale assortment and driving a 4% reduction in size related returns for those products versus products that do not have that. The next innovation we're going to offer our customers is precise size predictions for them, picking exactly their size for a particular article.
This is currently available in certain markets and in certain categories. We're innovating on this, iterating on this and scaling this. There are just 2 of the complications we're tackling in the digital experience area, but 2 that are very, very important to our customers. Next, let's look at convenience. Convenience is a moving target.
It was delightful before, becomes a basic expectation. The way we focus our efforts is looking at how can we create the best convenience for fashion and solve fashion specific problems. And I'd also like here to talk about 2 examples. 1st is our Pay Later offering. The Pay Later allows the customer to make the final purchase decision in their own home after they receive the articles.
And this is a great experience for our customers and one that drives significant NPS, as you can see here, and it's one that we're currently scaling to reach a 65% share of our customers. The next example, of course, is the returns process. Returns are part of fashion. And here, our goal is to make it as seamless as possible for our customers. And again, you can see the super high satisfaction that we're able to achieve based on all the fashion specific adaptations we've made in this area.
So, we'll continue to invest in new forms of convenience for our customers with the ultimate goal of customers saying, why would I shop anywhere else? It's so convenient on Zalando. Now, we've talked about elevating assortment, the digital experience and convenience, all crucial areas to our strategy. But given our ambition to be the starting point for fashion, we also need to take a step back and reflect that not every fashion journey is the same, not every moment is the same. One day a customer may need very fast delivery, but the next day maybe they need style advice for a special occasion.
And maybe yet another day, the customer is looking for an exciting deal instead. Obviously, we've been investing over the years and exploring many of these different situations and what the offering can be from Zalando. But what I want to share today is when we evaluate the success of these investments, we look at them in 2 different ways. What is the direct impact? And also, what's the indirect impact in terms of other customer behavior changes that we see associated with these?
And as our data shows, customers who turn to Zalando for more of their fashion needs spend significantly more. But it's important to point out that's not just through the new touch point that they've adopted, it's also across everything. We believe there's significant leverage in the capabilities and experiences we've developed and integrating them deeper and offering them to more customers. So, we see ourselves as increasingly relevant to the many different fashion moments our customers have, and that's our focus on becoming the one stop shop for our customers. And with that, I'd like to turn it over to Robert to talk more about how we're deepening our relationships with our customers.
Thank you, Jim. So as you saw, we are working very hard now on these arguments for being a selling point. And you will see us both grow in numbers of our active customers and as well in their spending. Yet in some areas of investing into our proposition, we will face choices. So choices such as if we're limited in the availability of assortment, so whom should we actually show this to?
We have a certain share
of orders that we can deliver same day, so to whom should we actually deliver these orders first? And when being faced with choices like these, being the starting point for those customers that are most committed to us is the better route for us. So we'd rather have 25,000,000 customers that spend 100% of their wallet with us than having 250,000,000 customers that spend 10% of their wallet with us. Going forward, we will prioritize the rise of being the starting point for our most committed customers over being just another fashion destination for many. And this is more sustainable and as well the more financially attractive path to take.
And I'll show you why. So as you see, we like already our deepest customer relationships are the ones that are the fastest growing. So on average, we have grown our active customer base by 15% over the last 5 years. But if we only look at the customers that spent more than €500 with us, actually we have managed to grow this customer group at double the CAGR, at more than 30%. And these customers, they shop everything with us.
They shop from head to toe, from basics to professional pieces. And the great thing about Hermes, they are proportionately more profitable. So the yield is several times much more profit contribution per year as an average Zalando customer. So this type of very deep customer relationship is the relationship that we are very focused on. So actually in 2008, we started off with a very simple marketing message.
The simple marketing message was great selection, free delivery, free returns. And with such a simple marketing message, we started to educate the population around understanding fashion e commerce as a way to have this changing room experience from offline at home. So and with that, we built it towards the mainstream, so to make it a natural part of people's life. So in Zalando, we're really at the forefront of this mainstream. So now in the next decade, we're building on top of this, but tailor the experiences going forward.
So we still have a main entrance to Zalando, but we're rolling out the red carpet. So the red carpet to our most committed customers. And with this red carpet, we invest into those customers even more, which are already the most committed to us. We give them an experience where the salon is not anymore one of many choices, but it's like the only choice that people are very happy with, with spending 100% of their fashion spending with us. Or to put it differently, we are now adding to the general transaction mindset of Zalando as well a more subscription mindset for our most committed customers.
And one key lever to deepen this customer relationship is through our successfully launched membership program, Zalando Plus. And Zalando Plus exactly builds on these mutual commitments. So in Zalando Plus, customers commit to us by subscribing to an annual fee of €15. We commit to them by providing them the right method, the best that fashion e commerce has to offer, faster delivery, fashion advice, return pickups and many things more to come. And like today, Plus is available in most parts of Germany and we already see like very positive impacts.
So we see that we increase our share of wallet with these customers. In fact, they spend 2 to 3 times more than average customer already. So customer satisfaction increased as well quite a lot. And as a result of signing up to the Plus program, we see as well an increase in customer lifetime value. So that's why we are so fascinated about Plus.
And this is why that's why we hang out to roll it out further, 2 countries to follow in 2019. And as we scale Plus, we'll decide then which more benefits we add to Plus and which more countries we add to Plus. So ultimately, with the benefits that we're adding to Plus, we aim at really going through the steep relationships and to provide customers with no reason to use any other fashion destination out there to get ultimately to this 100% of fashion wallets that we want to have. To sum it up, we have 17 European markets that we're in, and there's about 450,000,000 people. So and everybody needs fashion.
Nobody is running around naked. And everyone spends of them about like €1,000 per year on fashion, offline and online. And as I said earlier, we have 6% of the European population, which is already on Zalando, so 94% to go. 25 they spend about €250, so about 25% average of fashion. So you will see us grow in 2 dimensions.
We're adding more and more customers to Zalando by actually delivering on these statements. What is not on Zalando doesn't exist. Zalando knows me so well, knows my sizes, knows my style, knows what I want that I'm actually so surprised. Zalando is always the better choice if I have many choices, always the better choice. And with Alano, I have with one stop shop, it covers everything on fashion, so adding more customers.
But when being faced with choices, you will see us as well grow on the other dimension in terms of our share of wallet by applying a subscription mindset by rolling out the red carpet to our most committed customers and really growing as well into this direction. And we won't stop until like every single European is on Zalando and spends 100% of the share of wallet with us. So that's we need a price to win and this is where we are on. With that, thank you very much. And we'd like to go to Q and A.
Thanks, Robert. Usual setup. Magnus, will you start again or so we start here. Okay.
Hello. Yes, thank you very much. Charlie from Exane again. Can you talk about what proportion of your German customers and or what proportion of their spend now is coming through Zalando Plus?
Well,
we so we just last
year tested our program. So and we see very positive results. So it's still like it's not huge yet, but we plan to make huge, I think, with that.
Less than 10%?
With that. I tried. Yes. We shared so many KPIs with our customers.
Simon Owen. A couple. Firstly, just thinking about returns. You talked about the improvements to FICC and things like that. What percent can you break down the cause of returns?
I mean, what percentage are due to FICC? What percentage are due to other things, increased choice, etcetera? So kind of what part of the problem are you addressing here?
1st, let's keep in mind I'm a bit newer to the team, so I'm going to invite anyone who needs to, to correct me if I get something wrong. About a third of our a bit more than a third of our returns are size related today. Of course, we're constantly improving the instrumentation around size related returns, meaning getting better, higher quality data about the actual reasons why customers return. But this is what our current data shows. And of course, here, we're working super hard to give customers that size advice that I mentioned before, so that they themselves, using all the data collected across all returns at Zalando, can understand if something runs small or large, but also the more purchases they make in certain categories, the better we can predict their personal size as well.
So these are the 2 areas we're currently invested on, but we also have much longer term initiatives as well that we're not ready to talk about today, but are more experimental in nature. So the way we approach it is we have many different time horizons we're looking at in terms of innovation, starting with the things we shared today, which are currently operational, but also further reaching ideas as well.
Okay. And if I can ask
a follow-up on assortment. How many SKUs can you get into a single DC?
How many
SKUs can you get into a single DC?
Yes. I'm definitely going to defer that to someone else.
So a single DC is Okay.
First of
all, I think
they're all very different sizes. Okay.
But if I let's break down the next question. I got to take it.
So it's between 10,000,000 and 12 1,000,000 items and then it depends on really how many SBUs you can store into that.
In terms of range out of your 500,000?
So we said earlier in the main presentation that with our current footprint of 11 warehouses, we can deliver up to 12,000,000,000 GMV.
Right. So I just wanted to note, the point I'm trying to get to is as you widen the range, they're presumably not all in the same DC. And presumably, the kind of basket economics then start going down quite fast if somebody in Sweden orders two elements of their basket from the GMV in Poznan and the next one is kind of somewhere in Italy. So how do you kind of square away the increasing range if you can't make them all immediately available to your customers?
We definitely have people who can address this question. He's sitting down in the audience.
I can jump here and give you an idea. So in the end, you have certain we have our main warehouse, big hub warehouses in Germany and Poland at the moment. We have a small one in Italy, the other one in France and then the one up in Stockholm. If you are a Swedish customer, we're trying to replicate what we pretend what we forecast the Swedish customer will order. If he orders beyond that, then there's a certain one specific warehouse out of currently it's Poland where you're going to get delivered extra.
So it's roughly split. We forecast it on a very regular basis to split that out. So it's not that the case that you send something from Italy into Spain. It's more that you have already a kind of a setup where you say, okay, which is moving upwards and what is moving downwards.
Okay. So now I got your question. So yes, so I think like first of all, it's a machine learning question of where to put these items before and where we do the forecasting. The second question is like should we actually have like this like how much like soft zoning or hard zoning do we actually do? And by offering now or starting to offer like minimum order values, we will be as well able like to as well pay on this selection proposition by still not hurting our order economics going forward.
Thanks. Juergen from Kepler Cheuvreux. Two questions. First of all, Robert, you talked about the assortment that you want to have. Apparently, you're not yet there 100% that you have all the assortment ready so that everybody and every customer has all the opportunities where you still see white spots, where you would like to have a deeper or wider assortment available.
Ebs, can we hold that question for the next section following? Great. 2nd question?
Then switch to Jim, maybe. With your background from Amazon and being at Zalando now for some time, and obviously, you gave a little insight that you're working on these size questions. In terms of technology, where do you see more work to be done at Zalando? What's your core areas of digging deeper into at the Hasbem? Yes.
I think the good news is that actually a lot of the core work has been done and has been a priority for a long time. So again, it started 4 years ago the dramatic scaling of our engineering and data science practices. And this group has been very busy building really the infrastructure that we need as a company to work on these really difficult challenges. And I think when a company scales as fast as Zalando does, I think this is normal that you need to go through an infrastructural investment cycle. And I think we're coming out of that cycle to where more and more impact for customers will be visible in the experience.
So, I'm pretty optimistic about where we are right now. But of course, we're continuing to improve this infrastructure and hiring more talent to scale. So, I think biggest areas of opportunity in particular probably are all in the machine learning area. And here, I think, one big opportunity we have is to imagine different data we might receive through our ordinary processes, so that we can feed the machine learning models with much richer data sets. For example, I mentioned briefly earlier, improving the quality of the return data.
This is just one of probably 100 examples that we have where we imagine ingesting more data, different data, slightly higher quality data to drive these machine learning models and get a lot of leverage through these optimizations that we're doing with machine learning.
5, 6, 7. No further questions? Well, I also have no questions from the web. So we're going to conclude that session.
So ready for the last session? Yes. It's been quite a day. Look, now for now actually we turn it a bit around. We discussed so much about the starting point of for fashion.
We discussed our platform. So what we're going to do now is rather look at it from a bit different perspective. We look at it from a partner perspective, what does that strategy actually mean? And we pulled out sentences like, if it's not on Zalando, it doesn't exist today. And so this is quite a high ambition level.
If you look at it from an assortment point of view, that sounds a bit crazy at the first moment. And to be clear also, it does not mean for us that we have to carry every fashion item ever produced, but it means for us that we have to have anything that is relevant for a specific customer, so anything Siushi seeks for. But either way, it's quite a it's a tough nut for the assortment because how does it translate? We need all relevant brands. Then from those relevant brands, we need actually full range access like all the best styles.
Then of all those styles, yes, we have to have like a perfect availability, try to be never be sold out. And in addition to that assortment access, we also want to create great experiences for our customers. So, we actually need a lot of content, exciting content, great experiences. So, if you look at last year, we've done quite some progress along all those dimensions. If you look at relevant brands, we added interesting stuff like Massimo Dotti, so one of the last Innitex brands still to miss.
We've added interesting premium brands like Cieloie, Diana von Furstenberg, etcetera. And beauty, we mentioned it earlier today, that has also opened up actually quite new interesting players for us. We have very international players like Estee Lauder coming to the platform. In terms of range, take sneakers as an example. Yes, sneakers, it's always one of those most pronounced sections where you need the very latest and the very best styles available.
And that is something where we collaborate very closely with brands. We've worked, for example, with Nike quite closely to improve our SNCC experience. And this here, this Nike MK2, that's one example that has not driven not only the fashionability, but was also quite a commercial success. On the availability layer, I think we also mentioned that before. The partner program here actually unfolds its power.
You can actually see how well that adds to our availability. Those €190,000,000 that is just backfill. So again, what we mean by that, it's articles we have bought and we sold out on them. So the partners ship it directly. So that would have been customers.
We would have lost them or they would have been unhappy because their size was not available. And then also in terms of engaging content, we've increased quite a bit like this content layer. Any given week actually run around 1,000 campaigns in 17 different markets and we also have like a lot of exciting stories around. So, if you want to do all that, yes, we have to also remind ourselves that getting this full access in the fashion industry is actually super hard. If we want to have all relevant brands, yes, and I'm actually answering the question we recently had.
Of course, there's brands that never sell to other retailers or also don't like to sell through external partners. Vertically integrated partners are an example. I mean, the ZARUS and Inditex and Inditex world overall as an example. Premium brands that are very careful about where they sell and what the adjacencies are. And range access, also not an easy gain.
Sneaker, for example, to continue that. You have brands, they love to see those the customers camping outside some store in Kreuzberg. So they care a lot about like how they actually position their articles. Availability also, I mean, fashion has its very own characteristics. You have we have to place somebody has to place buying bets.
You have long order cycles. You have to manage inventory with size runs. And that's expressed by still like 260,000 size requests we get per day. And then also in terms of content, the more we move into the personalized world, I imagine we have to pay like fresh exciting content for 26,000,000 customers. So, building this flawless offer for customers, it is very hard.
And while I emphasize that it's hard, actually, that's why it's also our main one of our main differentiators. We have built up better access than anyone else, and we have built very strong partnerships. So I think there we're actually quite ahead. And there's also a reason for it, because to put it in very simple words like why brands place their bets on us, we provide a combination of reach of great business opportunities and a place where they can actually protect and or even build on their brand equity. I mean, reach, I think today we said a lot of numbers.
So I mean, again, like the 3,000,000,000 visits we have, I mean, that's enormous for partners, 26,000,000 active customers across 17 markets. And not only that access to consumers, it's also the insight that generates. I mean, this is like insights, that data, brands wouldn't get hold of that anywhere else and can use that actively to actually improve the product. And business opportunities. We provide the brands actually tools and services that allow them to actively invest into growth themselves.
And we also make sure that they can actually earn money with it. So we offer we know every brand somehow has to invest into digital. That's a secret anymore. But there's only very few alternatives, and Moritz will actually tell you a little bit about that in a minute. So actually, we are the partner.
We are the best alternative actually if they're growing and growing digitally. And then on the 3rd dimension, the brands. Yes, we focus on fashion. We'll create that environment. We want to create like exciting experiences consumers.
And in addition, we also provide the brands actually the tools to manage that themselves, to drive their brands, to drive their content, regard it a bit like having like a flagship store within our system. You might say those components, you can also get them somewhere else. You might have big marketplace models. They give you a lot of reach. But I can assure you, they do not give you this brand place, where the brands actually feel comfortable and where they actively invest into brand equity.
So there they try to aug it out or limit as far as possible to whatever old season stuff or late in season stuff, but they don't use it as brand building. Then you have retailers. They might get the brand perspective actually right or even better, yes, because of course you have some that are very opinionated and very sharp. But again, those they don't really have the reach. And plus, they don't also they don't give the brands actually those capabilities.
They actually need to drive their digital strategy. So it might be an add on, but they do not become part of their digital strategy. So very honestly, we believe that this combination in Europe, we're actually the only the best place for those brands to be. We have the only one who can actually combine all these important dimensions. And you see like how complementary that works to brands.
I mean, we have all those skill sets, building the reach, having data, the technology, the operations behind. And the brands, they can actually fully concentrate on what they do best. And there, I think, in that context, we've built up very strong and trusted partnerships. So now the good brands, they care about all these things I just said. The very best brands, they actually care about even something more because they actually strive to go direct to consumer.
And here this quote from Nike actually summarizes quite well. The closer we are to market, the stronger the demand signal and the better the assortment. The great brands actually know that they have to play a different game online. And they have to be in control of that brand, and they have to get closer to the consumer. So the most obvious pick, of course, is building our own ecom.
But we'll actually tell you in a minute that this is very limited, what they can do in there. And here, I also want to emphasize that a direct to consumer strategy from the brand is actually very much in line exactly with our platform strategy, because we actively build all those tools and capabilities necessary that enable and empower the brands. We don't want to be like a retail model or some kind of intermediary. Rather, we aim to become a significant part of their brand's digital strategy. And now I can actually hand over to Moritz who can tell you a bit more how that works out for brands.
Sure.
David said brands really like going direct. What they like in particular is their own e com store. They are big fans of their own ecom store for two reasons. Number 1, this helps them to outbalance the shrinking business in offline. And second, as David explained, this own e comm store gives them the chance to have a direct access to have a direct relationship with their customers.
So they love it. And I think you know better than I do that they have also communicated a lot on their own e com strategies, right? That's a big thing for brands. However, there's a problem. There's a problem.
You see from the growth rates, growth is slowing down. In the past, they had healthy or huge growth rates, and now their own ecom growth is coming down. And we expect that this is going down even further. And there are mainly two reasons. Number 1, for brands, it's very difficult to acquire new customers in the same speed as they did in the past.
Why is this the case? Brands are really used to doing now Google Marketing. And the Google search terms, they are not coming additional search terms to Google, and the Google search terms, the number or the volume is not growing. The number of people who have searched for a dress or searched for a skirt or searched for a sports shoe is not growing anymore. So there is a limit to how much the e comm business of a brand or the brand store of a business can grow on their own.
The second big piece is the retention. If you think about single brand, for example, like Levi's jeans or a shoe like a Nike shoe, There's only so much reason to come back on a regular basis, right? How often does someone on a weekly basis or every week buy jeans, right? The engagement, the shopping frequency is a big challenge for their brand on ecom. Now let us zoom a little bit into the new customer acquisition, one of the first problems the brand on ecom has.
When you talk to brands, they are now all into the mood. Social media is the way out. So I explained actually Google is limited. The number of people looking for dresses, I said, is stagnating. Now social media is the new thing, right?
We, on the other hand, also invest heavily in social media. And what we have figured out is when we show an ad, for example, for a Timberland boot to customers on Facebook or Instagram, in 19 out of 20 cases, in 19 out of 20 cases, customers buy something else than Timberland, right? And this is, in return, the beauty of having a multi brand store because this drives your conversion rate to a completely different level than in a mono brand or single brand environment, right? And you can see this from our figures. We have changed the way we do performance marketing last year heavily.
We do now machine learning and automated a lot of processes. But the core of the success of the social media team here at Zalando is coming from the multi brand environment, which drives the conversion rate to a much different level than you have on a single or mono brand environment. You just look at the figures. In 2018, we spent almost $19,000,000 right? 2017, 2018, like this.
And inside 2018, it's also trending like this. So Q4 was the record ever we had on social media spending, which in return makes it difficult to for multi brand use cases to compete with us on social media. So that was the new customer acquisition challenge for brands on ecom. The other topic I also mentioned was the retention piece. Here also like talking from our side, brands buy on Zalando 13 different customers buy on Zalando 13 different brands, right?
And now imagine a customer who needs to download 13 different apps, right, to engage with each of these 13 brands. Is most likely not going to happen, right? The whole move into app moves into this multi brand environment situation. You have the app fatigue, I think something you've probably heard. People don't do not download several apps.
And if they download apps, they only use a few. So the multi brand use case gears the whole industry to one fashion app, and that makes it much easier to then engage with the customer on a regular basis. Now I showed you 2 big examples or two examples why it's difficult for brands to succeed or their e comms to succeed in the future. Now our answer to this is there's as much as you like going direct to customers and as much as you like your own e com, you can like Zalando. So, what we want to do is we want to replicate all the positive or all the dimensions brand like at their ownecom@zalando.
That's the whole thinking. So, our thinking is that we allow brands as much as possible direct access, okay? We have 2 different business models. We have the Partner Program business model, which is the most direct business model. In Partner Program, brands own the stock, and they do merchandising and pricing on their own.
So, it's the most direct business model we can offer to brands. And on top of this, so that they feel it's very similar to their own e comm, we add a lot of customer insights. So, we have a merchant portal where they can interact and learn and cut and slice and dice their customer data as much as legally possible, right? But it becomes very similar it becomes very similar to their brand on e com. The second business model we have is the wholesale business model.
It's still the most dominant business model. Nevertheless, it also can have some direct features. It's different to the Partner Program model, but nevertheless, it can also have some direct features. We have here the retail portal where we allow brands also to engage with their customers, upload own article data, trigger, for example, reorders. There's also a lot of direct components in there.
Now let's talk about a little bit more in detail about the most direct business model we can offer, our Partner Program model. I think what we learned over the last years is that actually the success of Partner Program heavily depends on ZFS. ZFS is one of the enabling functions of PANOBRAN. So we think about Zalando in 2 business models, and then we have enabling features, ZFS, ZMS and so on. ZFS is probably the most important to unleash the platform dynamics as we want to.
So therefore, let me dive quickly into ZFS. ZFS is the magic to the whole platform for two reasons. Like, 1st of all, from a customer perspective, if you think about our average order, a customer has 3 to 4 items in her basket, right? And if you think now the extreme that all those items would be fulfilled by different partners, she would have to carry 4 boxes home, right? She would have 4 boxes to carry from different partners because they would all send different boxes to her.
And then she would be at home and then maybe she would keep 3 or 2 items out of the 4. That's not what she wants, right? She That's not what she wants, right? She wants one parcel and shop it all in one go also from a physical in a physical dimension. And therefore, we figured out that ZFS does the trick.
ZFS combines the convenience of our wholesale model with the beauty of the direct to consumer dimension an own ecom has. So ZFS, very good from a customer perspective. The second, and that's also an important point for the platform, ZFS unleashes profits, right? If you stick with stay with me in this example with the 4 different parcels customers who had ordered 4 different items, we would these 4 different boxes, they would all need to pay for carrier costs, right? The DHL here in Germany would have to come 4 times to her door, which makes it very costly for all of us.
The profit pool in such a situation goes down massively. So to put it reverse, ZFS decreases the shipment cost by 50%, right? By 50% because, on average, we have one partner article in our baskets. And now we combine them together. And instead of paying DHL 2 times, we paid DHL in this German example one time, right?
That's the whole the magic. What it does to the whole platform is since it's now much more attractive for brands to work with us in the partner program, they upload massively more SKUs, right? I just have here an example with you, a brand before ZFS, a brand after ZFS. It's 3 times more SKUs than before. It just comes from the fact that it's economically attractive for them to actually now with ZFS upload to upload more SKUs.
Now I said that this ZFS is actually the basis for the whole platform dynamics. Let me hand over back to David, who can now show you how it all comes together.
Thank you. Yes. Thank you, Morris. I think Boris perfectly explained how that works out for brands. And I have to say, like whenever we go talk to brands, it's actually not a real it's not a hard sell because actually it makes a lot of sense for them, and it has a lot of benefits for the brands.
And that's what we also see then reflected in the numbers. I mean, we do see that all those platform services are picking up a lot. And the brands, they're getting more and more active. The more they understand, actually, the more they invest into it. So I think we're on a very good track.
And you heard the numbers before, the partner program has picked up. We're now at already 10% of the GMV. And you also heard our plans that this will increase quite heavily over the next years. ZFS, yes, is super interesting. Mauricio explained all the benefits, yes.
And we also see that the brands are really signing up for that very heavily. And also, if you look not only like the current share of 25% of our partner program, the items, obviously the pipeline. I mean, perhaps those brands like Mango, Adidas, Inditex brands, I mean, there's a lot of movement also if we look at this year, what will happen. And ZMS, I think that's an interesting part. The better we get on the partner program and then with ZFS enabling, that, the more we unlock actually profit potential for brands, they can reinvest into growth.
And that's where ZMS comes in and where we also have like many positive examples and a good growth. And before also those examples like Under Armour where we enabled brands actually to target audiences where they wouldn't be able to get to otherwise. And to make it a bit more tangible, we can maybe briefly discuss a concrete example because I think Mango is an interesting and also a representative case of what we all discussed because they care a lot about going direct to consumer. They're vertically oriented. They have a strong brand.
They also care a lot about their own e com. So when we launched with them, we launched a partner program and they shipped from Spain. So wasn't the ideal situation. But then also when they saw the potential, they also started investing more and more into their own capability. Finally, they didn't only ship from Spain.
They started shipping from Germany. So we got better in the customer experience. We grew wider in the assortment, rolled it out further. That worked well in Germany. So, we started internationalizing and rolled out several countries.
And we went further and said, okay, let's jointly invest into marketing. And we did joint campaigns. Even like last year, we even did a joint TV campaign. We worked out exclusive collections with them. They don't even show like in their own stores.
And that went even that far now that they recently they even launched in Spain with us, which is their total home turf, yes, but and where they worry most about their own e com. But I think that's an interesting case where we see a brand that actually understands those tools and really knows how to leverage them, how well along that also goes with their own ambitions. And our goal is very clearly, let me say for Mango, it's not that we want to be one partner. Rather, we want to be a significant part of their digital strategy or post the stream phase, we want to be their digital strategy. We want to be the partner actually that helps them to be successful.
And there I think we also closed the loop to building that starting point because we very strongly believe by building those complementary capabilities or platform services by doing stuff that really makes sense for brands to invest in. So the brands, if they love it, then we know the customer will love it because the experience gets actually better and better. And the more time and money the brands invest, the better the customer experience, the more reason the customers have to actually use Zalando as their starting point. So that's somehow what we see how we see our platform at work. But with that, now we can also go to Q and A.
Wonderful. Thanks, David. Thanks, Moritz. So regarding my conversation, I had with some of you during the lunch break. There are some questions around that, but I didn't forget Jurgen.
So you have the microphone cube. So please take your postponed question to Moritz and
Yes. Just to follow-up what I was asking early on. Where do you see still some white spots in terms of product assortment that you would like to increase, I. E, being it specifically in sports or any specific price category even as well?
So I'd say, number 1, of course, we have some big verticals that are still out there. It's in Europe. Number 2, for me, premium brands. Premium is actually super successful for us, and we're growing very strongly. So, I think our proposition is actually getting better and better.
So, there's definitely brands to add. I mean, as a third, definitely have in rather specialist areas, for example, specialists in certain sports areas. And also to add the specialist beauty, I mean, we just launched it. That is also, of course, something where we can still improve like the offer quite a bit. And I think on all dimension, I think what's interesting like we think we're moving closer and closer like the verticals, I mean everything we described, they very actively support this direct to consumer strategy, which would be relevant for them.
Premium, the better we get in personalization and being able to send out targeted messages. I think there, we're also working in very close collaboration with them to do that. And then on the specialist area, it's the same story.
Other question? Magnus?
Magnus Roman, Handelsbanken. Perhaps I can ask a little bit outside of this brand question, but can you provide an update on the project to connect stores, physical stores? Perhaps share some numbers of how many countries you're alive now, how many stores or retailers that are signed up as of now?
Yes. Yes, sure. I think this is a very interesting really interesting future project. As we mentioned about those, call it, complications in fashion that we have so much decentralized inventory sitting around everywhere. And the majority of the inventory actually lies in physical stores.
So actually, we believe like in the future, it's a huge potential if we're able to unleash that. And then in the long run, even be smart about it and connect local inventory to local consumers, like superfast delivery or even creating a different experience. So, this whole thing is it is early stage. We started connecting. We started connecting first brands to we for example, with adidas, we had pilot cases where we connected stores.
We also connected shoe networks, for example, to connect midsize shoe retailers. So, by now, we have a couple of 100 of stores that are already integrated and that are shipping. And I think here, it's more about now we have to of course optimize processes, be it data quality, be it like the processes to actually handle those volumes. We had those example where the stores actually they suddenly have like a lot of parcels there that don't even get out anymore. So I think there's like many interesting things we can figure out still.
Because if you speak to leading store based brands, they describe this as the main potential for them to deliver out of stores, feeder stores and have really rapid delivery also out in geographical peripheral locations. But what would be the main reasons for you to be that partner for retailing retailers not to do that themselves proprietarily?
I mean, A, actually the more they do it themselves, the better for us because actually whatever they connect and to connect through their own ecom, it's actually easier for us to integrate it as well. So that's number 1. Number 2, I mean the same reasoning we had before. I think in their own e comm, it is limited, yes? And I mean, we unlocked them actually quite some additional potential.
I mean, if we connect those stores, I mean, we already have those proof points like how much volume it can actually generate additionally. And brands, they actually have a very strong incentive. If they work very closely with us and they have to go digital, they actually have a very strong interest in incentivizing their stores to be part of that equation and not actually undermine what the stores are doing. So I think in all sense from a store manager point of view, from a brand point of view and from our point of view, from a customer point of view, I think it makes sense. I said, just I mean, there's also that said, there's also, I mean, some hurdles we have to overcome like when it comes to all economics processes, of course, there's still also a lot we have to develop further.
Thanks. Tushar? Yes. Tushar from Goldman Sachs.
Just in terms of ZFS, the 3rd party brand inventory, do you keep the inventory only in Germany? Or do you send that inventory to your satellite hubs as well in terms of the order fulfillment in Italy or France or in Nordex?
So the ZFS logic works very similar to wholesale from an inbound perspective. So we are splitting the shipments upfront in order to optimize our warehouse.
If we come into internationalization, ZFS? I think that was also part of question, right, about
Yes, exactly. I mean
Switzerland, for example.
Switzerland is now is going live.
So we will be asking Mango to send parcels to Germany? Or you'll be asking Mango to send parcels, the whole inventory to all your warehouses?
So we cover then Mango in the same way as we would cover Mango in a wholesale business, right? We would store it in different locations in order to be as fast as possible to the customer.
Actually to add like Switzerland for example is also an interesting example. Like many brands don't even have the capabilities to deliver like conveniently to Swiss customers. So open up those capabilities that they can actually do that through us. That's actually another one of those examples where we actually have a stronger network and a stronger infrastructure than the sales.
And in terms of how many days do you keep the inventory before you give it back to Mango, for example?
How many days we keep the inventory? We have similar targets for the inventory as we have for wholesale, like we have stock over turnover targets stock turnover targets. And then if we are below those targets, then there is a conversation happening with standard.
Further questions? Yes, Caroline?
Hi. It's Caroline Gulliver from Jefferies. Could you share a bit more color on the data that you're giving back to your partner brands? In particular, are you giving them data on what their customers the other brands that they're looking at?
I think the most exciting for the brands is is to learn what the major competitors do. So we cannot like for legal reasons, I think I said this, we cannot like share individual customer data. What we can do is we can benchmark. And actually, Zalando is a massive, I don't know, insight center for them because they have no other way to benchmark themselves against their major competitors. And so therefore, they are really interested in getting this kind of data.
And that's what we do, right? So we try to ask them for a peer group. We define with them a peer group together or their major competitors. And then we benchmark their success and their whatever metric you're interested in, there always versus this peer group.
And how are you effectively pricing that knowledge that you're giving them? Is it just coming through in the gross margin terms? Or I mean, it's obviously a huge amount of powerful information that you can give on. But how are you how do you think about that economically?
So economically, we first of all think like from a customer perspective. So we think the more the brands know, the better they can serve our customers, right? That's our like that's the first way. I think in the long term, there could be potentials to maybe to monetize it even further. But for the time being, our main focus is to create the best customer experience.
Other questions? Yes. Oh, we go almost to the last row. Can I help you?
Thank you. Michael Benedicte from Berenberg. Are you able to let us know the commission rates you receive for the Partner Program, both with Zalando Fulfillment Solutions and without it?
Sorry, the last part of the question.
Both with ZFS and without?
Yes. So I think we shared it here that ZFS massively improves the profitability, right, which improves the profit pool for Zalando and for the partner. And therefore, we when we introduced ZFS, we also have a conversation about the commission rates. That's what we do.
And in a previous session, you said that you expect it to be free cash flow negative in 2021. Is the implication that you expect to be positive from 2022 onwards?
So that's always a super partner question. We have to ask Ruhan back to the stage, I guess, for stuff like that.
He was back testing it now. Other questions in the room here? If that is not the case, we are well ahead of time. All questions answered. So thank you very much for your attention.